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Chemical Coast: Plastics, Property Taxes, and Public Services


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The Chemical Coast, along the Gulf Coast of Texas and Louisiana, is where 84% of U.S. plastics production, across the sector’s supply chain. Each state has policies that both support using industrial revenue bonds and limit property taxes on petrochemical facilities, which produce the chemicals used in plastics manufacturing, that use fossil fuel energy with fossil fuel feedstocks to make the plastics we use, despite significant risks to local communities’ health.

In fact, nine publicly traded petrochemical companies in the S&P 500 own 37% of the U.S. plastics production capacity in the Chemical Coast, while, according to Bloomberg, only three of these nine companies have net-zero targets to mitigate climate change and not one of has sustainable plastics policies. This is despite plastics, and their related risks, being discussed more than 80 times during these companies’ quarterly earning calls since 2015.

Texas and Louisiana have two key property tax exemption pathways used by these petrochemical companies that they employ in the 22 out of 3,220 counties that make up the Chemical Coast.

  • First, by the end of 2021, Texas and Louisiana municipalities have issued more than 40 municipal bonds valued at $2.7 billion to support plastics production infrastructure with petrochemical corporations as the global ultimate obligor. As these municipalities are issuing these industrial revenue bonds, this may limit property taxes that otherwise would have been paid by these corporations on their infrastructure. The result is that this decreases funding for schools. For example, ExxonMobil’s East Baton Rouge petrochemical and plastics resins facility is partially financed via $523 million in municipal bond issuance. The facility is responsible for 13% and 5% of U.S. low-density polyethylene plastic and polypropylene plastic capacity.

  • Second, each state limits property tax collection that otherwise would fund schools, libraries, and municipal services. Louisiana’s Industrial Tax Exemption Program (ITEP) exempts 100% of property taxes over three years for manufacturing facilities. The facilities can extend their property tax exemptions for an additional five more years at 80%. Some projects even qualify for 100% tax exemptions over ten years. In 2019, Louisiana’s ITEP program impacted two-thirds of Louisiana’s 69 school districts who lost about $269 million revenues that would have otherwise funded schools.

Sometimes local institutions do reject tax exemption requests. In January 2019 as covered by The New York Times, the East Baton Rouge School Board voted 5 to 4 to reject ExxonMobil’s $2.9 million property tax exemption request under ITEP.

The Texas Economic Development Act, called Chapter 313, allows school districts in Texas to limit the appraised value of property over a 10-year period to attract industries. This reduces the chosen industry’s property taxes, and in return, the school district and chosen industry work out fees to be paid directly to the school district. This program has saved companies more than $10 billion in taxes over the 10-year agreement period. Like the current ITEP, Chapter 313 involves a reduction of property taxes and district-level control as well. However, the reimbursement mechanism of Chapter 313, which involves industry paying school districts directly, removes those funds from the larger “pot” of statewide school funding. Critics of this program say that this often leaves poorer districts to the wayside.  

Finally, these companies and the communities they reside in face many ESG and sustainability risks related to plastics production.

  • Climate change: Chronic and acute physical risks from climate change, such as sea-level rise, storm surge risk from increasing extreme weather events, and soil subsidence that can impact facility utilization rates while incurring potential financial risks. Louisiana has lost 1,900 square miles from sea-level rise and soil subsidence since the 1930s.

  • Toxic chemical releases: Toxic chemicals often are also released during plastic production that include chemicals such as benzene, which is a known human carcinogen. Other toxic chemicals released during production can cause negative health impacts such as endocrine disruption, asthmas, diabetes, and many other detrimental impacts to human health. Cancer Alley, along the lower Mississippi River between Baton Rouge and New Orleans, Louisiana, has nearly 150 oil refineries, plastics plants, and chemical facilities. Cancer Alley has a higher risk of cancer the much of the U.S.

  • Plastic pollution spills: Nurdles are lentil-sized pellets which are the foundation of most everyday plastic products. Nurdles are heated and formed into the single-use plastic products we use – and throw away – bottles, wrap, film, plastic in clothes and other products. Nurdles are frequently spilled, entering the environment and food chains, e.g., via shellfish and commercial fisheries. For example, on August 2nd, 2020, the container ship CMA CGM Bianca spilled 750 million nurdles in the Chemical Coast allegedly produced by Dow Chemical when a 40-ft container fell off the vessel’s deck after the vessel became adrift in New Orleans, Louisiana. In another example, Diane Wilson, a retired shrimper, sued Formosa Plastics in July 2017 and won a $50 million settlement, alleging that its Port Comfort plant had illegally discharged thousands of plastic pellets and other pollutants into Lavaca Bay and other nearby waterways along the Chemical Coast. U.S. District Judge Kenneth M. Hoyt ruled against Formosa calling the company a "serial offender". 


In conclusion, local municipal authorities and petrochemical companies along the Chemical Coast are using property tax relief and municipal bond issuance strategies to finance the petrochemical to plastics complex.


Investment professionals including buy-side and sell-side analysts, lenders and portfolio managers should assess public financing impacts when determining their chemical sector and plastics products strategies.


There are clear concerns that corporations may be using local public finance taxing and bonding authority for their advantage, at the detriment to these same authorities funding schools and other public services.


Advocates and socially responsible investors alike may find that their interests align in addressing the role of municipal tax and bonding authority in maintaining the petrochemical to plastics complex with detriment to other public services, such as fully funding schools, health care, and parks.

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