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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 Two 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.
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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