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, is located (Appendix: Table 4). 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 (Appendix: Table 5).

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. While these companies may have related policies, they are not being tracked or easily available to investors and analysts who use Bloomberg. This is despite plastics, and their related risks, being discussed more than 80 times during these companies’ quarterly earning calls since 2015 (source: Bloomberg, L.P. 2021).

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. Note: In Louisiana, counties are called parishes.

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 (cusips 270777AC9, 270777AD7, and 270777AE5). 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.  

During the Texas legislative session in May of 2021, a bill to renew and expand Chapter 313, which is set to expire in December of 2022, was widely rejected by the Texas House. Yet it is expected that Chapter 313 will be renewed later this.

In 2019, lost school revenue in Texas was estimated at $290 million. One-third of Texas school districts lost more than $1,000 per pupil annually due to this corporate tax break.

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.

• The CMA CGM Bianca flies under the flag of Malta. The ship is owned by CMA CGM. It was built in 2011 by Shanghai Jiangnan Changxing. Skuld provides protection and indemnity insurance for the Bianca. Bianca’s International Maritime Organization number is 9436367. French-based CMA CGM is 74% owned by Lebanese-based Merit Corporation SAL.

• Nurdles are packed in 25 kg bags. 990 sacks per container, which equals 24.75 mt, with average weight per nurdle of 0.033g, yielding about 750 million nurdles.

“I cried. It was that bad,” said Liz Marchio, National Parks Service science educator. “They were like snowdrifts piled up. Inches deep with the river sloshing around.” For clean-up, CMA CGM the 3rd largest shipping company globally, who reported $31.4 billion in revenue in 2020, hired two men to use leaf blowers to blow the nurdles into the Mississippi River and then try to scoop them out.

Unfortunately, the U.S. Coast Guard and other U.S. regulatory agencies chose to not to penalize or fine CMA CMG or Dow as they do not consider nurdle plastic pollution a “hazardous material” under the U.S. Clean Water Act.

In another example, Diane Wilson, a retired shrimper, sued Formosa Plastics in July 2017, 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”. Texas RioGrande Legal Aid (TRLA) said the $50 million settlement is the largest in U.S. history involving a private citizen’s lawsuit against an industrial polluter under federal clean air and water laws. Formosa Plastics is a frequent recipient of Chapter 313 property tax limitations in Texas.

Louisiana’s Industrial Tax Exemption Program (ITEP)

Louisiana’s Industrial Tax Exemption Program (ITEP) exempts 100% of property taxes over three years for manufacturing facilities with an option for five-year renewal at 80%. Some projects still enjoy benefits of pre-executive order exemptions of 100% for ten years. In 2019, about two-thirds of Louisiana’s 69 parish school districts were affected by ITEP, losing roughly $269 million in property tax revenues to the program that would have instead funded schools. The program is frequently used by petrochemical producers and plastics manufacturers. Local governing authorities, such as school boards, have decision-making power regarding ITEP.

According to latest figures and only assessing ITEP’s “active” and “active renewal contracts”, the petrochemical to plastics complex in Louisiana’s 11 Chemical Coast parishes are responsible for $56.6 billion in investment with an Ad Valorem tax (loss) of $922 million, see Table 1. The estimated annual tax loss in these 11 parishes from the 352 different ITEP contracts in the petrochemical and plastics industry is 44% of all state-wide losses.  

Table 1: ITEP for 11 Louisiana parishes in the Chemical Coast. * Category is “estimated new jobs” and excludes construction jobs, as reported by ITEP applicants to the State of Louisiana. ** Includes Formosa Petrochemicals’ controversial single-use plastic facility. *** Jefferson Parish has lost 30% of its land since 1960 due to subsidence, saltwater intrusion, and sea level rise. It is forecast to lose 42% of its remaining land area over the next 50 years due to these same climate-impacted physical risk factors.