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Friday, 11 March 2011 13:12
US Government Regulations Pull Louisiana Economy, Budget Down
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In a few short weeks, the Louisiana Legislature will begin to grapple with confecting a very difficult budget. The easiest way to take the pain out of tough budget decisions is to grow the revenues needed to keep state finances on a positive growth trend. There are four key factors that can go a long way toward ensuring future economic growth for Louisiana.

            First, the federal government needs to end its economic hostage-taking and allow the full resumption of both shallow water and deep water drilling in the Gulf of Mexico. A full resumption of offshore drilling would give a substantial lift to our economy through capital investment and job creation. Only one deep water permit has been issued since the moratorium ended and that was not for a new well. Shallow water permit issuance is woefully behind pre-moratorium levels. Resuming exploration and production in both deep and shallow waters would quickly result in increased economic activity for Louisiana.

            The second factor that can greatly expand economic activity in the state is for the federal government to stay out of regulating shale oil and gas drilling activities. In 2004, the EPA concluded a 5-year study that concluded that the hydraulic fracturing process used in shale drilling was safe. Now the current EPA wants to go back and revisit the issue. If the EPA outlaws hydraulic fracturing, it will be the death-knell for shale oil and gas production. There is currently a tremendous amount of economic activity going on in northwest Louisiana from shale gas drilling in the Haynesville Shale play. Across central Louisiana, there is a potential for as much as 70 billion barrels of crude oil from the Tuscaloosa Shale play. Production from these shale plays can be a real shot in the arm to jobs and investment in our state.

            Another major factor that can impact Louisiana’s economy is the greenhouse gas “endangerment finding” handed down recently by the EPA. If the agency proceeds with establishing a punitive regulatory scheme for carbon dioxide emissions, it will impact our oil refineries and the chemical industry initially and eventually most businesses in Louisiana.

            Another key factor in the state’s economic outlook is manufacturing. In most recessions, housing is the sector that leads the economy out of recession. That is not the case with the latest recession. Clearly manufacturing is the bell cow attempting to pull the national economy out of its doldrums. Many residents of our state do not realize that Louisiana is one of the top five states in the U.S. in manufacturing. Much of Louisiana’s manufacturing is geared to exports due to our location at the mouth of the Mississippi River. Here are some interesting facts: between 2003 and 2008, Louisiana’s manufacturing exports grew by 266 percent while the rest of the state’s economy grew by only 51 percent. During that same time period, jobs created by Louisiana’s manufactured exports grew by 131 percent while all other jobs in the state fell by three percent.

            For manufacturing to continue to lead our economic recovery, our trade policies must encourage exports. One major way to accomplish that is to enact the free trade agreements that are pending between the U.S. and several nations around the world.

            There is reason to be optimistic about Louisiana’s economic future. Left to their own devices, our businesses and industries could accomplish a major turnaround in our economic fortunes rather quickly. The major change that is needed is for the federal government to give us oars and not anchors as we try to navigate the ship of our state’s economy out of perilous waters.

by Dan Juneau, CEO and President Of Louisiana Association Of Business and Industries


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