A New Day in Paradise
Left for dead after hurricanes and BP spill, no place on the globe is seeing more action than the Gulf Coast
By Mike Randle
We don't know of anyone who has lived in more places on the Gulf Coast than South Alabama-born Jimmy Buffett. The entertainer is also one of the Gulf Coast's most successful businessmen, with ventures in all five Gulf States. It was Buffett's songs "Margaritaville" and "Cheeseburger in Paradise," among others, that helped him launch his career, one that makes this Gulf Coast parrothead about $100 million annually. Margaritaville, the fictitious place where shrimp are on the boil and booze is in the blender, is paradise. And paradise is the American South's Gulf Coast.
Yet, Buffett's regional home has had a tough time of late. But like the singer's career, the South's Gulf Coast is resilient. And almost all of its traditional industries – petrochemicals, tourism, manufacturing, fishing, aviation and aerospace – are hoppin' like no year in the region's history, and exports from the Gulf Coast are off the charts. Let's not forget that it was just a few years ago that the Gulf Coast was left for dead after devastating hurricanes and the BP oil spill.
I remember the conversation as if it were yesterday. I called my good friend Mike Olivier, then Secretary of Louisiana Economic Development, about the current situation in his state to see if we could help in any way. The call was made in early October 2005, about 10 days after Hurricane Rita – a Category 3 Hurricane with winds at 120 mph – struck the Louisiana-Texas border on September 24, 2005. Rita devastated Southwest Louisiana and Southeast Texas, but it was overshadowed by what had happened on August 29, 2005.
A little more than three weeks earlier, Hurricane Katrina, one of the five deadliest hurricanes in U.S. history, made landfall just east of New Orleans near the Louisiana-Mississippi border. Over 1,800 people lost their lives in the Katrina storm and aftermath. Total property damage was estimated at $134 billion, according to the National Climate Data Center.
Talking to Olivier on that October morning in 2005 was a sad affair. The effects of Katrina were enormous and when Rita hit, it was clear to me that the great momentum Secretary Olivier and Louisiana Gov. Kathleen Blanco had made in economic development had come to a screeching halt.
Olivier said something to me during that conversation that I will never forget. "Mike, I am hearing from prospects that they will never build anything south of Interstate 10 from here on out." Olivier wasn't talking about job-generating prospects that needed deep-water access, such as the massive petrochemical industry. And it wasn't something that he projected.
"That was part of our problem, at the time," Olivier said recently for this article. "Katrina and Rita were devastating, don't get me wrong. But the way the media represented the disasters was sort of like the entire Gulf Coast was in a state of sheer horror from the storms. That wasn't the case."
Looking at a map, you can see that I-10 is a major artery for much of the Gulf Coast, and the route from Mobile, Ala., to Houston represents the largest energy hub in the Western Hemisphere. After the 2005 hurricane season, the road became a hurricane buffer by default. South of I-10 are the beaches, fisheries, refineries, oil platforms and wetlands that make up one of the world's most diverse land masses. South of I-10 is also ground zero for hurricanes that strike the Gulf Coast.
Olivier's comments in 2005 (Mike is now the CEO of the Committee of 100 Louisiana) about industry simply dismissing any pending or future plans to build facilities south of Interstate 10 were supported by other economic developers in the five states that make up the region. But the perception that Gulf Coast states were a high risk to large industrial investments took on a life of its own in the year or two after Katrina and Rita. Tana Trichel, President and CEO of the Northeast Louisiana Economic Alliance, told me at the time she had trouble convincing prospects that her 1,440-acre Franklin Farm Mega Site was safe from hurricane damage. The Franklin Farm site is about 300 miles away from the Gulf Coast.
"After Katrina, there appeared to be a universal perception that all of Louisiana was in danger and at risk from hurricanes and floods," Trichel said. "I remember standing in line at Customs shortly after the storm and someone overhearing my accent said, 'Our Elks Lodge just sent you $5,000.' That was an emotional moment, but my sympathy was with my friends who were victims in South Louisiana."
Disasters are just that; horrible, mostly uncontrollable things that change the perceptions of many shortly after the dust settles and the waters subside. Soon enough though, those disasters are forgotten. For example, there was substantial resistance to rebuild a tall structure on the World Trade Center site. Now, the new 104-story One World Trade Center – known in New York as 1 WTC – is nearing completion in Lower Manhattan.
Since the incredibly destructive hurricane season of 2005, times have changed on the Gulf Coast as well. The region is back like never before when it comes to large capital investments and much of that activity is the result of recent discoveries of shale oil and gas, as well as new technology to extract it. In fact, in the last three or four years, the Gulf may have seen its most active industrial build-up in its history, or at least since World War II. Investments totaling in the hundreds of billions have been made on the Gulf Coast since 2008 by some of the world's largest corporations. And where are most of those investments being made? That would be south of Interstate 10.
Check out this incredible statistic about investments on the Gulf Coast.
In calendar year 2011, according to our 2012 Southern Business & Investment 100 (a ranking SB&D has produced since 1994), 20 of the South's 100 largest corporate or industrial investments were made south of Interstate 10. Yep, 20 percent of the 100 largest investments made in the South last year are currently being built directly on the Gulf Coast.
Additionally, 15 more of the top 100 investments announced in the South last year were at sites within 50 miles north of Interstate 10. That means that more than a third of the largest capital expenditures announced in the South in 2011 were on the South's Gulf Coast. To top it off, the four largest investments – and six of the top 10 – made in the South in 2011 were south of I-10 and two of those were made exactly where Hurricane Rita made landfall seven years ago.
Is the great Gulf Coast year of 2011 a fluke? In calendar year 2010, 26 of the 100 largest investments in the South were made on the Gulf Coast. In comparison, in 2006, the year after the 2005 hurricane season, only six of the top 100 investments made in the South were on the Gulf. Therefore, the answer to the question is that this incredible industrial comeback by states that make up the Gulf of Mexico coastline is no fluke. It is real and it is huge and it is fueled by almost one thing: natural gas. Make that cheap natural gas.
The American South's Gulf Coast: There's only one.
"There's only one Gulf Coast and God isn't making any more of 'em," you may have been told by a real estate agent while negotiating the purchase of a home or condo on the beach. The real estate agent was right. There is only one Gulf of Mexico and whether it was God, science or both that created it, well, another one won't ever be made.
Whatever your perception of the American South's Gulf Coast is, you likely cannot put your arms around the sheer magnitude of what we believe is North America's most precious resource. But don't feel alone. The Gulf has been kicked around for decades and ignorance about its role in commerce in the Western Hemisphere is common.
The aforementioned Hurricane Katrina was the costliest natural disaster in U.S. history. And the Deepwater Horizon MC252 oil spill in 2010 was the largest accidental marine oil spill in U.S. history.
Regardless, this massive, five-state mega-region is more resilient than any region we know of on the planet. Its ecosystem gets hammered – both naturally and by human intervention – and it gets up, shakes itself off, and continues to be home to massive influxes of people looking for sun, fun and jobs, and industry looking for opportunity that's not available anywhere else in North America.
"It's about business. . .about money," Vic Lafont said. Vic is the President and CEO of the South Louisiana Economic Council (SLEC), which is located in the bayou city of Thibodaux. "Profit drives everything, including the human spirit. We literally live on the water's edge. We are Acadians and some believe we settled where no one else wanted to settle.
"In the 18th century, when we first got here, we looked at it and saw the value of living here. Today, this region is our home. It is our culture. It's who we are. I have no problem getting industry to locate here. I have a bigger problem accommodating them with buildings and sites. For some industrial sectors, it is imperative to be located here in South Louisiana."
We asked Vic about being at ground zero of several disasters on the Gulf Coast, including the BP oil spill. "Five hurricanes, a major oil spill. People ask me, 'What's next, locusts?' In South Louisiana we are in a constant state of recovery. But we are prepared for recovery. We have a knowledge base that we've earned by recovering from these disasters. But in the end, profit drives everything, and there are lots of companies making big profits down here right now. It is a matter of weighing the risk with the reward," LaFont said.
LaFont's right. Establishing an operation in the hurricane-prone Gulf Coast is simply about weighing opportunity versus the risk. There are risks and rewards for companies siting facilities all over the world, including security issues, earthquakes and hurricanes in Mexico, tornados in the South and Midwest, earthquakes in California and the upheaval in the Middle East. Let's not forget earthquakes and tsunamis in China and Japan.
The Gulf Coast: The world's seventh-largest economy.
The five Gulf States – Alabama, Florida, Louisiana, Mississippi and Texas – account for over 57 million of the nation's 310 million people, or right at 19 percent of the U.S. population. The population of those living directly on the coast in those five states totals over 21 million people, or a little more than seven percent of the total U.S. population. Fueling that growth are Texas and Florida, the second and fourth largest U.S. states, where 38 percent of residents live directly on Gulf waters.
One demographic coming from the Gulf Coast is quite surprising. Only 14 percent of the population in the Gulf Coast Region is at or above retirement age (age 65). Nationwide, 13 percent of the population is at or above retirement age.
While the U.S. is the world's largest economy by a wide margin, the American South is the world's fourth largest economy, behind only the U.S., China and Japan when ranked by total gross product. According to the Bureau of Economic Analysis, in 2011, the five U.S. Gulf states – if considered an individual country – would rank seventh in global Gross Domestic Product. With nearly $3 trillion dollars in gross product, the Gulf States currently out-produce the gross domestic product of the UK, Italy, Russia and India.
The Gulf Coast region's economy traditionally has been connected with its natural resource base, including oil and gas deposits, commercial and recreational fisheries, and waterways for ports and waterborne commerce. Agribusiness is also a major traditional player on the Gulf Coast, with a market value of almost $9 billion in 2010.
The Gulf region's place in U.S. energy production is uncontested by any other. Approximately 54 percent of crude oil production in the U.S. comes from Gulf States. Fifty-two percent of natural gas production is based in the Gulf and 47 percent of U.S. crude oil refinery capacity calls the Gulf home. But those are 2010 figures – the latest available – and the way the Gulf is producing oil and gas now, the 2010 figures are without a doubt plainly outdated.
According to the Bureau of Labor Statistics, about $20 billion in wages are paid annually to those working in the oil and gas industry in the Gulf Coast region. But that was in 2010, too. We figure those wages have grown to more like $30 billion now in just two years. Who knows? The activity you are about to read about is happening too fast for anyone to calculate. Yep, what's happening on parts of the Gulf Coast is a wage gusher.
Active oil and gas rigs in the Gulf of Mexico stretch from Brownsville, Texas, near the Mexican border, to the Fort Morgan peninsula, just west of the beaches of Gulf Shores, Ala. The vast majority of those 3,700-some-odd active rigs are off the Louisiana coast, not Texas, as many believe. In fact, 80 percent of U.S. offshore rigs are located on Louisiana's Outer Continental Shelf, and counting offshore production, the state is the No. 1 producer of crude oil and the No. 2 producer of natural gas in the country.
And Louisiana's energy-related influence is not just a Gulf Coast thing. It stretches around the world, including the oil-rich nations of the Middle East. The expertise of oil and gas professionals from Cajun country is legendary and global. "Under every oil sheik's robe, there's a Boudreaux, Broussard or Thibodeaux," said Marion Fox, Executive Director of the Jeff Davis Parish Economic & Tourism Commission, when we visited her in September (for more info on Southwest Louisiana and Acadiana, where Marion operates, refer to the Acadiana-Southwest Louisiana supplement contained in this article).
Houston: Energy capital of the world.
No place on the Gulf represents the center of the petrochemical industry more so than Houston. Texas' largest market ranks third in the total number of Fortune 500 headquarters, behind only Chicago and New York. Energy-related corporate headquarters dot the map in Houston, with ConocoPhillips, Halliburton, Marathon Oil, Anadarko Petroleum, El Paso and Noble Energy, among many others, based in Houston.
But it's not just oil and gas that make up Houston's claim as the "Energy Capital of the World." Houston is the center for all things energy, from petrochemicals to wind power. It is the home of one of two locations of The Institute of Energy Research, a non-profit that conducts intensive research and analysis of the functions, operations and government regulation of global energy markets.
While it may seem an unlikely event, Houston is the No. 1 city in the U.S. when it comes to purchasing wind energy. Wind energy companies have been drawn to Houston because of its diverse energy production platforms. Some of those companies include ABB, ALSTOM POWER, GE, Siemens and Vestas.
These companies have helped the Houston region become a poster child for the manufacturing resurgence seen in the South since 2009. More manufacturing jobs have been created in Houston than any other U.S. metro every year since 2009. The incredibly fast-growing energy sector is the primary reason why Houston and other areas of the Gulf Coast have experienced manufacturing job increases not seen since the mid-1990s.
The Gulf: Export central
Advanced technologies have unlocked new sources of oil and gas in shale-rock formations and other sources throughout much of the South. Everyone knows that. But what some may not realize is this newfound energy source is creating activity at and around Gulf ports not seen in decades. In fact, just call the South's Gulf Coast "export central."
There are too many projects being built or studied on the Gulf Coast designed to export energy to mention here. But two in Southwest Louisiana come to mind, since my wife Stacy and I boarded a helicopter in September to check them out first-hand from the air.
South Africa-based Sasol announced in 2011 it would build a multi-billion dollar complex in Lake Charles, La., to convert natural gas to liquid fuels such as diesel fuel for trucks. Sasol is now working on feasibility studies to build a $14 billion petrochemical project at its site in Lake Charles. The project would be, according to MiningWeekly.com, a "Secunda-scale complex." Sasol operates the massive Secunda complex in Mpumalanga, a site that is currently the world's largest producer of fuels from coal and gas.
Another company taking advantage of the natural gas opportunities along the South's Gulf Coast is Houston-based Cheniere Energy. Cheniere may have a short-term monopoly on U.S. liquid natural gas exports (LNG), according to a story posted on SeekingAlpha.com, once it adds export capabilities to its current multi-billion dollar import complexes in Southwest Louisiana and in Corpus Christi.
At present, no facilities export LNG in the United States except one outdated, small facility in Alaska. After all, natural gas production so prevalent in many Southern states is somewhat of a new phenomenon. Furthermore, facilities to process gas to LNG are incredibly expensive to build. Cheniere invested billions in its Southwest Louisiana facility to import the gas and convert it a few years ago. Now it is in the process of building an export component that will cost billions more.
Cheniere is in great shape to earn a huge return on that investment. A Department of Energy study in January determined that the significant export of U.S. mined natural gas converted to LNG could cause a spike in U.S. gas prices. Therefore, DOE is not approving any more export applications until it determines how exporting the gas would affect prices here in the U.S.
As for Cheniere, it already has a facility on the Sabine Pass in Southwest Louisiana and it has almost all of its permits and tons of financing in place. That being the case, once Cheniere finishes its export facility in Louisiana, it should have at least a two- to three-year start on others, such as Exxon Mobile, which wants to build LNG export facilities on the Gulf Coast as well.
The huge export advantage of Paradise: Deepwater ports
All states in the South are seeing increases in exports at rates rarely seen in history. And if it has to go out of the South to worldwide markets or even just down the coast, it has to go out on a big, expensive boat. You will find those monster boats at Gulf of Mexico ports. In fact, the Gulf Coast region is home to 13 of the nation's 20 leading ports based on tonnage last year.
Gulf Coast ports now contribute over $50 billion annually to the U.S. economy and provide over 750,000 jobs directly related to port activities, according to the Gulf Ports Association of America. But again, those are numbers from a year ago, and not representative of a Gulf economy that is reinventing itself literally every day.
Gulf ports are so critical to the U.S. economy that they handle more than 50 percent of international trade – export and import. The ports of South Louisiana and Houston are the top two U.S. ports in every major category; total trade, imports, exports, foreign trade, tonnage and domestic trade. And ports such as those in Beaumont, Corpus Christi, Texas City and Freeport in Texas; New Orleans, Plaquemines, Baton Rouge and Lake Charles in Louisiana; Gulfport and Pascagoula in Mississippi; Mobile, Ala.; and Tampa, Panama City and Manatee County in Florida, moved most of the American South's $310 billion (that's with a "B") in exports in the second quarter of this year.
So how does the American South's $310 billion in exports in the spring quarter compare to the nation as a whole? Well, the nation moved $773 billion in exports in quarter No. 2 this year, meaning the South was responsible for about 40 percent of all U.S. exports for that three month period.
But here is a more impressive stat: of the South's $310 billion in exports during this year's second quarter, more than two-thirds, or about $209 billion, were moved through Gulf Coast state ports, according to the World Trade Center in New Orleans.
Just a note on exports: This nation as a whole, with the South being the leading region, is exporting goods at growth rates rarely seen in history. Exports are growing so fast that they have doubled in 10 years, but even more incredible, they could double in 2012 compared to 2011. The $773 billion in exports for the U.S. in Q2 2012 is more than half of U.S. exports in 2011. And here is another neat statistic. Texas leads all U.S. states in exports by a wide margin. In Q2 2012, Texas moved $130.7 billion compared to second-place California, which saw $77.3 billion.
Top 15 Gulf Coast Ports
|1. South Louisiana, La.
|2. Houston, Texas
|3. Beaumont, Texas
|4. Corpus Christi, Texas
|5. New Orleans, La.
|6. Texas City, Texas
|7. Plaquemines, La.
|8. Mobile, Ala.
|9. Baton Rouge, La.
|10. Lake Charles, La.
|11. Pascagoula, Miss.
|12. Tampa, Fla.
|13. Port Arthur, Texas
|14. Freeport, Texas
|15. Galveston, Texas
* Total trade based on tonnage in calendar year 2010.
A Pennsylvania success story as a result of Gulf Coast exports
Frank Brogan, Deputy Port Director for the Port of Corpus Christi, is seeing the export boom first-hand. "I have been with the Port for 25 years and I have seen more activity here in the last 18 months than I did the previous 23 1/2 years combined," Brogan said. Considering Corpus Christi's location near the expanding Eagle Ford Shale play, the port is likely going to continue seeing strong activity. A study by the University of Texas at San Antonio recently found that the 20-county region surrounding the Eagle Ford Shale has witnessed approximately $25 billion worth of economic growth, including more than 45,000 full-time jobs. It should be noted that the Eagle Ford Shale wasn't discovered until 2008.
"Five years ago we were doing none of this," Brogan said. "In fact, in 2008 we had our first layoffs in the 86-year history of the Port. Now we are making large capital investments and hiring more staff to do all the work."
Much of the crude coming from the Eagle Ford is being sent from Corpus Christi over to Houston and Louisiana to be refined. For decades, the Port of Corpus Christi imported oil from foreign-flagged ships. They still do. But now that process is being reversed and it has had profound implications for not only Corpus Christi, the Gulf, the South, but the Northeast as well.
A symbol of Eagle Ford Shale's impact on the U.S. economy arrived at the Port of Corpus Christi in late September. The MV Pennsylvania, a Pennsylvania-built, U.S.-flagged oil tanker, made its first-ever visit to Corpus and loaded Eagle Ford Shale crude and transported it to American markets. Why is a new U.S.-built, U.S.-flagged tanker important? In 1955, 25 percent of the world's overall vessel tonnage was carried by ships flying a U.S. flag. Today, that figure is a little more than two percent according to the American Maritime Congress.
"The fact that the Pennsylvania was built in the U.S. is a good sign for the American economy," Corpus Christi Port board President Mike Carrell said. The Pennsylvania is one of two tankers built by Aker Philadelphia Shipyard. Before those two tankers were built, a direct result of the natural gas boom in the U.S., the Aker Shipyard was teetering on closure. The two ship contracts lifted the prospects for the Pennsylvania-based shipyard and now they are hiring for other deals associated with the natural gas strikes that are creating jobs all over this country.
The U.S.-flag designation allows the tanker Pennsylvania to operate under the Jones Act, or the 1920 law that mandates all goods moved by water between U.S. ports can only be carried by tankers under the U.S. flag. In other words, foreign-flagged ships can import to U.S. ports, but then they must embark to another foreign port. Since this natural gas boom mandates that goods must be moved easily from one U.S. port to another, the industry in the Gulf is actually positively affecting employment as far away as Philadelphia.
But it is bigger than that at the Port of Corpus Christi. The aforementioned Cheniere Energy has already committed to a LNG export facility near Corpus Christi. Cheniere just filed its application with federal officials to begin construction on the LNG facility on August 31, 2012. The Houston-based company is planning on investing billions in the project. "Their site is right on the Corpus Christi ship channel," Frank Brogan said.
There's more. To gain easy access to natural gas coming into the Port of Corpus Christi, M&G Group announced last year that it is building a $1 billion plastics plant on port property. "We are quickly selling or leasing out every available piece of land we have," Brogan said.
Southern State Exports
|6. North Carolina
|7. South Carolina
|13. West Virginia
*Gulf states in bold. Totals – in billions – from Quarter No. 2, 2012.
Paradise is a manufacturing Mecca
From the massive ships made by the 10,000-employee workforce at Huntington Ingalls' Pascagoula, Miss., shipyard, to the hundreds of large field and offshore oil and gas equipment manufacturers throughout Texas and Louisiana, to ThyssenKrupp's multi-billion dollar steel facility near Mobile, Ala., to the dozens of massive chemical plants found in the region, much of the Gulf Coast is a manufacturing Mecca.
We already mentioned that 20 of the 100 largest industrial investments made in the South last year came south of Interstate 10. We did not mention that exactly 50 of the South's 100 largest manufacturing investments made in the region last year were announced in the five Gulf States of Alabama, Florida, Louisiana, Mississippi and Texas.
There are many reasons why the South's Gulf States dominate the manufacturing arena in the largest manufacturing region of the U.S. But the most important is location. With the expansion of the Panama Canal expected to be completed in two years, Gulf ports will benefit as alternatives to West Coast ports. Setting up manufacturing facilities on the Gulf simply makes logistical sense, more so now with the Panama Canal expansion that includes two new sets of locks and the widening and deepening of existing channels.
And with global corporations now placing great emphasis on supply chain costs, "making it where you sell it" will greatly benefit the Gulf Coast as companies shift production for U.S. consumption from Asia to the South and Mexico.
Forward-thinking local and state governments on the Gulf Coast have already invested in infrastructure, including large sites for industry. One of those sites is the South Alabama Mega Site. The 3,009-acre, county-owned site is located in Baldwin County on Interstate 65 east of Mobile, Ala. The site is just 32 miles from the Port of Mobile.
"Our County elected leaders had the foresight to purchase the South Alabama Mega Site as an investment in economic development for the future of our area," said Lee Lawson, President and CEO of the Baldwin County, Ala., Economic Development Alliance. "Considering some of the large corporate capital investments along the Gulf Coast recently, we believe our McCallum-Sweeney Certified Mega Site is the top contender for future investments. With multiple direct access points to I-65, close proximity to I-10, the Port of Mobile and CSX mainline service on site, it is truly one of a kind and poised for the next large project in the South," Lawson said.
Editor's note: There is a comprehensive industrial site directory in this edition.
Some of the world's largest manufacturers are currently scouring the Gulf Coast for sites, and others are just now getting up and running. Caterpillar recently opened its newest facility in the South in Victoria, Texas. Charlotte-based steelmaker Nucor is finishing the $750 million first phase of its direct reduced iron making facility in St. James Parish, La. And of course, Airbus announced this summer it is building a $600 million large jet manufacturing facility south of Interstate 10 in Mobile, Ala., that will house 1,000 workers initially. There are so many others.
Mike Eades, President of Ascension Economic Development Corp., located on the Mississippi River in Gonzalez, La., said recently in a Bloomberg article titled, "America's Energy Seen Adding 3.6 million Jobs Along with 3% GDP," that activity in Ascension is off the charts. "We are seeing an incredible amount of activity."
In August, Eades' parish landed a pretty sexy project when Avalon Rare Metals announced it will build a $300 million rare earth elements separation plant and refinery. Heavy rare earths will be shipped to Louisiana's Ascension Parish from the company's mines in the Northwest Territories of Canada to be refined into 10 rare earth elements used in a variety of products including flat-screen televisions, computers and hybrid and electric vehicles.
Eades said he wasn't surprised to learn that more than a third of the South's largest manufacturing projects last year were made on the Gulf Coast. "Three of them were here and we will have more this year. You can't discount the (Mississippi) river. People underestimate the interrelationships among industries here. For example, few people understand how many air separation plants – oxygen, nitrogen, hydrogen – are on the river and the massive feedstock that is here to support the petrochemical industry. People think those things are everywhere, but they are not," Eades said.
Eades' office is a short walk across the parish line into St. James Parish, where Nucor is building its plant. "Nucor, even though it is in another parish, will have a tremendous impact on us. One thing that fascinates me about Nucor is the scale of the whole project. They have built these huge spheres or vessels that do the iron reduction. They had to build a ramp to move those vessels off barges on the river onto these crawler vehicles like those used by NASA to move large rockets. The ramp alone, which they will dismantle, costs over $30 million," Eades said.
A rising tide lifts all boats in Mississippi
Over in Mississippi, where its three Gulf counties were devastated by Hurricane Katrina more than seven years ago, you don't have the massive concentration of petrochemical facilities seen in Texas and Louisiana that rise along the landscape like science fiction cities on Mars. But Mississippi does have the largest ship-building facility on the Gulf Coast and that's Huntington Ingalls' Pascagoula, Miss., shipyard. There is also a large refinery in Pascagoula, and DuPont has operated a chemical plant in Pass Christian, Miss., for years.
In terms of jobs lost during the 2005 hurricane season, the casino industry on Mississippi's Gulf Coast took it on the chin. Waterfront casinos in Gulfport and Biloxi were simply thrown inland like bathtub toys during Katrina, temporarily snuffing out the 10,000 jobs the gaming industry supported there at the time.
Today, the casino industry on Mississippi's Coast has been rebuilt better than ever, with an 800-foot buffer from the waterfront. Bigger players are operating the casinos than prior to 2005 and the industry currently employs about 12,000 in south Mississippi. The supreme parrothead himself – Jimmy Buffett – opened the new Margaritaville Casino and Restaurant in May on the "back bay" sector of Biloxi and it currently houses about 850 workers. But even new laws in Mississippi enabling casino owners to build off the waterfront didn't help Buffett's marina at his casino. The new marina and outdoor bar area were damaged when Hurricane Isaac hit the Gulf Coast in late August. Again, weighing the risk with the reward.
"Letting the casinos move inland after the storm made a tremendous difference," said Ted Riemann, owner of The Prime Time Agency, LLC, a downtown Gulfport, Miss.,-based advertising agency he has owned since 1979. "We have built back stronger than before and as they say, a rising tide lifts all boats.
"We couldn't have done it right without the influx of federal money at the time. What gets me is we still have tremendous problems with insurance rates. It's almost impossible for residents to afford to build Gulf-front with the insurance rates as they are. You have to be self-insured to rebuild in the same spot," Riemann said.
Florida: The difference maker on the Gulf
In just a few short years, Gulf States have reinvented their economies from import to export and from consumerism to manufacturing and in some places, from traditional economic development to local entrepreneurialism through innovative investments such as incubators.
Throughout the South, this reinvention began sprouting legs in 2007, the first year since 1996 that manufacturing topped services in large new and expanded projects of 200 jobs or more and/or $30 million in investment or more.
Yet, in Florida's case, its economy was so intertwined in the consumerism era of the mid-1990s to 2007, that a reinvention of its economy was a much tougher deal. When financial services companies – the largest new job-generating industry in Florida by a wide margin from the mid-1990s to 2005 – were moving money around a million times a day, well, Florida's economy was humming like it was the late 1980s. Back then, there was a period when a thousand people moved to the Sunshine State a day. But it was an economy that was essentially a house built of cards. And those cards toppled on Florida like no other state in the American South in the Great Recession.
Speaking of house, did I mention that housing was king in that decade from 1995 to 2005? It was more than king in Florida. The word "flipping" was invented in Florida in the late 1990s. Remember that "day trading" kind of thing, where you could buy a house or condo one morning and sell it for $50K more the next morning? What were we thinking. . .that something like flipping could even remotely support the South's economy?
I wrote this about part of Florida's economy in the last issue of SB&D: "I was the keynote speaker at the Tampa Bay Partnership's annual meeting in April 2005. During the Q&A segment, I was asked by a member of the audience, 'What do you think about the housing crisis?' Housing crisis? I had never heard of the phrase 'housing crisis' at the time, but apparently one was underway in Florida as early as April 2005.
"Almost a year later, when I looked at the 2005 SB&D 100 numbers, one sector stood out. Financial services projects with 200 or more jobs fell like a rock that year to 21 deals announced in the South. The year before (2004), that figure was 52 big deals from financials. When I saw that financial services fell from 52 projects to 21 in one year, I remembered that audience member's question at that Tampa Bay speech. But at the time, I simply dismissed it.
"Since that severe drop in large job generating projects coming from financial services from 2004 to 2005, the sector has performed like this:"
Chart No. 3
Financial services sector performance 2004 to 2011
*Total number of financial services projects announced from 2004 to 2011 of 200 jobs or more in the American South. Source: SB&D
Since Florida's economy was so service-driven by the aforementioned sectors, it has lagged in the recovery compared to its larger Gulf Coast cousin, Texas, which leads the nation in manufacturing job-generation. But the reinvention of Florida's economy is well underway.
"Mike, quite frankly, Florida can compete with any state," said Gray Swoope, President and CEO of Enterprise Florida. "Projects in our pipeline are up and we are competing for projects Florida couldn't compete for in the past. We're focusing on three areas: job creation through the competition of projects; facilitated growth, such as setting aside money into infrastructure like deepening the Port of Miami channel and increasing the tourism budget; and lastly, eliminating governmental red tape. Gov. Scott and his team have helped eliminate over 1,500 regulations that were obstacles for companies that wanted to grow in Florida," Swoope said.
Those initiatives have worked. Florida is one of the South's hottest economies and when in the last seven years have we written that? We haven't, but check this out: Since January 2011, Florida's unemployment rate has dropped lower than any other U.S. state. Other large Southern states, such as North Carolina, are still dealing with near 10 percent unemployment. Florida's rate is now 8.8 percent and the state saw a net new jobs increase of 28,000 in August.
One of only two mega-regions (along with Houston) on the Gulf Coast, Tampa Bay is clawing itself out of quite possibly the deepest economic hole it has ever experienced, one that lasted about seven years. One of the ways is by participating in the export boom seen all over the Gulf. Tampa Bay is entering that fray, albeit in a different manner than the natural gas-fired export economies of Louisiana and Texas.
Tampa Bay was recently selected by the Brookings Institution to participate in the Brookings Metropolitan Export Exchange. The Exchange will help create and execute strategies that increase the Tampa Bay region's exports. With $9.6 billion exported in 2011, Tampa Bay is the 32nd largest merchandise export region in the U.S., according to the U.S. Department of Commerce. Other markets selected by Brookings include Charleston, S.C.; Chicago; Columbus, Ohio; Des Moines; Louisville-Lexington; San Diego and San Antonio.
"The reason Brookings picked us," said the Tampa Bay Partnership's CEO Stu Rogel, "is they saw what we were doing and realized this is a community that knows where it's headed. Traditionally, we have had a pretty significant export base with raw materials such as phosphate and food products from the citrus industry. But the real export opportunities for us in the future are high-tech electronics, medical devices, and marine-oriented products. Tampa Bay is transitioning from a consumer-oriented economy."
There you go, another expert saying that consumerism cannot be the biggest pillar in a successful ecosystem as it became from 2000 to 2007. Sharon Hillstrom knows that consumerism trap all too well. Sharon is the President and CEO of the Manatee Economic Development Corporation. Manatee County is located south of Tampa in the Bay Region.
"During the recession," Sharon said, "Manatee County faced a huge downturn because so much of our economy was based on housing and construction. We may have had the biggest bubble burst in that industry in the state. In 2008, our local government said we needed to attack the problem. We developed a local incentive program, and then developed an aggressive business recruitment program that didn't exist before. We started connecting with site consultants, who explained to us that we had to do a better job with permitting. So we built on our reputation of being incredibly business-friendly by creating a rapid response team for permitting new and expanding projects. We are now really focused on diversifying Manatee County's economy because we took such a big hit during the recession."
Success has found Manatee County since the effort to diversify from consumerism to sectors such as manufacturing. This summer, Pennsylvania-based Air Products & Chemicals announced it would build a plant at Port Manatee that will manufacture heat exchangers that liquefy natural gas. The deal will create 250 jobs.
"Air Products' investment in Florida demonstrates our success in recruiting job-producing companies that strengthen our economy as well as our business climate," Gov. Rick Scott said.
FPL (Florida Power & Light), which is aggressively reentering the economic development picture in Florida with the hiring of economic development veterans Lynn Pitts and Crystal Stiles, provides electric loads on Southwest Florida's Gulf Coast, which includes Manatee County and its port, the closest Gulf port to the expanding Panama Canal.
In addition to the port, one of Air Products' motivations in locating to Manatee County was FPL's new economic development rate, which provides significant savings above and beyond the company's competitive electric rates. The utility's program will reduce Air Products' base load rate for four years.
Aerospace central: Another big anchor drops in on the Gulf Coast
On July 2 of this year, code name "Project Hope" became a reality as European aircraft manufacturer Airbus announced a $600 million large jet assembly plant on the Gulf Coast in Mobile, Ala. The site at the Brookley Aeroplex is located just south of Interstate 10 and will be one of only six places on the globe where large jets are fully assembled. The others are Toulouse, France (Airbus/EADS), Hamburg, Germany (Airbus/EADS), the Puget Sound, Wash. (Boeing), Tianjin, China (Airbus/EADS) and North Charleston, S.C. (Boeing).
Airbus, part of the European Aeronautic Defense and Space Co., will build the A320 jet in Mobile, which competes directly with Boeing's 737 models made in the Puget Sound. According to Airbus, the A320 is the world's best-selling aircraft, with more than 5,000 flying and another 3,000 on order.
The project is a game-changer, as the supply chain to the commercial jet plant should expand all along the Gulf Coast to all five states. The deal is also a testament to the "make it where you sell it" movement that is sweeping the South as it reinvents its economy. Airbus is banking hundreds of millions that the Mobile facility will help it win new orders from U.S.-based airlines. Currently, Airbus has 20 percent of the U.S. market, yet 50 percent of the global share of large passenger aircraft.
Late in October 2009, Boeing announced it would build a second 787 Dreamliner plant at the Charleston, S.C., International Airport. The deal was slated to create 3,800 jobs. Now that 787s are leaving the line in North Charleston, Boeing's facilities there currently house over 6,000 workers.
We believe, if successful, the Airbus facility in Mobile will grow beyond the 1,000 jobs slated for the plant when 40 to 50 A320 aircraft a year are rolled out of the Mobile facility in about three years. The projected output is small, compared to the 40 planes a month that are built at Airbus' factories in France, China and Germany. But again, it is simply a projection based on how many planes Airbus can sell here in the U.S.
The Airbus project was a relief for Alabama politicians and economic developers. I don't think I have ever seen a group more deflated when Boeing won the Air Force tanker project in February 2011 over EADS. I was watching the announcement live on our own site, www.RandleReport.com, and viewing the disappointment in Montgomery and Mobile was heartbreaking. Alabama was so sure it had the deal locked.
EADS, Airbus' parent, would have built the tankers at the same site where the new A320 plant is now under construction. So, getting the Airbus plant was not only salve from the loss of the tanker, it was a huge boost to Alabama and all on the Gulf Coast that would have benefitted from the tanker being built in Mobile.
Alabama Gov. Robert Bentley said, "When Airbus aircraft take to the skies, Alabama's pride and workmanship will soar along with them. We have worked a long time and have put in many hours to make this announcement a reality. This project will create thousands of well-paying jobs that the people of this area need and deserve."
The unsuccessful recruitment of the Air Force tanker project, as well as the successful recruitment of the Airbus A320 plant, was not just an Alabama thing. The entire Gulf Coast region, minus Texas – a decision by Texas officials that isn't surprising to me because Texas' economy is so huge – has invested in the Aerospace Alliance, a four-state regional effort to recruit major players such as Airbus.
"The Aerospace Alliance (Louisiana, Alabama, Mississippi and Florida) brings the region's aerospace economies together to focus on expanding the already fourth largest aerospace corridor in the world," said Neal Wade. Wade, one of the South's most successful economic development practitioners, is the former head of the Economic Development Partnership of Alabama, the Alabama Development Office (now the Alabama Department of Commerce) and now is the President and CEO of the Bay County, Fla., Development Alliance based in Panama City. Neal is the Chairman of The Aerospace Alliance.
"The Aerospace Alliance is a true example of 'coopetition' where we cooperate in growing aerospace and aviation jobs where it makes sense and compete where it makes sense. With the new Airbus assembly plant and other major aerospace companies expanding across the Gulf Coast, the region is poised for unprecedented growth that will impact people's quality of life for a long time," Wade said.
So, you might be asking yourself, how could the Gulf Coast be the fourth largest aerospace corridor in the world, as Wade maintains? If you add Texas, it might be the world's largest aerospace corridor. Does, "Hello Houston" ring a bell?
Stretching from west to east on the coast, you have NASA's Michoud Assembly Facility in New Orleans and the Stennis Space Center in south Mississippi. In Alabama you now have Airbus and the myriad of military bases that specialize in aviation in the Wiregrass region of the state just off the coast.
And just across the line with Alabama, you will find seven naval and aviation-related military installations, including massive Eglin Air Force Base. The bases and the thousands of suppliers throughout Northwest Florida will provide Airbus and others like them on the Gulf Coast one of the best aviation-related workforces on the planet.
The RESTORE Act: Paradise Restored
All of the impressive stories and statistics about the Gulf Coast's economy can't hide the fact that paradise has many scars. Thousands of small businesses on the Gulf Coast closed during the BP spill in 2010. That included restaurants, real estate developers, seafood shops, oyster harvesters and shrimpers, charter boat operations, hardware stores, boat repair companies, oil rig suppliers and motels, just to name a few.
The BP event captured the nation's attention unlike few disasters in history simply because of its length. It began with an explosion at the Macondo well that killed 11 workers on April 20 and wasn't capped until three months later on July 15, 2010.
Hurricane Isaac, which hit Louisiana this summer, boiled up two-year-old oil from the BP spill and carried it onshore in Alabama, Mississippi and Louisiana, answering the question, "Where did all of that oil go?" Well, it is still there in places and all it takes is a Category 1 storm such as Isaac to move the oil off the bottom and onto the beaches.
In July, Congress took steps to restore the Gulf Coast when it enacted the Resources and Ecosystems Sustainability, Tourist Opportunities and Revived Economies of the Gulf Coast States Act. That long moniker is now known as the RESTORE ACT. President Obama signed the bipartisan legislation on July 6.
RESTORE Administrator Lisa P. Jackson wrote this on the White House Blog on June 29, 2012, the day the bill passed: "During the oil spill, we essentially 'lost' the Gulf for a period of time, and natural resources in the Gulf were extensively damaged. We lost the use of valuable fishing grounds, incredible recreational opportunities and all of the other benefits of a thriving, vibrant ecosystem. That loss helped show folks who aren't from the Gulf Coast just how important it is to our nation. But our goal and commitment is not simply to address the damage caused by the spill – it is to ensure the long term improvement and restoration of the Gulf Coast and its unique ecosystems."
The RESTORE Act will direct 80 percent of the Federal Clean Water Act penalties paid by BP to be placed in a new trust fund for restoration efforts in all five Gulf Coast States. But before the monies flow to the Gulf, the five states and the federal government must settle with BP. If that can't get done, BP will find itself in more courthouses than the number of tugboats in the region. BP will pay either way.
"You've got a defendant who can afford to pay the judgment," said Blaine LeCesne, a law professor at Loyola University in New Orleans, in a Reuters article picked up by The Huffington Post and The Randle Report on July 16. Folks in the know of the process have said the judgment amount could be as little as $4 billion, with a high of $21 billion if BP is found negligent. SB&D believes it will be much closer to the $21 billion than the $4 billion. Without the RESTORE Act, BP's fines under the Clean Water Act would simply have gone straight to the U.S. Treasury.
"BP has a $30 billion problem with the federal government's claims," said LeCesne in the Reuters article. "I can't see this settling for $10 billion or $15 billion. If so, that's a steal for BP.
Again, BP will pay to restore the Gulf and help make it whole again regardless of how well the Gulf restores itself during the negotiation period with the London-based oil company. In the meantime, this incredible body of water is doing what it does best; it is actually restoring itself from the worst single manmade disaster it has ever confronted.
Interestingly, Gulf of Mexico fisheries have rebounded. In calendar year 2011, according to the National Marine Fisheries Service, the total seafood catch in the Gulf was 25 percent larger than in 2009, the year before the spill. "Our fisheries are on the way up," said Harlon Pearce, Chairman of the Louisiana Seafood Promotion and Marketing Board, in an article published September 19 by Bloomberg.
In paradise, they are already lining up for BP's money. And why not? There is a famous saying from one of the Gulf Coast States and it is "Don't mess with Texas." That can easily be reapplied here: "Don't mess with paradise," because there's only one Gulf Coast and God isn't making another one any time soon. It's a new day in paradise.