Currency
A series exploring the highs and lows of Lafayette’s economy, providing critical commentary about what’s working and what’s not.

COLUMN: How Lafayette can pivot from oil and gas with what it already has

The fall of Lafayette’s oil and gas industry has destroyed thousands of jobs and ripped billions in revenue away from local businesses. We are now faced with the challenge — and the opportunity — of figuring out how to leverage assets stranded by that decline to build a new future for our economy. 

A challenge of this magnitude has no easy solutions that get thousands back to work or revive the hundreds of small businesses that have suffered or shut down. But there are opportunities to pivot using what we already have at our disposal. In other words, there’s hope that we can rise to the challenge.

Renewable energy

Regardless of your politics, green energy is clearly the most significant growth opportunity. And a lot of the capacity that our area has developed to support the oil and gas industry could be repurposed to support solar and wind instead, whether that’s a skilled and experienced labor force, abstractors who know how to analyze and negotiate land acquisitions, machine shops that could be retooled to build critical infrastructure like racking systems for solar farms or local inventors who have a long track record of coming up with new devices that solve sticky problems. 

Solar is picking up steam in Louisiana, with major utilities like Entergy investing in solar farms. LUS itself is poised to invest heavily in solar production, too. Wind could get a jumpstart soon. Gov. John Bel Edwards asked the Bureau of Ocean Energy Management, which oversees offshore oil leasing in the Gulf, to create a task force to explore developing offshore wind farms. 

Plus, some oil and gas companies are already making the transition. Houma-based steel fabricator Gulf Island Fabrication partially built the first commercial offshore wind farm in the U.S. off the coast of Rhode Island, leveraging its expertise in oil platforms to build bases for 600-foot tall wind turbines.

But, the pivot to renewable energy likely won’t fully replace what’s been lost. Clean energy workers earn salaries that are 25% higher than those of typical U.S. workers, but oil and gas jobs average 40% higher. So it’s possible not all of the income will be recovered even if the jobs are. 

Gains in the renewable energy space in Louisiana have been somewhat limited. Less than 1% of power generation in the state comes from renewable energy, according to the U.S. Department of Energy. By comparison, Texas generates approximately 20% of its energy from renewables. So it’s likely going to take years before renewable energy scales up sufficiently in Louisiana to move the needle.

Plus, we’re probably going to need a lot of help getting there. We need every little bit of federal funding we can to make this transition. That means our political and business leadership should support economic policies that encourage the growth of renewable energy. Whether we like renewable energy or not, oil and gas production in South Louisiana isn’t likely to come back, and a massive pivot is likely to require massive government support.

Plugging orphaned wells

Short of a total overhaul, a more immediate opportunity to create new jobs for Lafayette’s oil and gas workforce is the growing support for a large-scale effort to plug “orphan” wells — those left-behind on drilling sites with no clear ownership. The number of orphaned wells has been growing for years and has accelerated more recently as oil and gas companies go out of business. The state of Louisiana has already identified more than 4,300 orphaned wells with more expected to be found. These wells can pose serious threats to our environment that only increase over time as metal rusts away. 

Oil industry advocates support this effort as long as it’s the federal government paying the bills rather than oil and gas companies, which are still pushing to do away with legacy lawsuits and state severance taxes. 

But plugging orphaned wells isn’t exactly a growth industry — economically, they’re a non-renewable resource — and even if funding is found to pursue this effort, some estimate it would support 1,000 full-time jobs statewide for one year. 

Technology-based service companies

As mentioned in my last column, one area of optimism for Lafayette’s oil and gas industry is those service companies that deliver technology-based solutions to a much larger market than just drillers in South Louisiana. Companies like Techneaux Technology Services (Disclosure: I do some consulting work for them) and CSE ICON provide services like remote monitoring of pipelines and the development and support of systems for managing data. They offer hope that our area’s oil and gas know-how can be combined with local technical talent to continue bringing in revenue that supports local oil and gas jobs. 

How much growth potential exists in this sector is uncertain. Today it accounts for only hundreds of jobs, and with the headwinds that all domestic oil and gas production face, I don’t know if it will be able to scale up to thousands. But as oil and gas production becomes more and more reliant on technology, the opportunity is absolutely there for growth, and these technology-based service jobs tend to pay well enough to replace the wages lost from the decline of production-based service jobs for those who can make the pivot into working with technology.

Innovation-based service companies

Already, we’ve seen a number of companies develop expertise to pivot and that have capacity to support other industries as well. A great example of this has been ASV Global, a maker of autonomous boats. The technology was developed in part to support the operations of offshore oil rigs. Now it’s grown to a point where in 2018 it was acquired by L3Harris Technologies, a $40 billion company, and as a subsidiary it’s now developing and selling its technology to a variety of other industries, including the military. 

Lafayette’s oil and gas industry has fostered the growth of a number of innovators like ASV Global. And innovation-based services offer some of the best potential to generate new jobs and wealth through local manufacturing and design of products marketed nationally and internationally. 

What opportunities do you see for Lafayette’s oil and gas industry to pivot?

The opportunities highlighted in this column are just the beginning of a conversation we need to be proactively having as a community. 

I plan to continue tracking these opportunities and sharing them with you. But I want to hear from you. What opportunities do you see? How can we leverage the assets we have to help Lafayette thrive? Email me here.

The unfortunate reality is that there are no easy answers. But there are opportunities we need to pursue. And it all starts with committing ourselves to working toward building a new future for our economy and not getting stuck in a past that isn’t likely to return.