A June 9, 2021, release from Louisiana Governor John Bel Edwards and ExxonMobil Baton Rouge Refinery Manager David Oldreive announced that the international oil and gas company will invest over $240 million in capital improvements at its refinery in Baton Rouge, Louisiana.
As the announcement notes, the scope of the project’s work “will improve processing capability, increase flexibility for meeting market demand, advance overall site competitiveness and install technology for an expected 10 percent reduction of volatile organic compound emissions” — with project construction slated to begin later in 2021.
In the press release, Governor Edwards claimed that the investment “will help retain 1,300 existing jobs at the refinery,” while adding that “ExxonMobil estimates the upgrades will support more than 600 construction jobs on-site over three years.” Alongside the 1,300 retained jobs, the plan also creates 20 additional guaranteed jobs for graduates of the North Baton Rouge Industrial Training Initiative.
Governor Edwards’ press release notes that according to Dr. Stephen Barnes — director of the Kathleen Babineaux Blanco Public Policy Center at the University of Louisiana at Lafayette — “direct, indirect, and induced jobs resulting from project construction will total 2,030 in Baton Rouge by 2023.”
The press release also claims that ExxonMobil will be focusing on providing supply opportunities to businesses specifically in North Baton Rouge. Baton Rouge Mayor-President Sharon Weston Broome reinforced this, saying that alongside “supporting thousands of residents with quality jobs,” the company would be “strategically partnering with local companies for procurement needs.”
The project is funded in tandem with the Louisiana Economic Development program, which the release notes “attracted 58 new economic development projects representing over 11,600 new jobs [and] 8,600 retained jobs” in 2020.
Investment comes amidst major conflict between ExxonMobil, steelworker’s union employees
ExxonMobil’s investment may help to assuage concerns for a large number of its employees, as the company is facing a number of labor issues that threaten to impact the operations of its facilities. The Baton Rouge Refinery’s United Steelworkers chapter — which represents around 1,000 workers at the plant — sent a complaint to the National Labor Relations Board over a lack of “good faith” negotiations over labor issues.
Cheryl Coney Arnold, the business manager for the union’s chapter, noted that “What the management people have done is taken people and moved them off their shifts so they don’t know if they are working days or nights.”
“They are running short on having qualified people, and sometimes when the samples come in there’s nobody there to do the work,” Arnold continued. “This is the first time we have encountered these problems.”
These issues haven’t been contained to Baton Rouge operations, either, as a recent leak at ExxonMobil’s Beaumont Refinery in Beaumont, Texas also caused concern for employees.
On June 9, 2021 — the same day as the Baton Rouge refinery improvements were announced — the company announced that refinery employees “observed and reported a sheen on the Neches River resulting from a leak of a minor biodegradable hydraulic fluid that occurred during equipment maintenance activities.”
At the same time, more than 600 members of the United Steelworkers union at the Beaumont Refinery are locked out by ExxonMobil as the union negotiates a new collective bargaining agreement in talks that have been ongoing since January 2021 — a situation that has raised significant concern following the recent leak and threat of the upcoming hurricane season.
Oil and gas refineries and operators can be complicated situations for contractors
Working with refinery projects can bring up a number of issues for contractors, much the same as it does for projects outside of the oil and gas industry — and this is a volatile time for the oil and gas industry.
Though it’s unlikely for this to occur for a major international company like ExxonMobil, 2020 saw a significant number of oil and gas producers go bankrupt during the uncertainty caused by the COVID-19 pandemic, with three major American energy producers — Chesapeake Energy Corporation, Denbury Resources, and Rosehill Resources — seeking bankruptcy protection.
In a notable example of the amount of nonpayment that can occur on even just one project, two mechanics lien claims were filed in 2020 against a Husky Energy oil refinery project in Lima, Ohio, after contractors claimed a total of $3,906,606.60 in unpaid construction work.
Depending on the project itself and the improvements made to any property, contractors have multiple options for securing payment.
Refinery improvements — like that of the Husky Energy project or the upcoming ExxonMobil investment in Baton Rouge — can usually be secured with mechanics liens much like other tangible property improvements.
However, some oil and gas projects may require a contractor to file a mineral lien — which are usually only found in states with significant oil-related business. Mineral liens are available to contractors and suppliers who are working on an improvement for a project like an oil and gas field, but this definition does cover a large number of people who work on their projects.
An example from Texas statute offers some insight into who can get protection under a mineral lien: It defines a mineral contractor as “a person who performs labor or furnishes or hauls material, machinery, or supplies used in mineral activities under an express or implied contract with a mineral property owner,” while listing a mineral subcontractor as a company or person who furnishes or hauls material, machinery, or supplies used in mineral activities…performs labor used in mineral activities under contract with a mineral contractor… [or] performs labor used in mineral activities as an artisan or day laborer employed by a subcontractor.”
As Levelset’s Dawn Killough notes, mineral liens attach to different things in different states, but these options can vary widely depending even on the success of a project:
“In Texas, the law doesn’t just apply to active and prosperous oil and gas operations. If a contractor provides services on a site that eventually becomes a dry hole, and if the work was done on a large property which also has a highly productive well, the lien may attach to all the wells located on the property, including the highly productive well.”