State Forecast
Louisiana counters industrial drop with progress in other areas

By Sam Barnes

Sustained drops in chemical construction and a shaky economy gave the construction industry some sleepless nights in 2003.

While the outlook for the chemical industry hasn't improved, other sectors of the economy are providing glimmers of hope:

• Highway spending has been fueled by a revitalized TIMED (Transportation Infrastructure Model of Economic Development) program.
  
• Ft. Fort Polk was named one of six sites for a new quick-response military unit called the Stryker Brigade, which should result in about $250 million in new construction spending in central Louisiana.
  
• The construction of several liquefied natural gas terminals is on tap.
  
• An abundance of several significant one-time building projects are already under construction or are about to begin.

These projects seem to have sustained other construction markets not as dependent on industrial work.

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"And we expect modest growth in 2004."

Mike Gibson, executive director of Associated General Contractors - Shreveport said several factors should positively affect his market.

"Medical/biomedical, retail, riverfront and entertainment will highlight some of the opportunities for construction," Gibson said.

Airports should also be a hotbed of construction activity. As they broaden their scope and purpose in Louisiana, they're aiming their construction dollars at projects that not only expand but also convert and adapt their facilities.

These projects aren't just targeted at passenger air travel, but commercial and military uses as well.

In Donaldsonville, The Louisiana Airport Authority is pushing forward with a plan to develop an Intermodal Transportation Center that would include an airport to service commercial clients.

At Barksdale Air Force Base in Bossier City, hangars and aircraft aprons are being revamped for a fleet of B-52s.

In Alexandria, the multi-year conversion of the closed England Air Force Base into Alexandria International Airport will culminate with a new $20 million terminal building next year.

For the most part, expansion has been the name of the game at other airports, as the Federal Aviation Administration ramps up efforts to provide more money to support a growing number of flights.

But the lack of construction in the chemical sector will continue to drag down overall construction statistics. Expansions have decreased to nearly non-existent levels in the last two years and the high cost of natural gas has been labeled the culprit.

"Over the years, the nation's policy has been to encourage the use of natural gas but to discourage exploration," said Dan Borne, executive director of the Louisiana Chemical Association of Baton Rouge. "Many plants were built on the economics of gas less than $3 per MMBtu (million British thermal units). Now, gas prices are $5 and $6.

"Unless the government intervenes more industry will go overseas. Trinidad, Russia and other areas of the world have very inexpensive natural gas. A consistent environment of $6 gas or higher will effectively restrict or even eliminate a lot of future construction at petrochemical plants in Louisiana."

The chemical and fertilizer industries are being hit the hardest because they're most dependent on the fuel. High natural gas prices not only raised operating costs but prompted several area chemical owners to lay off employees or close their facilities temporarily, partially or completely. DSM Elastomers and CF Industries have shuttered their plants, while Formosa Plastics, ExxonMobil, BASF and PSC Nitrogen all have plans to lay off employees.

Refineries are providing the one bright spot in industrial construction statistics.

"Refineries in Louisiana have invested an estimated $1.1 billion to meet EPA guidelines for reducing the sulfur content of gasoline from 300 parts per million (PPM) to 30 ppm for 2004 model cars," according to a report from Loren Scott, James Richardson and A. M. M. Jamal in the Louisiana Economic Outlook. "This additional expense went directly against the refineries' bottom lines, so each began to scramble to find ways to offset this additional cost. One approach was to reduce labor costs as much as possible, hence the job losses of recent years."

And the pattern is about to be repeated.

"The refineries must next address the sulfur content of diesel fuel," the report says. "For highway use the sulfur content of diesel must drop to 15 ppm by 2006, and for nonroad diesel (railroad engines, tractors, graders etc.) the sulfur content must drop to 500 ppm by 2007 and to 15 ppm by 2010."

Some optimism can be derived from recent industrial statistics. Third quarter 2003 project announcements were catapulted by more than 150 percent after the unveiling of two petrochemical projects that total nearly $1 billion. Total project announcements for the third quarter reached $1.72 billion, significantly higher than the $678.5 million posted a year ago.

The information was provided by The Louisiana Economic Development's Division of Policy, which derives its data from applications for tax exemptions filed by the project owners.

Topping the list of third quarter project announcements were a $552 million LNG receiving and processing facility for Cameron LNG LLC in Hackberry; a $400 million refinery for Valero Refining in New Orleans; an $88 million biomass facility for Vanguard Synfuels LLC in Pollock; an $84.7 million project at Shell Chemical LP in Norco; and a $61.5 million reinstrumentation project at Motiva Enterprises LLC in Norco.

Still, it may be a while before these projects actually hit the construction industry's bottom line.

"From the industrial side, things haven't improved," said Jorge Tarajano, 2004 Louisiana Chapter president of Associated Builders and Contractors. "Work resulting from EPA requirements is the lion's share of new construction and the larger refineries are either finished or have already awarded contracts to complete the work."

Derrell Cohoon, chief executive officer of Louisiana Associated General Contractors Inc. of Baton Rouge, said he looks forward to new investment generated by incoming Governor Blanco.

"We're looking forward to participating in her strong focus on economic development," Cohoon said. "New administrations usually spell new activity and renewed general confidence and we're wishing the new administration well and the new legislature every success as we all work to move Louisiana forward, together."

Metro areas

Alexandria. Alexandria will benefit from the Army's decision to use Fort Polk as one of six training sites for a new type of quick-response military brigade called the Stryker Brigade.

"An estimated $250 million in construction projects will come to the central Louisiana area as a result of this new designation," according to the Louisiana Economic Outlook. "Of that amount, $45 million in construction will take place at England Airpark."

Related projects include:

• A 40,000-sq.-ft. military passenger terminal
  
• 45 acres of new ramp space
  
• Loading bays
  
• Runway improvements
  
• Hot pads for aircraft with ammunition

In addition, there are two significant non-military construction projects that are scheduled for bid this year at the airpark:

• $34 million for a passenger terminal complex
  
• $15 million in airfield improvements

Also, Proctor & Gamble has announced a $125 million expansion of its detergent plant in Pineville. While this expansion will result in only 20 new permanent jobs, it did spin off several "feeder" businesses in the area.

Baton Rouge. The problem for Baton Rouge over the next two years will be its chemical industry.

Fortunately, this will be offset somewhat by several other large construction projects that will continue or begin over the period:

• The $30 million D'Iberville Building to house the Department of Natural Resources
  
• The $30 million Bienville Building for the Department of Education
  
• The $30 million expansion of the Riverside Centroplex
  
• The $50 million Shaw Performing Arts Center

Also, LSU will spend $29.1 million to build a new residential college and another $18.5 million to remake its music and dramatic arts building.

And it was recently announced that the $47 million renovations of the Capital House Hotel will soon begin.

Houma. The driving force behind Houma's excellent forecast will be the oil and gas extraction industry. The extraction industry will finally react to high oil and natural gas prices and increase its expenditures on exploration activities.

"When the extraction industry expands, it typically pulls the fabricated metals sector up along with it," the Louisiana Economic Outlook says. "Gulf Island Fabricators is already back up to 1,100 workers and hopes to add 200 more. British Petroleum has corralled J. Ray McDermott's yard at Amelia Island. Under a $600 million contract, McDermott is constructing topsides for five BP projects in the Gulf."

The firm to watch over the next two years will be Bollinger Shipyards. Bollinger is participating in a large Coast Guard contract along with Avondale Shipyards. The firm is taking 110-ft. Coast Guard vessels and expanding them to 123 ft. It is also working on a new 400-ft. vessel.

Lafayette. Lafayette's economy will be driven by significant expansions in healthcare construction.

"Lafayette is in the midst of $250 million in expansions in the health care area," according to the Louisiana Economic Outlook reads.

The Lafayette area will also benefit from the opening of the new Evangeline Downs "racino" in Opelousas. The racetrack moved to St. Landry Parish so that slot machines could be added to the facility.

Other job growth should come from what has become one of the area's larger employers - Cingular Wireless. Cingular recently opened a new call center in Lafayette that has expanded to 1,200 employees and is projected to grow to 1,400 in the next two years.

Other large employers in the area such as Stuller Settings, Acadian Ambulance and Petroleum Helicopters will also fuel the economy with new employment.

Lake Charles. For the next two years, Lake Charles will struggle to achieve employment levels because of declines in the chemical and industrial construction sectors.

There are, however, several positive events on Lake Charles' horizon that should offset the negatives.

Construction of the $325 million Pinnacle Entertainment casino/hotel complex began last summer with an anticipated opening date of 2005. Once completed, Pinnacle is expected to be the state's largest riverboat casino. Accompanying the casino will be two 20-story hotel towers with 700 rooms, a 220,000-sq.-ft. pavilion and amphitheater and an 18-hole golf course.

Other Lake Charles-area projects include the expansion of Trunkline's LNG import facility and construction of a new LNG plant by Sempra Energy.

Monroe. Monroe will feel declines from a decision by Riverwood International and State Farm to reduce their workforces.

Also, now that interest rates are going up the volume of home refinancing should slow considerably.

"That will likely lead Chase Manhattan (mortgage division) to shed employees," the Louisiana Economic Forecast says. "And we are concerned that continued high natural gas prices will force Koch Nitrogen to completely shutter its plant in Sterlington."

These will be difficult blows for the Monroe area to absorb.

One factor that could ease the pain is an announcement by Key Tech Communications, an after-hours answering service, that it will create up to 150 new jobs under a proposed expansion program.

New Orleans. "The most difficult problem for the New Orleans area to overcome will be the downsizing in its chemical and industrial construction sectors. Almost 70 chemical plants are located here," according to the Louisiana Economic Outlook.. "Almost half of that activity is concentrated in St. Charles Parish."

Positive factors include:

• The area could get a significant boost from its transportation equipment sector. About 800 new jobs are almost certain at Northrup Grumman's Avondale Shipyard.
  
• Bollinger Shipyards should be a source of new jobs as well. Bollinger will be participating in a Coast Guard contract and should be picking up maintenance/repair work as the national and global economies improve.
  
• Science and Engineering Associates is moving its headquarters from Albuquerque to New Orleans and has announced plans to hire 200 technology workers.
  
• Proctor and Gamble is constructing a new 695,000-sq.-ft. Folgers warehouse in St. Tammany Parish.

Shreveport/Bossier City. Several events will contribute to a much-improved outlook for the Shreveport/Bossier area.

Mike Gibson, executive director of the Associated General Contractors Shreveport Chapter, said the recent opening of the $900 million General Motors facility has attracted 17 tier-one suppliers that will hire 1,300 new employees, make capital investments and have annual payrolls of approximately $41 million.

In addition, the Louisiana Downs Racetrack has invested $41.5 million to add 900 slot machines at the track in a temporary casino. It has begun an additional $68.5 million investment in a new casino with 600 more slots and a 300-room hotel.

Red River Pharma is planning a $25 million investment at Shreveport's Wet Lab Science Incubator.

The new $72 million convention center broke ground recently and about $60 million is being spent to relocate the Bossier Parish Community College.

About $150 million is also being spent on the Louisiana Riverwalk in Bossier City. The facility houses a Bass Pro Shop and several eateries. Another $12.5 million in capital spending is under way on the Shreveport Riverview project, which includes a visitor's center, an amphitheater, floating boat docks and a programmable walk-in fountain.