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Fueling America’s Energy Corridor: Port of Lake Charles Releases Calcasieu Ship Channel Economic Impact Study

Posted on: November 24th, 2015

Fueling America’s Energy Corridor:
Port of Lake Charles Releases Calcasieu Ship Channel Economic Impact Study

Southwest Louisiana is full of visionaries—individuals who see the big picture and inspire us to imagine the best possible version of our community for generations to come. Back in the 1920s, a group of local leaders did just that, and we still feel the effects of their actions today.

The Calcasieu Ship Channel was engineered in the 1920s, 1930s and 1940s to straighten, widen and deepen the Calcasieu River from Lake Charles to the Gulf of Mexico, making Lake Charles a deepwater port, although it is 34 miles inland.

To fund this ambitious endeavor, the Calcasieu Parish Police Jury called for a bond election in 1922, and the residents of Calcasieu Parish approved a $2.75 million bond issue to create the channel.

“Our leaders in the 1920s had the foresight to engineer the Calcasieu Ship Channel, which acts as the conduit for today’s economic boom,” said George Swift, CEO of the Southwest Louisiana Economic Development Alliance. “The need for visionary leadership today cannot be overstated. Just as at the turn of the 20th century, industry is booming again in Southwest Louisiana, and we must be ready.”

Almost nine decades later, the Lake Charles Harbor and Terminal District—the local sponsor for the ship channel on behalf of the State of Louisiana—carries this same vision and continues to tell the channel’s story.

Last month, the District released a new study that dramatically underscores the far-reaching economic impact of the ship channel on the Lake Charles region, the state of Louisiana and the nation.

The study, titled “Economic and Fiscal Impacts of the Calcasieu Ship Channel,” concludes that for the people of Calcasieu and Cameron parishes, on average, 46 cents of every dollar in their pockets comes from the channel.

According to the study, the health of almost half of the Lake Charles metro economy depends on the health of the channel. For instance, nearly one third of jobs in the Lake Charles metro area are tied to the channel and the port authority, and maritime commerce accounts for 46 percent of the Lake Charles economy’s total $14.8 billion of business activity.

“Our community’s economic expansion and overall standard of living are made possible in large part because of an asset many of us take for granted—the Calcasieu Ship Channel,” said Mayor Randy Roach of Lake Charles.

The channel drives Southwest Louisiana’s oil, gas and chemical industries, and as a result of the channel, economic forecasts show that the LNG and petrochemical industries will substantially grow by 2023.

Since the 1920s, the ship channel has become a highway for the delivery of goods, both inbound and outbound, and dozens of companies built facilities on the channel to produce, process, send or receive those goods. The District has grown to become the 11th-busiest port in the United States by tonnage, according to U.S. Army Corps of Engineers, and the channel now acts as a powerhouse for our region’s economy.

“The channel study demonstrates to stakeholders just how vital this waterway is to Southwest Louisiana. The fact that we are a ‘port city’ has brought tremendous economic benefits to our area,” said Bill Rase, executive director of the Port. “And the study gives us a preview of how our economy will benefit from the $80+ billion in capital investments announced for the area—80 percent of which is being made because of the Calcasieu Ship Channel.”

Some key findings of the study (figures are for 2014) include:

  • The ship channel is responsible for nearly 36,000 direct, indirect and induced jobs in the area, or 31 percent of the total employment in the Lake Charles metro area.
  • Fifty percent of local tax revenue is generated from industrial production or maritime services tied directly to the ship channel.
  • Over 80 percent of the manufacturing employment in Lake Charles is strongly tied to waterway-dependent industries.
  • Some 46 percent of the GDP in Lake Charles directly depends on the ship channel for either raw material receipt or for the shipment of finished product.
  • An additional $1 billion of earnings and $1.3 billion of personal income is generated outside of the Lake Charles economy from the ship channel’s production and services.
  • Industries relying on the ship channel produce nearly 13,000 additional jobs outside of the local economy. The total number of jobs in Louisiana generated by the ship channel is nearly 50,000 jobs or almost 2 percent of the state’s workforce.
  • The ship channel and associated industrial production contributed $916 million in federal taxes in 2014; that figure is expected to rise to $1.3 billion in 2023.

These impacts will grow substantially in the next several years as the regional economic boom continues to materialize. If the proposed 19 industrial projects tied to the ship channel are completed and operational in 2023, the study states that the region will see a 25 percent increase in channel-dependent jobs, a 78 percent expansion in channel-dependent GDP and more than double the local tax revenues generated from channel–dependent companies.

“Its [the ship channel’s] economic impacts touch every person in our area, not just those who work in the maritime industry but the employees at our petrochemical facilities and our teachers, medical professionals and small businesses as well,” said Mayor Roach. “We should support the continued efforts to secure the funds and resources necessary in maintaining its current depth and width.”

The U.S. Army Corps of Engineers is responsible for dredging the channel to keep it open to deep-draft ships, but insufficient federal funding reduces overall transportation efficiency on the channel. Without regular dredging, the channel becomes shallower and narrower, meaning deep-draft shifts cannot travel it with a full load. Lighter loads means more ships are needed to deliver the same cargo, decreasing efficiency and increasing transportation costs.

“Multi-billion dollar industrial facilities along the ship channel will count on having a reliable waterway to transport their goods,” said Channing Hayden, director of navigation for the District. “The ship channel must be dredged yearly to ensure that it meets the 400-foot-wide and 40-foot-deep federally mandated requirements.”

Numerous Port tenants are contributing to the economic boom, and many rely on efficient channel access. Companies such as Magnolia LNG, Citgo, IFG Holdings, Sasol, Cameron LNG/Sempra Energy, Trunkline LNG, G2X Energy, Golden Nugget Lake Charles, L’Auberge Casino Resort Lake Charles and many more, supply the region with high-demand jobs, far-reaching visibility for the area and dollars for the economy.

“The staff and board of commissioners of the District have maximized the potential of the channel and have made it a powerful economic artery for the state and nation,” said Swift.

Deep-draft ship traffic is projected to double over the next ten years, growing from 1,022 annually to over 2,183 vessels in 2023. The Port can double ship traffic without a problem, as long as the federal government meets its responsibility to properly maintain the channel, which means advocating for channel maintenance funding remains a top priority for Port officials.

Early this year, the Corps of Engineers added $16 million from discretionary funds provided by Congress to its FY2015 spending plan for the channel’s continued operation and maintenance. The discretionary spending was in addition to the $11.7 million for the channel in the FY15 budget passed by Congress.

The total $27.7 million in FY15 was a slight increase from FY14’s total budget and discretionary allocation of $26.24 million, but far short of the $30 million to $40 million needed annually to properly dredge the channel.

The channel study states that the incoming channel-dependent expansions are forecasted to boost local revenue tied to the channel by nearly 80 percent to $10.2 billion by 2023.

Taking significant tax implications into consideration, proper channel maintenance at the congressionally authorized draft and width of 40 feet deep by 400 feet wide is critical to supporting planned industrial expansions.

“The findings in the channel study will provide the data the Port needs to continue lobbying efforts at the local, regional, state and federal levels to secure adequate funding for channel operations and maintenance,” Rase said.

With the channel’s 75th anniversary—as well as the 90th anniversary of the Port—arriving in 2016, the public is once again called to see the bigger picture and envision Southwest Louisiana’s best possible future. The importance of the ship channel reaches across the generations, and we must be its caretakers in order to keep our link to the rest of the world open.

To view the full channel study, click here. The channel study was conducted by CSRS and Taimerica Management Co.

The Lake Charles Harbor and Terminal District is governed by a seven-member board of commissioners and comprises two marine terminals and over 5,000 acres of property zoned for industrial use, including an industrial park. For more information, call 337-439-3661.