How can Louisiana recover without Federal Aid?

Open Letter to Gov. Blanco from Foster Campbell, Commissioner. Copied with permission.

21 September 2005

Hon. Kathleen Babineaux Blanco
Governor of Louisiana
P.O. Box 94004
Baton Rouge LA 70804-9004

Dear Governor Blanco:

As you prepare to ask the Legislature to face the task of rebuilding New Orleans and southeast Louisiana, I urge you to allow debate on a tax on foreign oil and gas processed in Louisiana. Such a tax could form the basis of a dramatic restructuring of State fiscal policy that would invigorate our economy, restore our wetlands and bring our people home.

Hurricane Katrina’s crushing blow to Louisiana was no surprise to those who have studied coastal erosion and flood control in the lower Mississippi River valley. As numerous reports and articles have shown, the decades of oil and gas production in the Louisiana coastal region have eroded our wetlands and worsened the effects of storms like Katrina. As recently as October 2004, National Geographic wrote:

“Since the 1950s engineers have also cut more than 8,000 miles (13,000 kilometers) of canals through the marsh for petroleum exploration and ship traffic. These new ditches sliced the wetlands into a giant jigsaw puzzle, increasing erosion and allowing lethal doses of salt water to infiltrate brackish and freshwater marshes.”

The same article quoted former petroleum geologist Bob
Morton, now with the U.S. Geological Survey:

“ ’… much of the (wetland) loss between Bayou Lafourche and Bayou Terrebonne was caused by induced subsidence from oil and gas withdrawal. The wetlands are still there, they're just underwater.’ "

As they use our natural resources and harm our wetlands, major oil companies profit from a political climate tilted in their favor. While other states turn them away, these companies process foreign oil and gas in Louisiana virtually tax-free to fuel the nation’s increasing appetite for petroleum products. They have used their clout to defeat all previous attempts to modernize Louisiana’s 85-year-old system for taxing oil and gas. The bill for the damage to our state from their activities remains unpaid.

GOVERNOR BLANCO
21 September 2005
Page One of Two

For these reasons the major oil companies must now acknowledge their moral obligation to assist Louisiana in this unprecedented time of need. The industry will point to its donations to the recovery effort. To put these donations into perspective, I have quoted the amounts given by four major oil companies in the chart below. They range from a low of $2 million by Royal Dutch Shell (equivalent to one hour of the company’s 2004 net income) to a high of $7 million by ExxonMobil (2.4 hours' net income). You can draw your own conclusions, but compared to what these companies are making, their donations are minimal.

Company 2004 Net Income Income/hr. Katrina donation

ExxonMobil $25.33 billion $3 million $7million(2.4hours)
Texaco $13.3 billion $1.5 million $5million(3.3hours)
British Petro. $15.731billion $1.8 million $5million(3hours)
RoyalDutchShell $18.183billion $2 million $2million(1 hour)

Source: Company web sites

The polls I have seen (conducted before gasoline exceeded $2.50 per gallon) indicate overwhelming public support for a tax on foreign oil and gas processed in Louisiana. The arguments for updating Louisiana oil and gas taxation have never been more compelling. I propose a four-percent tax on oil and gas processing to generate $4.8 billion per year. I would use the proceeds to eliminate the State income tax, the State severance tax, the State sales tax on business utilities and the State corporate income tax. This will leave $1.2 billion, which could be bonded to yield $10 billion for immediate coastal restoration and levee repair. The impact at the gas pump will be spread across the country, not just in Louisiana, and I estimate no more than a nickel a gallon.

The people of Louisiana welcome the President’s offer of federal assistance, but how soon after the news crews leave New Orleans will it be before the deficit-ridden U.S. Government turns its attention elsewhere? Louisiana needs a long-term, consistent supply of funding to overcome Katrina’s devastation. This plan calls for a State constitutional amendment allowing the people to decide how that money is raised and how it will be spent. It fairly places the burden on those profiting most from Louisiana’s natural resources. Don’t you think it’s time that Louisiana took care of its own?

With every good wish I remain

Sincerely yours,

FOSTER CAMPBELL
Commissioner

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