OCS Study

MMS 2001-020

Coastal Marine Institute

Lafourche Parish and Port Fourchon,

Louisiana: Effects of the Outer Continental

Shelf Petroleum Industry on the Economy

and Public Services, Part 2

Cooperative Agreement

Coastal Marine Institute

Louisiana State University

U.S. Department of the Interior

Minerals Management Service

Gulf of Mexico OCS Region
OCS Study

MMS 2001-020

Petroleum Mining on the Outer Continental Shelf,

Gulf of Mexico: Impact on the Economy of and

Public Service Provision in Lafourche, Parish,

Louisiana, Part 2

Authors

David W. Hughes

J. Matthew Fannin

Walter Keithly

Williams Olatubi,

Jiemin Guo

April 2002

Prepared under MMS Contract

1435-01-96-CT-30660-19945

by

Department of Agricultural Economics and Agribusiness

and

Coastal Fisheries Institute

Louisiana State University

Baton Rouge, Louisiana 70801

Published by
iiii

U.S. Department of the Interior Cooperative Agreement

Minerals Management Service Coastal Marine

Institute

Gulf of Mexico OCS Region Louisiana State University

DISCLAIMER

This model and user guide were prepared under contract between the Minerals Management Service

(MMS) and Research and Planning Consultants, Inc. This report has been technically reviewed by the

MMS, and it has been approved for publication. Approval does not signify that the contents

necessarily reflect the views and policies of the MMS, nor does mention of trade names or commercial

products constitute endorsement or recommendation for use. It is, however, exempt from review and

compliance with the MMS editorial standards.

REPORT AVAILABILITY

Extra copies of this model and user guide may be obtained from the Public Information Unit (Mail Stop

5034) at the following address:

U.S. Department of the Interior

Minerals Management Service

Gulf of Mexico OCS Region

Public Information Unit (MS 5034)

1201 Elmwood Park Boulevard

New Orleans, Louisiana 70123-2394

Telephone: (504) 736-2519 or

 1-800-200-GULF

CITATION

Suggested citation:

Hughes, D.W., J.M. Fannin, W. Keithly, W. Olatubi, and J. Guo. 2001. Lafourche Parish and Port

Fourchon, Louisiana: Effects of the Outer Continental Shelf Petroleum Industry on the

Economy and Public Services, Part 2. Prepared by the Louisiana State University, Coastal

Marine Institute. U.S. Dept. of the Interior, Minerals Management Service, Gulf of Mexico

OCS Region, New Orleans, LA. OCS Study MMS 2001-020. 51 pp.
v

TABLE OF CONTENTS

LIST OF FIGURES ........................................................... vii

LIST OF TABLES ............................................................ ix

EXECUTIVE SUMMARY ...................................................... xi

I. INTRODUCTION ............................................................ 1

II. GULF OF MEXICO PETROLEUM ACTIVITIES .................................. 1

A. Introduction .......................................................... 1

B. A Brief History of Oil and Gas Activities ..................................... 2

C. An Era of Cautious Optimism ............................................. 3

D. Oil Production ........................................................ 3

E. Gas Production ........................................................ 4

F. Future Activities ....................................................... 5

III. DEVELOPMENT OF PORT FOURCHON ...................................... 7

A. Introduction .......................................................... 7

B. Non-OCS, Petroleum-Based Economic Activities .............................. 9

1. Louisiana Offshore Oil Port ......................................... 9

2. Waterborne Commerce ............................................ 9

3. Commercial Fishing Activities ....................................... 9

C. Oil- and Gas-Based Economic Activities .................................... 10

IV. CHANGES IN PARISH SOCIOECONOMIC ACTIVITY ......................... 11

A. Employment Changes .................................................. 11

B. Population Changes ................................................... 12

C. Residential Construction Changes ......................................... 12

D. School Enrollment Changes ............................................. 13

V. THE LOUISIANA COMMUNITY IMPACT MODEL ............................. 14

A. Introduction ......................................................... 14

B. Input-Output and Labor Market Models .................................... 16

C. Fiscal Module of LCIM ................................................ 17

D. Sectors With Direct OCS Oil Industry Links ................................. 18

E. Petroleum-Related Businesses Operating at Port Fourchon ...................... 19

1. Petroleum Production Firms ....................................... 20
vi

2. Other Oilfield Support Firms ....................................... 21

3. Shipbuilding ................................................... 22

4. Water Transportation ............................................ 24

5. Motor Freight (Trucking) Companies ................................. 25

6. Air Transportation (Helicopter Companies) ............................ 25

F. LCIM Model Results .................................................. 26

G. Results From the Input-Output Module ..................................... 26

1. Changes in Parish Population ....................................... 28

2. Local Government Revenue and Expenditure Impacts .................... 29

2.a Changes in local government expenditures ....................... 29

2.b Changes in local government revenues ......................... 30

2.c Net costs to local government ................................ 31

H. Additional Pressures on Publicly Provided Services ............................ 35

1. City Water .................................................... 35

2. Roads ........................................................ 35

3. Additional Costs to Local School System ............................. 36

VI. SUMMARY AND CONCLUSIONS .......................................... 36

REFERENCES ............................................................... 37

APPENDIX A ............................................................... 41
vii

LIST OF FIGURES

Figure Page

 1 Offshore Oil Production, 1985-1997.......................................................... 4

 2 Offshore Gas Production, 1985-1997......................................................... 5

 3 Port Fourchon and Surrounding Area.......................................................... 8

 4 Employment in Lafourche Parish, 1969-1997............................................. 11

 

 5 Population in Lafourche Parish, 1969-1997................................................ 12

 6 Residential Construction in Lafourche Parish, 1969-1997......................... 13

 7 Public and Private K-12 School Enrollment in Lafourche Parish, 

1989-1997.................................................................................................... 14

 8 Overview of the Louisiana Community Impact Model .............................. 15 

 9 Petroleum Mining Employment in Lafourche Parish, 1982-1998.............. 22

 10 Shipbuilding Employment in Lafourche Parish, 1987-1997...................... 23

 11 Water Transportation Employment in Lafourche Parish, 1982-1998......... 24

 12 Actual versus Predicted Population Change, Lafourche Parish, 

1994-2002..................................................................................................... 29

 13 Estimated Local Lafourche Parish Government Spending under Baseline 

and Oil Shock Scenarios, 1995-2002 ........................................................... 32

 14 Estimated Local Lafourche Parish Government Revenue under Baseline 

and Oil Shock Scenarios, 1995-2002 ........................................................... 33 

 15 Estimated Local Lafourche Parish Government Revenues Less Costs 

under Baseline and Oil Shock Scenarios, 1995-2002 ................................... 34 

 
ix

LIST OF TABLES

Table Page

 1 Projected Daily Oil and Gas Production in the Gulf of Mexico, 

1998-2002.................................................................................................... 6

 2 Companies Operating out of Port Fourchon that Support OCS Petroleum

Activity.................................................................................................... 19

 3 Ordinary Least Squares (Regression) Analysis Results Indicating 

Employment in Lafourche Parish Water Transportation, Ship Building, 

and Mining Industries as a Function of Deep Water Outer Continental 

Shelf Oil Industry Activity........................................................................ 21

 4 Direct, Indirect, and Induced Changes in Employment due to OCS 

Petroleum Industry Activity in Lafourche Parish, 1995-2002.................. 27

 

 5 Direct, Indirect, and Induced Changes in Output due to OCS 

Petroleum Industry Activity in Lafourche Parish, 1995-2002................... 28

 6 Predicted Changes in Local Government Expenditures for Lafourche 

Parish Under OCS Oil Industry Development, 1995-2002.................... 30

 7 Predicted Changes in Local Government Revenues for Lafourche 

Parish Under OCS Oil Industry Development, 1995-2002.................... 31

 
xi

EXECUTIVE SUMMARY

Published analysis indicates that oil production from the Gulf of Mexico will increase in the

range of 35 to 70 percent between 1998 and 2002 (7-10 percent per year). Production from

deepwater fields will soon account for up to 64 percent of total Gulf of Mexico oil (compared to 26

percent in 1997). This increase in deepwater activity will require considerably more land based

services than is currently available. Limitations on such facilities could place restrictions on future

deepwater activities.

Port Fourchon’s strategic location provides it with a competitive advantage as a supply base for

oil-and-gas related activities in the Central Gulf of Mexico. These activities are diverse, ranging from

supply boats used to service oil and gas rigs to the maintenance and repair of mobile drilling rigs. 

Currently, more than 600 offshore platforms are located within a 40-mile radius of Port Fourchon and

the Port is likely to play an increasingly important role as development in the Outer Continental Shelf

(OCS) progresses. 

Further development of OCS activity and Port Fourchon is expected to markedly effect

Lafourche Parish. Rapid increases in parish employment, which began in 1995, have continued in 1998

(2,184 new jobs) and have been concentrated in water transportation and shipbuilding.

 Community Impact Models (CIM) quantify the linkages among economic activity in local

communities and the demand for and ability to support local government services. A CIM developed

for Louisiana is used to evaluate the impact of the OCS petroleum industry on the economy and local

government finances of Lafourche Parish. An input-output model represents the local economy. This

model used data collected prior to January 2000.

The OCS petroleum industry has and will continue to have a significant impact on the Lafourche

Parish economy according to model results. Based on published estimates of OCS activity from 1995

through 2002, the industry is predicted to be directly and indirectly responsible for the addition of 6,349

jobs and $603 million in total output. But U.S. Census estimates indicate that the Lafourche Parish

population has continued to experience slow growth through 1997. Dramatic declines in parish

unemployment levels (starting in 1995) indicate that many new jobs have gone to the unemployed and

to workers commuting into the parish. However, population levels should ultimately begin to show

strong growth. For example, model results predict an increase in population of 4.2 percent from

88,263 in 1997 to 91,977 in 2002.

Model results also indicate increases in various revenue and expenditure categories due to the

OCS petroleum industry. Total, inflation-adjusted, revenues paid to local governments are expected to

increase by $20 million (11.2 percent) in 2002 from the 1995 level. Model results also indicate marked
xii

increases in expenditures ($9.6 million) by 2002 thus implying that ongoing activity in the Gulf of

Mexico should not strain the ability of local governments to deliver publicly provided services. 

However, this result is tempered because certain costs incurred by local governments due to the OCS

petroleum industry, such as a major expansion in the water system, are not accounted for in model

results. Such costs are an addition to costs increases predicted by the model. Hence, the ability of local

governments to meet increases in cost due to the expansion of the OCS petroleum industry could be

problematic. Further, a detailed study shows that State Highway 1 (LA 1) is receiving significant

damage as a result of OCS activity. Because it is not a local responsibility, the cost of maintaining and

upgrading the road is also not accounted for in model results.

Finally, the historical development of the OCS petroleum industry and the resulting impacts on

economic and population levels in Lafourche Parish has been boom and bust. Increases in population

and economic activity could and in some cases are already requiring substantial new investment in local

infrastructure. If activity in the OCS petroleum industry should decrease rapidly in the future, local

governments may incur the costs of infrastructure development without obtaining the levels of revenue

needed to meet such costs. 
1

I. INTRODUCTION

In the summer of 1996, the Executive Director of the Greater Lafourche Port Authority

(responsible for the operation of Port Fourchon) wrote the Regional Director of the Minerals

Management Service, Gulf of Mexico Region, calling his attention to the growing truck traffic on

Louisiana State Highway 1 (LA 1) due to the increasing oil related activities on the Outer Continental

Shelf (OCS) in the Gulf of Mexico. The increase in truck traffic raised the concern that the road is and

will continue to be detrimentally affected. Hence, the ability of the road to handle increasing levels of

truck traffic is questionable.

This report grew out of that concern. The report provides a brief history of OCS activities in

Gulf waters, describes the current expansion in exploration, development and production activities on

the OCS, and examines the prospect for future activities. Resulting growth in the Lafourche Parish

economy is examined both from long run and more recent perspectives. The increasing activities of the

OCS oil and gas industry have strongly affected the Lafourche Parish economy and Port Fourchon is

an important locus for these effects. This report describes the Port and its environs, focusing on issues

related to activities on the OCS. 

Typically, rapid economic growth places stresses on a wide range of publicly provided services

from schools, to police and fire protection, to welfare agencies, to provision of roads and utilities. The

effects of the growth in the OCS petroleum industry on a range of public services in Lafourche Parish

are discussed. In some cases, the offshore petroleum industry places unique stresses on public

services. These are also described and discussed. (In particular, a detailed analysis of the impact of

OCS petroleum industry activity on LA 1 issue is provided in the companion document, “An Analysis

of LA Highway 1 in Relation to Expanding Oil and Gas Activity in the Central Gulf of Mexico” (Guo et

al., 2000). 

A major portion of the research presented herein involved the development of a regional

economic model for Lafourche Parish and Port Fourchon. Accordingly, regional modeling in general,

the regional model developed for this study, and the results from that model are extensively discussed. 

Also provided are discussions of the parish, the port, and oil and gas activity in the Gulf of Mexico.

II. GULF OF MEXICO PETROLEUM ACTIVITIES

A. Introduction

The Gulf of Mexico, almost completely surrounded by the United States, Mexico, and Cuba, is

an oval sea encompassing some 3.9 million square kilometers. With approximately four thousand oil

and gas platforms along the shelf and slope regions, the Gulf of Mexico is the most intensely developed

region of the world on the basis of offshore oil and gas production and accounts for 90 percent of all oil

and gas production in offshore waters of the United States (Louisiana Mid-Continent Oil and Gas
1 The U.S. domestic production of oil equaled almost 2.4 billion barrels in 1995 while the

production of gas equaled 18,902 billion cubic fee. Production of oil from the Gulf of Mexico

Outer Continental Shelf (OCS), defined, with some exceptions, as the area of oceans beyond

the state boundaries out to 200 miles offshore, in 1995 (357 million barrels) represented 15

percent of the nation’s 2.4 billion barrels produced while production of gas from the Gulf of

Mexico OCS (5,015 billion cubic feet) represented more than a quarter of the nation’s total

domestic supply.

2 This legal dispute emanated from a 1945 declaration by President Truman that the United

States maintained ownership of natural resources of the seabed beyond the coastal states three

nautical mile jurisdiction.

3 This figure may be somewhat inflated because some tracts may have been returned and

reissued at a subsequent date.

2

Association, 1996).1 Between 1954 and 1993, oil and gas activities generated more than $90 billion to

the U.S. Treasury in the form of lease bonuses and royalties (American Petroleum Institute, 1998).

B. A Brief History of Oil and Gas Activities

While offshore oil and gas development dates back about a century ago to Santa Barbara,

California, 1933 is considered the benchmark year for activities in the Gulf of Mexico. It was in this

year that the first attempt to drill in the offshore waters of the Gulf of Mexico was made and the first

successful producing well became active four years later in 1937. This well, about a mile offshore, was

drilled in 13 feet of water. In 1947, Kerr-McGee Oil Company completed the first well completely

beyond sight of land. This well, which produced 600 barrels of oil per day, established the pattern of

supporting offshore wells from onshore bases (Weber et al., 1990). Following a legal dispute between

the federal government and the states involving ownership of the offshore seabed adjacent to the states

coasts, the federal government, in 1954, conducted its first sale of offshore drilling rights.2 Since that

initial sale, more than 100 thousand tracts totaling more than 500 million acres have been offered for

lease and more than 40 million acres have been taken for lease3 (Weber et al., 1990).

Through time, the industry became more experienced and developed wells in ever greater

depths. By the mid-1950's, wells fifty miles away from land were in operation (Weber et al., 1990). 

As of January 2000, 3,971 active oil and gas platforms were operating in the Gulf of Mexico OCS

(Minerals Management Service, 2000). Exploration and drilling activities associated with these wells

require substantial land based infrastructure to ensure continued operation. This land based

infrastructure -- including oil field equipment dealers, air transport, marine equipment and transportation

services, and contract labor and engineering services, to name just a few -- is located largely in

Louisiana and Texas and contributes significantly to the economies of local coastal communities.

Until recently, the vast majority of oil and gas production from the Gulf of Mexico OCS was

shallow water based (defined as taken from depths of less than 1,000 feet). As recently as the late
3

1980's, most of the conventional fields were mature and moving toward production decline (the Gulf of

Mexico was being referred to as the “Dead Sea”). This observation was discredited during the 1990's,

however, as a result of several factors including significant deepwater discoveries, new exploration and

extraction technologies, and deepwater royalty relief (Cranswick and Regg, 1997). 

C. An Era of Cautious Optimism 

The rejuvenation of oil and gas activities in the Gulf of Mexico OCS is generally credited to

three factors according to production analysts at Minerals Management Service (Cranswick and Regg,

1997). First, there have been significant discoveries in the deepwater shelf of the Gulf of Mexico in

recent years. In 1997, for example, eleven new deepwater discoveries were announced. Second, new

and improved technologies have been developed and implemented in recent years, which have

permitted the extension of the conventional fields and increased discoveries on fields in deeper waters. 

Third, the passage of Public Law 104-58, Title III, the OCS Deepwater Royalty Relief Act (signed on

November 25, 1995) appears to have provided a stimulus to deepwater bidding and leasing activities. 

For example, before the passage of the OCS Deepwater Royalty Relief Act in 1994, 49 bids were

submitted on Gulf of Mexico tracts in excess of 800 meters. After enactment of the Act, the number of

bids had increased to 722 in 1996 and to more than 1,100 in 1997 and as of April 2000, there were

3,670 leases in water depths of 1000 feet or greater (Baud et al., 2000). As a result, economic

conditions have been favorable in recent years (Cranswick and Regg, 1997) although output prices

have followed an erratic pattern of declines and increases from 1997 through 2000. Particularly

pronounced growth since the early 1990's has been in deepwater activities (in excess of 1,000 feet of

water) and there is cautious optimism that these offshore activities will continue, and likely expand, well

into the next century. To assess oil and gas activities in the Gulf of Mexico, recent trends are first

presented. Then, attention is turned to analysis of future activities based on available forecasts and

other relevant information.

D. Oil Production

Production of oil from the Gulf of Mexico OCS for the 1985-97 period is illustrated in Figure

1. Overall, annual production ranged from a low of 275 million barrels in 1990 to a high of 412 million

barrels in 1997. Examination of the data suggests two distinct trends during this 13 year period. The

first, from 1985 to 1990, is one of a sharp decline in total production. Overall, total production during

this period fell by about 20 percent. This decline is generally associated with the declining price of the

products during this period. The second trend, evident from 1990 through 1997, is one of increasing

total production. During this period, production of 

oil from the Gulf of Mexico (OCS) grew by 50 percent with the last four years exhibiting particularly

pronounced production increases (Minerals Management Service, 1999).

The increasing production since 1990 is primarily the result of expanding deepwater activities

(defined here as production in more than 1,000 feet of water). Deepwater production of oil from the

Gulf of Mexico equaled 12 million barrels in 1990. By 1997, deepwater production had increased

more than ninefold to 108.5 million barrels (Figure 1). Overall, the share of Gulf of Mexico OCS oil
4

In one recent economic study, for example, Walls (1994) predicted that Gulf of Mexico oil

production would decline from about 277 million barrels in 1989 to about 160 million barrels

by the year 2000. Similarly, production of gas was predicted to fall from 4275 bcf to 3160

bcf. Walls under-predict activity because her predicted oil and gas wellhead prices were well

below current prices and because the technological development supporting current expansion

in deepwater activities was not foreseen.

4

production represented by deepwater activities was 26.3 percent in 1997 as compared to 4.4 percent

in 1990 (Minerals Management Service, 1999).

E. Gas Production

Natural gas production from the Gulf of Mexico (OCS) is given in Figure 2 for the 1985-97

period. Total production, as indicated, increased from 4.1x109 mcf in 1985 to 5.2x109 mcf in 1997, an

increase of 26.4 percent. Production of natural gas from deepwater activities increased from 3.1x107

mcf in 1990 to 3.8x108 in 1997, an over tenfold increase. Overall, the share of the Gulf of Mexico

OCS production derived from deepwater activities increased from less than 1 percent in 1990 to 7.4

percent in 1997 (Minerals Management Service, 1999). Predicting future Gulf of Mexico oil and gas

activities is, at best, imprecise with the level of imprecision increasing in relation to the length of the

forecast period.4 Having given this cautionary note, some forecasts and indications of future activities

are contained herein.
5

Source: Minerals Management Service, 1999

85 86 87 88 89 90 91 92 93 94 95 96 97

Year

0

100

200

300

400

500 Oil 

Other Deep Water

Source: Minerals Management Service, 1999

85 86 87 88 89 90 91 92 93 94 95 96 97

Year

0

1000

2000

3000

4000

5000

6000 Gaz 

Other Deep Water

Figure 1. Offshore Oil Production, 1985-1997.

Figure 2. Offshore Gas Production, 1985-1997.

F. Future Activities

Analysis conducted by MMS (Melancon and Roby, 1998) indicates that oil production from

the Gulf of Mexico will increase in the range of 35 percent to 70 percent between 1998 and 2002, or at

a rate of 7 percent to 10 percent per year (Table 1). 

Depending on assumptions used in the analysis, production of gas will either rise by as much as

15 percent or decline by 6 percent. Melancon and Roby suggest that production from deepwater fields

will account for 56 percent to 64 percent of the total Gulf of Mexico oil production by the year-end

2000 (compared to 17 percent as of 1996) and from 23 percent to 30 percent of the gas supply

(compared to 6 percent as of 1996). This increase in deepwater activity will, of course, require

considerable land based services and Melancon and Roby recognize that limitations of land based

service facilities could place restrictions on future deepwater activities.
6

Table 1 

Projected Daily Oil and Gas Production in the Gulf of Mexico, 1998-2002. 

Rate Projections - GOM

1998 1999 2000 2001 2002

Low Oil MBOPD*

(Decline Used)

1,226 1,493 1,592 1,606 1,976

High Oil MBOPD*

(No Decline used)

1,347 1,667 1,816 1,874 1,976

Low Gas Bcfd**

(Decline Used)

13.27 13.43 13.39 12.83 12.43

High Gas Bcfd**

(No Decline Used)

15.26 16.30 17.07 17.25 17.54

* Oil in MBOPD includes condensate.

** Gas in BCFPD includes associated or casinghead gas

Source: Melancon and Roby, 1998.

Several indicators suggest considerable current and near-term future expansion of deepwater

oil and gas activities in the Gulf of Mexico. Drilling permit applications (approved by the Minerals

Management Service) increased from 39 in 1992 to 126 in 1996. Rigs drilling in federal shallow and

deepwater for the period followed a similar trend, increasing from three in 1992 to 19 in 1996 (monthly

average). Similarly, for federal shallow and deepwater, the total number of fields in production equaled

16 in 1996 compared to only six in 1992 while the total number of fields with proven reserves

increased from 15 in 1992 to 25 as of June 1996 (Melancon and Roby, 1998).

Baud et al. (2000) suggest that more recent information supports continued and even

accelerated interest in deepwater activities in the Gulf of Mexico. They report, for instance, that an

additional 11 deepwater discoveries were announced in 1998. Furthermore, the 1997 lease sales in

the Central and Western Planning Areas of the Gulf of Mexico received set records in terms of the

number of bids received, tracts bid on, and the number of tracts leased in deepwater. The average

number of rigs drilling for oil and natural gas in the deepwater of the Gulf of Mexico increased from 18

in 1996 to 26 in 1997. Finally, Baud et al. (2000) report that deepwater oil production surpassed

shallow-water production in late 1999. The steady increase in deepwater gas production has offset the

recent declines in shallow-water gas production.
7

While past activities do not necessarily reflect future activities, the information provided above

suggests significant future activities in the deepwater of the Gulf of Mexico, ceteris paribus. Much of

the ongoing and anticipated future activities are concentrated in the Central Planning area and most are

easily accessible from the Port Fourchon area. This study presents an analysis of the impact of ongoing

deepwater oil and gas activities on Port Fourchon and the Lafourche Parish area and evaluates

potential impacts associated with expanding activities.

III. DEVELOPMENT OF PORT FOURCHON

A. Introduction

Port Fourchon, located in Southeast Louisiana near the mouth of Bayou Lafourche in southern

Lafourche Parish, is the only major Louisiana port located directly on the Gulf of Mexico (see Figure

3). The Port covers 3.6 thousand acres and extends approximately three miles along the east side of

Bayou Lafourche from its junction with Belle Pass and Pass Fourchon to the Flotation Canal (U.S.

Army Corp of Engineers and Greater Lafourche Port Commission, 1994).

LA 1 is the only road providing surface access to Port Fourchon from the rest of the state. 

From where it dead-ends in Grand Isle, LA 1 runs north past Port Fourchon through Leeville, Golden

Meadow, Galliano, Larose, Lockport, and almost to Raceland before it connects to U.S.

90. U.S. 90, in turn, runs east to New Orleans and west through Houma and New Iberia to

Lafayette. At Lafayette and in the New Orleans area, U.S. 90 connects with 

U.S. Interstate 10 (I-10), part of the interstate highway system. The technical term for the connection

from U.S. 90 to the Port is “intermodal.” Unlike commerce moving on U.S. I-10 or U.S. 90, which

moves through the area and can go to other places and states, commerce going to Port Fourchon has

to stop there and be loaded on a boat - another “mode” of transportation - to continue its journey (U.S.

Army Corp of Engineers and Greater Lafourche Port Commission, 1994). 

Port Fourchon’s waterway connections are of primary importance to its functions as a port. It

is connected to the Gulf of Mexico by a navigation canal dredged through Bayou Lafourche and Belle

Pass to the Gulf. Currently, the canal is 20 feet deep, approximately four miles long, and has a jetty at

the mouth. While this canal is of primary importance to the Port’s business, the port is also connected

by a canal dredged in Bayou Lafourche north to Lockport. At Larose, this canal bisects the southern

arm of the Intercoastal Waterway, giving Port Fourchon access to this waterborne traffic (U.S. Army

Corp of Engineers and Greater Lafourche Port Commission, 1994). 

Federally constructed projects provide access on Bayou Lafourche from Lockport, Louisiana,

to the Gulf of Mexico. Channels are maintained by the Federal Government with the exception of the

reach (section) extending from Port Fourchon to the Gulf. This section is maintained by the Greater

Lafourche Port Commission (U.S. Army Corp of Engineers and Greater Lafourche Port Commission,

1994).
8

Port Fourchon is, first and foremost, a land based support terminal for the offshore oil and gas

industry in the Central Gulf of Mexico. As stated in a 1994 U.S. Army Corps of Engineers report

(p.19) “the economic viability of Port Fourchon is directly related to the exploration and production

activities of the offshore oil and gas industries operating in the Federal waters of the Gulf of Mexico.” 

The Port also provides logistical support for several other types of economic activities (U.S. Army

Corp of Engineers and Greater Lafourche Port Commission, 1994). These activities - including the

Louisiana Offshore Oil Port, waterborne commerce, and commercial fishing- are briefly examined

below. Then, a more detailed examination of the offshore oil and gas based services housed out of Port

Fourchon is provided.
9

Figure 3. Port Fourchon and Surrounding Area
10

B. Non-OCS Petroleum-Based Economic Activities

1. Louisiana Offshore Oil Port: The Louisiana Offshore Oil Port (LOOP) is located

approximately 21 miles south-southwest of Port Fourchon. The port, which became operational in

May of 1981, is the only deepwater port operating under U.S. license. The port was built to facilitate

the unloading of imported crude oil from oceangoing tankers. LOOP is a monobuoy facility that

supports tankers up to 700 thousand deadweight tons. Crude oil is offloaded and pumped to

underground storage areas in the Galliano Salt Dome, located on the east side of Bayou Lafourche near

Golden Meadow, Louisiana. From there, the crude can be piped to storage areas and refineries

throughout Louisiana, Texas, and the Midwest. Connection to five pipelines gives LOOP access to

more than 30 percent of the nation’s refinery capacity (U.S. Army Corp of Engineers and Greater

Lafourche Port Commission, 1994). LOOP was developed to handle up to 1.2 million barrels of crude

oil per day. In 1995, LOOP handled approximately 685 thousand barrels of oil per day, or more than

250 million barrels per year. LOOP handles 10 percent of all crude oil imports entering the United

States (Louisiana Dept. of Transportation and Development, 1998).

2. Waterborne Commerce: Given its prime location, near the Gulf of Mexico mouth of

Bayou Lafourche, Port Fourchon supports considerable internal waterborne commerce. As discussed

in a 1994 U.S. Corps of Engineers feasibility study, Bayou Lafourche is navigable from upstream to

the northern end of the Federal navigation project in Lockport, Louisiana, to the Gulf of Mexico. This

waterway links the communities of Raceland, Lockport, Larose, Golden Meadow, and Leeville to the

Gulf Intracoastal Waterway. The Gulf Intracoastal Waterway intersects Bayou Lafourche at Larose

(Gulf Intracoastal Waterway mile 35) (U.S. Army Corp of Engineers and Greater Lafourche Port

Commission, 1997). 

Waterborne commerce on Bayou Lafourche averaged approximately 1.15 million tons

annually during 1987-90. With the recent increase in OCS activity in the Central Gulf of Mexico, the

significance of Bayou Lafourche in the movement of cargo in support of OCS activities has also

increased. Between 1990 and 1992, for example, freight traffic along Bayou Lafourche advanced from

approximately 1.2 million tons to 2.0 million tons, or by 70 percent. By 1994, reported freight traffic

had advanced to more than 3.1 million tons and advanced again to 4.2 million tons in 1996. Overall,

1996 freight traffic exceeded the 1990 traffic by 250 percent (U.S. Army Corp of Engineers and

Greater Lafourche Port Commission, 1994).

3. Commercial Fishing Activities: Commercial fishing has long been an important way of

making a living for residents of the Golden Meadow-Leeville-Port Fourchon area. Before the full

development of Alaska’s fisheries, Louisiana generally ranked either first or second (after

Massachusetts) when evaluated on the basis of commercial landings.

The area surrounding Port Fourchon lies in the heart of Louisiana’s commercial seafood

industry. Because of the shallow drafts of the fishing boats and the traditional residence patterns of the

fishing families, commercial vessels tend to tie up along the banks of Bayou Lafourche. The ex-vessel

(dock) value of commercial marine products landed in Lafourche Parish in 1997 equaled $27.7 million,
11

or approximately 8 percent of the state’s $330.6 million reported harvest (Louisiana State University

Agricultural Center, 1998). Much of the product landed in the parish is delivered fresh to the New

Orleans market or shipped elsewhere for processing or fresh consumption.

Port Fourchon, at one time, represented an important unloading facility for the shrimp fleet

operating out of Lafourche Parish. The best information on commercial fishing vessel traffic at the Port

is dated and comes from a special census of port traffic conducted by the Greater Lafourche Port

Commission during the month extending from July 15 to August 15 in 1988. During this month, which

tends to be near the peak of the offshore shrimp season, 79 commercial vessels with drafts of 12 feet or

greater made 330 round trips out of the Port. This is approximately one trip per week per vessel which

reflects the common practice among Louisiana’s commercial fishermen (U.S. Army Corps of Engineers

and Greater Lafourche Port Commission, 1994). Given the sharp reduction in the deflated dockside

price of shrimp since the Port Commission survey and the concurrent reduction in fleet size, the 1988

figures are likely to be significantly higher than current activities.

C. Oil- and Gas-Based Economic Activities

Port Fourchon’s strategic location provides it with a competitive advantage as a supply base for

oil and gas related activities in the Central Gulf of Mexico. These activities are diverse, ranging from the

use of supply boats and tugboats to service oil and gas rigs to the maintenance and repair required for 

mobile drilling rigs. As of 1998, more than 600 offshore platforms are located within a 40-mile radius

of Port Fourchon (Falgout, 1999) and the Port is likely to play an increasingly important role as

development in the OCS progresses.

An examination of the types of waterborne cargo transported along Bayou Lafourche helps

establish the importance of Port Fourchon to the offshore oil and gas sector. Specifically, 35 percent of

the 4.2 million freight tons moved along Bayou Lafourche in 1996 constituted machinery (not electrical),

classified under SIC code 7110 (U.S. Army Corp of Engineers, 1997). While statistics do not indicate

the end use for this machinery, most of it is used in OCS related activities (Falgout 1997). Petroleum

and petroleum products represented an additional 27 percent of the total freight tonnage. Finally,

inedible crude materials (such as limestone, gravel, and marine shells) accounted for about 16 percent

of the 1996 freight traffic in terms of tonnage.

The OCS oil industry has numerous links with a variety of onshore and offshore industries. 

These industries range in nature from restaurants that provide food and catering to offshore workers,

shipbuilders that fabricate drill ships and oil well service vessels, air transportation and water

transportation firms, as well as petroleum extraction companies. Estimating the relationship between

growth in OCS petroleum activity and growth in these industries was a major part of the research effort

presented in this document. Accordingly, a detailed discussion of these industries is presented in the

section concerning model application.
12

Source: United States Department of Commerce, Louisiana Department of Commerce

&

&

&&&

&

&&

&

&

&

&

&

&&

&&&

&&&&

&

&&

&&

&

&

&

69 72 75 78 81 84 87 90 93 96

Year

15

20

25

30

35

40

45

Thou

&Jobs

IV. CHANGES IN PARISH SOCIOECONOMIC ACTIVITY

A. Employment Changes

The total number of jobs in Lafourche Parish has increased rapidly in recent years. While other

factors, such as a healthy national economy, contributed to this increase, a sizeable portion is due to

activity in the deepwater offshore oil industry. From 1977 to 1998, employment in Lafourche Parish

grew at an annual rate of 1.6 percent (Louisiana Dept. of Labor, No Date). However, the growth rate

does

not

reflec

t the

cyclic

al

natur

e of

the

paris

h

econ

omy

(due

in

part

to the

cyclic

al

natur

e of

the petroleum industry). Total jobs in the parish increased from 28,235 in 1977 to 34,119 in 1981 (a

20.8 percent increase over a five-year period) (Figure 4). 
13

Figure 4. Employment in Lafourche Parish, 1969-1997.

In the years preceding 1986, employment dropped in 1983 (to 30,934 jobs) but increased in

1985 (32,130 total jobs). At that point, employment dropped by more than 5 percent in 1986 (as a

net of 1,644 jobs were lost) and remained stagnant until 1990. Growth in employment then resumed at

a slow pace. Rapid increases in employment began in 1995 and are estimated to have continued into

1998. Parish employment increased from 35,357 jobs in 1995 to 36,664 jobs in 1996 (an increase of

1,307 jobs or 3.7 percent). With the exception of 1993, this increase was the largest absolute

increase in employment in Lafourche Parish since 1980. Employment estimates showed a similar level

of growth (1,326 jobs) from 1996 to 1997. Estimates through March of 1998 have shown even

stronger increases in employment. Based on this data (provided by the Louisiana Department of

Economic Development, 1998), Parish employment is expected to increase by 2,505 jobs (6.6

percent) to a total of 40,496 in 1998. These increases in employment are consistent with increases in

employment experienced from 1977 to 1978 

(7.7 percent or 2,184 new jobs) during the 1970s oil boom. Recent increases in employment in

Lafourche Parish have been concentrated in the water transportation and shipbuilding sectors.

B. Population Changes

Published estimates through the middle of 1997 (Louisiana Dept. of Economic Development,

1998) did not indicate marked increases in population as a result of the recent and dramatic increase in

deep and shallow water petroleum activity in the Gulf of Mexico. Published Lafourche Parish

population estimates provided in Figure 5 indicate slow growth. Population in the parish grew at an

annual rate of 0.36 percent from 1990 through 1997 as 

compared to an annual population growth rate for the entire state of 0.44 percent during the same

period. However, as discussed later, there are indications that marked increases in population growth

may be starting to occur.
14

Source: United States Department of Commerce

&

&

&

&

& & &

&

&

&

&

&

&

&

& & & & &

& & & & & & & & & & &

69 72 75 78 81 84 87 90 93 96

Year

60

70

80

90

100

Thous

&Population

Source: U.S. Bureau of Census, Construction Statistics Division

+

+

+

+

+

+

+

+

+ +

+

+

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+ +

+

+

,

,

,

,

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1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

Year

0

100

200

300

400

500

600

700

800

Num

,Buildings+Units

Fi gure

5. Pop

ul ation

in Lafo

urche Parish, 1969-1997.

C. Residential Construction Changes

As indicated in Figure 6, residential construction in Lafourche Parish has consistently grown from

a low of 136 buildings and 136 units (multi-unit residential buildings include apartment complexes,

duplexes, and similar buildings) in 1988 to 358 buildings and 427 units in 1997 (U.S. Bureau of the

Census, 1998). From 1988 through 1997, residential construction grew at an annual rate of 11.15

percent in terms of buildings and at an annual rate of 13.82 percent in terms of units. The number of

building units constructed in 1997 either equaled or exceeded 1985 levels. However, residential

construction is still less than the levels seen in the late 1970s and early 1980s (the last sustained oil

boom).
15

Figure 6. Residential Construction in Lafourche Parish, 1969-1997.

The increase in Gulf of Mexico petroleum and exploration activity and resulting growth in Port

Fourchon has undoubtedly contributed to the increase in residential construction in recent years. 

Residential construction, especially in terms of units, has shown continued strong growth from 1995

through 1997. However, the recent increase in residential construction (buildings and units) has not

deviated from the longer term 1988 through 1997 growth trend. Accordingly, trends in residential

construction provide evidence that recent increases in employment have not translated into marked

increases in local population as of 1997.

D. School Enrollment Changes

Parish school enrollment exhibited modest increases from 1990 through 1997 (Figure 7). In

percentage terms, the increase in school enrollment was consistent with estimated changes in population. 

During the 1987-97 period, a low of 17,679 students were enrolled in public and private primary and

secondary education in Lafourche Parish in 1992. Enrollment had increased to 18,759 students by

1996, before declining slightly in 1997 (Louisiana Dept. of Education, 1997a).
5 A detailed discussion of the CIM model for Louisiana (LCIM) is provided in Appendix A.

16

Source: Louisiana Department of Education

&

&

&

&

&

&

&

&

&

89 90 91 92 93 94 95 96 97

175

180

185

190

Pupils 

&Pupils

Figur

e 7.

Publi

c and

Privat

e K12

Scho

ol Enrollment in Lafourche Parish, 1989-1997.

V. THE LOUISIANA COMMUNITY IMPACT MODEL

A. Introduction

In recent years, policy analysis tools called community impact models (Johnson 1991, 1996)

have been developed to provide policy leaders a way to measure the potential impact of policy decisions

on designated areas. Community Impact Models (CIM) are a further development from earlier efforts

where models of the local economy have been joined to demographic models of the community (Jones

et al., 1988).

CIMs quantify the linkages among the three major components (economy, government revenue,

government service provision) of the community economics local government system (Figure 8).5 When

a change in demand for an industry basic to the local economy occurs, initial economy activity develops

(Block 1, Figure 8). The interdependency of local industries and spending behavior of local residents
6 For example, as local per capita income grows in Louisiana and many other states, the per

student level of payments from state to local government supporting K-12 education declines.

17

Change in Demand 

for Local Industry

[Block 1]

Multiplier Effects in Local Economy

Direct, Indirect and Induced Effects on

Output, Earnings and Employment

[Block 2]

Changes in Local 

Government Revenue

[Block 3]

Changes in Demand 

for Public Services

[Block 4]

leads to multiplier effects in the local economy (Block 2, Figure 8). An increase in external demand for

the output of the local industry causes that industry to increase its purchases from other local firms and

from local labor. These purchases are dollars injected in the local economy that in turn drive additional

spending. For example, if shipbuilding grows in Lafourche Parish because of increased OCS petroleum

activity, then 

Figure 8. Overview of the Louisiana Community Impact Model

shipbuilders will purchase additional output from local fabricators. The local fabricators will in turn make

purchases of their own. Hence, the re-spending of money interjected by particular types of activity

leads to growth in jobs and income in the entire economy. For this study, any Lafourche Parish

industry directly tied to OCS oil and gas activity belongs to the basic set of industries (Block 1, Figure

8). A major research challenge, therefore, is ascertaining the change in economic activity for industries

such as water transportation and shipbuilding, directly due to growth in OCS activity. 

Multiplier effects from the local economy simultaneously result in increases in local government

revenue and in demand for local public services ((Block 3 and Block 4, Figure 8). Changes in local

government revenues are primarily due to changes in various forms of local taxes (usually property and

sales) and user fees as the economy grows or declines. Intergovernment transfers from state and federal

government to local government entities are another source of local government revenue. Such transfer

payments also tend to change in step with local economic activity.6
18

Similarly, the demand placed on services provided by local government grows as the local

economy grows (Block 4, Figure 8). Changes in local government expenditures occur in a variety of

categories, such as roads and schools. As the economy grows, for example, population would

ultimately grow meaning that schools and roads would become more congested. Spending by local

government would increase as a result. In the CIM, the backward linkages that occur as a result of

government spending also leads to additional multiplier effects within the local economy. That is,

spending by local government to alleviate pressure on publicly provided services, such as increased

spending on education, will also interject dollars into the local economy. As local government revenues

increase, local governments may have some additional discretionary spending, which can be used to

provide new or improved public services.

In this study, a community economic model developed for Louisiana (LCIM, Louisiana

Community Impact Model) is used to evaluate the impact of the OCS industry on the economy and local

government finances of Lafourche Parish. In LCIM, an input-output model and a labor market model

together represent the local economy (Block 2 in Figure 8). A fiscal module represents both the

generation of local government revenue (Block 3 in Figure 8) and the changes in demand for locally

provided public services (Block 4 in Figure 8). The process originates with estimates of the impact of

OCS activity on Lafourche parish industry that directly support such activity (Block 1, Figure 8).

B. Input-Output and Labor Market Models

Input-output (I-O) analysis allows us to look at the flows of products between different

industries of an economy in a formalized framework. As such, I-O analysis is especially useful in looking

at (1) the structure of a local economy and (2) secondary effects that may spin off from an initial change

in economic activity. An I-O model serves as a framework for collecting, categorizing and analyzing

data that concerns the overall structure of a given regional economy (Schaffer, 1989). Thus, the model

serves as a way to link micro decision making at the firm level to economic events at the regional macro

level (Powell et al., 1990). The economy is represented with general categories, such as interindustry

product flows and value-added payments. Relationships between different economic agents are

identified within each major category, such as the level of intermediate product flows between specific

industries. By identifying interrelationships between households and firms and by indicating the presence

or absence of interindustry linkages, I-O models can make an important contribution to the policy

making process (Giarratani, 1990).

"Regional input-output studies attempt to quantify the impacts on the sectors located in a

particular region that are caused by new final demands for products made in the region" (Miller and

Blair, 1985, p. 46). Economic multipliers (estimates of the total change in the regional economy resulting

from an exogenous shock to the economy) are derived by tracing the ripple effect of a given exogenous

change in demand for regionally produced goods and services (Richardson, 1972). Policy relevant

questions concerning the total effect of a demand-side shock to a regional economy, such as or the

growth or decline of an already established industry (California Commission on State Finance, 1988)

can, therefore, be addressed.
7 Changes in the labor force are result in growth in and out commuting. Changes in commuting

are netted from local jobs to estimate local jobs going to local workers. These local workers

may be previous unemployed or nonparticipants in the labor market or new residents.

8 The labor market module and the I-O model also interact in accounting for household spending

induced effect impacts. That is, changes in jobs lead to changes in population and household

earnings. These in turn lead to household spending and additional induced effect impacts.

19

Accordingly, an I-O model is an appropriate tool for examining the impact of growth in OCS

petroleum activity on the economy of Lafourche Parish, especially in regards to growth in Port

Fourchon. The IMPLAN (Impact Planning) modeling system (U.S. Forest Service 1996) will be used

to compute the I-O model used in this study. IMPLAN is considered a ready-made modeling system. 

This modeling system relies on secondary data, such as employment, combined with the assumption that

the regional economy is very similar in structure to the national economy (Hughes and Guedry 1993). 

Because this assumption is often tenuous, ready-made I-O models should be evaluated and altered in

light of other data sources and knowledge concerning the local economy.

Regional I-O models have been conjoined with models that represent the regional labor market

in various ways for a number of years (Miller and Blair, 1985). For this study, a conjoined model is

appropriate because jobs generated in the local economy often go to in-commuters or the previously

unemployed. Not accounting for these possibilities could lead to overestimation of both local population

and resident income growth. Hence, a labor market module (a set of econometric equations) is also

used to represent the local economy. This component of the LCIM model allocated demand for labor

by firms in the local economy between in-commuters, unemployed local workers, and in-migrants.7 This

component of the model also provides population estimates as the local economy grows or declines.8

C. Fiscal Module of LCIM

The fiscal model receives input from the conjoined I-O and labor market module. That is,

changes in population and earnings from the I-O and labor market model are “drivers” in the fiscal

module. For example, tax yields from retail sales are a function of population and income growth. This

growth is determined by results from the I-O and labor market module.

Sixteen equations are included in the Louisiana fiscal module. Six of these equations are in the

revenue generating part of the module. Two equations measure revenue capacity--assessed value and

retail sales. Four direct revenue equations are included--severance tax revenue, state transfer revenue,

federal transfer revenue (for both schools and other functions), and other tax revenue.

Ten expenditure equations are estimated in the fiscal model. These equations attempt to explain

changes in spending for school, road, general, administration and other, law enforcement, waste

disposal, hospital, levee and drainage, fire, parks and recreation, and utility expenditures. Hospital

expenditures include own hospital expenditures, other hospital expenditures, and health care

expenditures. Waste disposal expenditures include solid waste expenditures and sewer expenditures. 
9 A sector is either a single industry or an aggregate of industries in the I-O model.

20

Law enforcement expenditures include expenditures for judicial, police, and corrections. General,

administration, and other expenditures include financial administration, general services/buildings, library,

public welfare, general debt interest, insurance trust, and liquor store expenditures. Changes in local

government expenditures are indirectly driven by changes in population and earnings from the I-O and

labor market module. For example, changes in population and earnings drive changes in property tax

yields, which in term drive changes in spending in K-12 education by local government.

D. Sectors With Direct OCS Oil Industry Links9

As previously stated, the modeling process sketched in Figure 7 starts with estimating the

strength of linkages between Lafourche Parish industries and OCS petroleum activity. To estimate the

impact of the OCS oil industry on the Lafourche Parish economy, changes in levels of economic activity

in all sectors of the Lafourche Parish economy directly affected by the OCS oil industry had to be

estimated. Estimates through 1997 and in some cases 1998 were based on a combination of regression

analyses using employment data (Louisiana Department of Economic Development), telephone

conversations with firms with facilities at Port Fourchon, and data found in Melancon and Roby

concerning OCS Oil Industry activity. Least squares regression analysis was used to aid in our

predictions concerning the direct impact of OCS oil industry activity on employment in the water

transportation, ship building, and mining industries in the parish. That is, the regression analysis was used

to confirm our observations based on other published sources and on the conversations with firms in the

three industries located at Port Fourchon. Estimates after 1997 were based on the assumptions that

estimated relationship between the OCS oil industry and the sector in question would remain unchanged

and of conservative growth in future OCS oil industry activity (4.0 percent per year). Future growth

rates are based on the most recent published projects of Gulf of Mexico OCS petroleum activity

(Melancon and Roby, February 1998) at the time this research was conducted including the slowdown

in OCS petroleum activity due to sharp declines in crude oil prices in the summer of 1998 (Baton Rouge

Advocate, 

August 1, 1998). Growth rates and resulting economic impacts are projected through the year 2002.

Direct major changes in employment and economic activity were estimated for construction,

catering, water transportation, petroleum extraction, shipbuilding, and air transportation. Relatively small

changes in employment and economic activity were estimated for providers of oil field waste disposal, oil

worker medical testing services, and equipment rental.

Other parish industries, such as oil spill clean up firms, diving companies, oil field equipment

manufacturers, and fabricated metal product manufacturers, were also evaluated for changes in

employment due to growth in the offshore oil industry. No growth in employment or output was found

for these industries in Lafourche Parish in relation to growth in the OCS oil industry. Likewise, firms

classified as construction companies are often directly responsible for the construction of deepwater,

offshore oil rigs. These companies usually fall into SIC category 1629, Heavy Construction NEC. 

However, data indicated no growth in this sector in Lafourche Parish in relation to OCS oil industry
21

activity, although, in other parts of the state, the sector is expanding in relation to the level of OCS

activities.

E. Petroleum-Related Businesses Operating at Port Fourchon

The expansion in port facilities is attributable to the growth of the offshore oil and gas industry. 

More than 100 businesses are operating at Port Fourchon as of May of 1999 (Falgout, 1999). The vast

majority of these companies are either directly or indirectly involved in supporting OCS activity,

including deepwater activity. Major commodities shipped through the port include steel pipe, various oil

field fluids, barite, limestone, and fuel. Further, the port is the major point of departure for offshore oil

workers, virtually all by helicopter (Louisiana Dept. of Economic Development, 1998). As shown in

Table 2, these companies fall into a number of major categories.

Table 2 

Companies Operating out of Port Fourchon that Support OCS Petroleum Activity

Firm Firm Type

MINING FIRMS:

 Oryx Energy co. Oil Company

 Greenhill Petroleum Corp. Oil Company

 Agip Petroleum Co. Inc. Oil Company 

 Kinlaw Oil Company (Major)

 Phillips Petroleum Co. Oil Company (Major)

 Marathon Oil Co. Oil Company (Major)

 Arnoco Oil Company (Major)

 Kerr McGee Corp. Oil Company (Major)

 Shell Offshore Oil Company (Major)

 Pool Company Drilling Company

 Rowan Petroleum Drilling Company

 Diamond Offshore Turnkey Drilling Company

 M I Drilling Fluids Oil Field Fluids

 Anchor Drilling Fluids Oil Field Fluids

 Chemrich Oil Field Fluids

 Francis Drilling Fluids Oil Field Fluids

 Ambar Oil Field Fluids

 Baker Hughes Inteq Oil Field Fluids

 Dowell Schlumberger Oil Field Fluids

 OSCA Oil Field Fluids

 SBM Operators Oil Field Fluids

 Bariod Drilling Fluids Oil Field Fluids 

 Subsea International Pipeline Laying Company

 Offshore Pipeline, Inc. Pipeline Laying Company

 Shell Pipeline Corp. Pipeline Laying Company

OTHER OIL FIELD SERVICES:

 Walsh Environmental, Inc. Computers and environmental testing services

 American Oilfield Divers Divers

 Buckner Rental Equipment Rentals

 C-Port/Stone Fuel Supply

 L & L Oil Dock #16 Fuel Supply

 Tetra Oil & Gas Services Oil Field Services

 Land Treatment Systems, Inc. Oil Field Waste Treatment

 Newpark Environmental #1 Oil Field Waste Treatment
22

 Cenac Environmental Services Oil Spill Response Firm

 Hughes Tool Co. Oil Tool Company

 B.J. Services Oil Tool Company

 Halliburton Services Oilfield Cement 

 Chervon Pipeline Company Transmission Pipeline

Table 2 

Continued

TRANSPORTATION:

 Brown & Root (East Main Yard) Intermodal Terminal

 Gulf Star Oilfield Services, Inc. Intermodal Terminal

 Ocean Marine Operators Intermodal Terminal 

 Martin Fuel Dock Intermodal Terminal

 C-Port Intermodal Terminal 

 Offshore Logistics, Inc. Helicopter Transportation Company

 Era Aviation Helicopter Transportation Company

 PHI Helicopters Helicopter Transportation Company

 Airlogistics Helicopter Transportation Company

 Evergreen Helicopters, Inc. Helicopter Transportation Company

 Packard Trucking Trucking

 Ace Transportation Trucking

 Gulf South Systems Tanks for Truck Transportation of Oil Field Fluids 

 Bollinger Fourchon, L.L.C. Shipyard

MISCELLANEOUS SERVICES:

 Lafarge Coporation Construction Cement

 R & C Supply & Lumber Co., Inc. Hardware Store

 Danos & Curole Labor Contractor (Stevedores)

 Lafouche Services, Inc. Medical Testing, Job Drug Testing

 Kajun Sportsman Truck Stops Restaurant

Source: Unpublished Records, Greater Lafourche Port Commission, 1998.

1. Petroleum Production Firms: Nine petroleum production companies maintain operations at

Port Fourchon including major oil producers, such as Phillips Petroleum, and smaller, less well know

firms, such as Greenhill Petroleum Corporation (Table 2). Based on discussion with local firms and

observation by the Port Director, oil producers have a relatively small number of employees located at

the Port (dispatchers and a petroleum engineer). These individuals are responsible for dispatching

equipment and other materials to offshore rigs through either inland barge to ship or truck to ship

(intermodal) transportation facilities at the Port (Falgout, 1997). They are also responsible for

dispatching personnel to and from offshore rigs.

Nineteen other firms at the Port fall into the SIC Code 13 Oil and Gas Extraction (Mining)

Category (Table 2). These companies provide a variety of oil field production support facilities. Ten

firms provide various drilling fluids, such as drilling muds (Falgout, 1997). Drilling fluid company

employees at Port Fourchon are responsible for overseeing the intermodal transfer of drilling fluids, fuel,

and water to offshore rigs. The employees also provide a variety of special services as needed. At least

three independent drilling companies also operate out of Port Fourchon as do several oilfield pipeline

laying companies, some of which are subsidiaries of major petroleum producers.
23

Based on telephone conversations with all of the firms located at the port, 29 companies identified

as belonging to SIC 13 (Petroleum Mining) employed an estimated total of 533 people. More than 80

percent of all current employment was credited to OCS activity. Of the 14 companies that responded to

our inquires in early June 1998, an average increase in employment of 7.2 percent was indicated in the

near future due to increased activity in the deepwater OCS. Regression analysis provided in Table 3

show mining employment in Lafourche Parish as positively and significantly related to the number of deep

water production plans filed with MMS. 

Table 3

Ordinary Least Squares ( Regression) Analysis Results Indicating Employment in Lafourche Parish Water

Transportation, Ship Building, and Mining Industries as a Function of Deep Water Outer Continental

Shelf Oil Industry Activity.

 Independent Variable -------- ----------------- Regression Equation-------------------

Water Transportation Ship Building Mining

Constant 1850.5* 724.55* 901.8*

Exploration Wells 1.3850 Na Na

Deep Water Production Plans 15.629*** Na 3.1402***

Deep Water Production Na .007996* Na

Number of Observations 7 13 7

R-Square 0.9435 0.6757 0.6828

Adjusted R-Square 0.9135 0.6462 0.6194

Note:

Values in the table are beta values.

*Significant at the " = .001 probability level

**Significant at the " =.01 probability level.

***Significant at the " = .05 probability level.

**** Significant at the " =.10 probability level.

Na means that the equation in question does not contain that particular independent variable.

Results for ship building are based on annual data for deep water production and parish employment; results for water

transportation and mining are based on quarterly data (1995-1st quarter 1998) for exploration wells, deep water

production plans, and parish employment. Data for the various measures of OCS production and exploration came

from Melancon and Roby (1998). Employment data came from the Louisiana Department of Economic Development

(1998).

The regression analysis indicated that one additional plan would be expected to result in a slight increase

(3.1 percent) in mining jobs in Lafourche parish. Our projected increase in jobs (7.2 percent) was also
24

,

,

, ,

,

,

,

,

, ,

,

,

, ,

,

, ,

1982 1984 1986 1988 1990 1992 1994 1996 1998

Year

0

500

1000

1500

2000

Jo

,Jobs

consistent with a slight increase in petroleum extraction employment credited to Lafourche Parish

beginning in 1995 (Figure 9).

2. Other Oilfield Support Firms: A variety of firms at Port Fourchon fall into the other oilfield

support services category (Table 2). Analysis of telephone conversations with such firms indicates that

they have a small number of employees at the port. Still, the various services that they provide are

important. Such firms also belong in a variety of different SIC categories. Two oilfield waste treatment

firms are present at the Port as is one oil spill response company. At least

Figure 9. Petroleum Mining Employment in Lafourche Parish, 1982-1998.

one company provides diving services to the offshore petroleum industry. Several companies provide

fuel supplies while at least one company provided medical testing facilities for workers. Several major oil

tool manufacturers, such as Hughes Tools, have employees at the port. Providers of oil field cement,

used to plug-up dry wells and for other purposes, are also present. 
25

Source: U.S. Dept of Commerce, Louisiana Department of Labor

$

$

$ $

$

$

$

$ $ $

$ $

$

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

Year

0

500

1000

1500

2000

Jo

$Jobs

Based on telephone conversations with firms, small increases in employment in oil field waste

treatment, medical, and equipment rental sectors of the economy were assumed for the period of analysis

(1995 through 2002). No growth in employment was assumed for firms that deal with oil field spills or

for diving companies. 

3. Shipbuilding: Shipbuilding is an activity in Louisiana that has historically had strong ties to the

offshore oil and natural gas production industry. Three types of drilling rigs (jack up, semi-submersible,

and drill ship) are used for exploratory wells in offshore waters (Minerals Management Service,

November 1997). Drill ships are ship shaped vessels usually used for such a purpose in water depths of

more than 750 meters. These vessels are usually constructed by 

shipbuilding firms (Minerals Management Service, November 1997). In fact, shipbuilding throughout the

Gulf Coast states has undergone a dramatic revitalization, in large part due to renewed activity in the

OCS.

Figure 10. Shipbuilding Employment in Lafourche Parish, 1987-1997.
26

Employment in shipbuilding has grown in Lafourche Parish to the point where it is the major

parish manufacturing sector (Figure 10). Major shipbuilders in the parish include Bollinger Shipyards,

with three facilities (at Larose, Lockport, and Port Fourchon), North American Shipyards, and Allied

Shipyards, among others (Louisiana Dept. of Economic Development). Seven shipbuilding firms have

facilities located in the vicinity of Port Fourchon. Certain facilities, such as the Bollinger facility at Port

Fourchon, provide vessel repair services. Other facilities, such as the Bollinger yard in Lockport, are

being used to construct ships, some up to 200 feet in length (Bollinger Shipyards Inc, 2000). 

Shipbuilding in the parish is positively and highly significantly related to deep water production

levels based on the regression analysis provided in Table 3. That is, deepwater OSC activity has been

responsible for a significant share of the employment growth in shipbuilding. Based on the R-square

regression value reported for the shipbuilding employment equation reported in Table 3, deepwater OCS

activity has been responsible for 65 percent of the employment growth in shipbuilding from 1985-1997. 

This percentage is comparable to the statement by industry officials that 75 percent of shipbuilding

employment in Louisiana is tied to 

OCS petroleum production activity (Minerals Management Service, November 1997). 

Regression results indicated that a 10 percent increase in OCS deepwater activity would be expected to

lead to a 7 percent increase (120 more jobs from 1997 levels) in shipbuilding employment in Lafourche

Parish.

4. Water Transportation: Firms falling in the SIC category of Water Transportation (SIC 44)

have experienced the largest levels of growth in Lafourche Parish due to deepwater OCS activity (Figure

11). Employment in the sector has increased rapidly since 1995 with a net gain of 167 jobs in 1996, an

additional 323 jobs in 1997, and over 400 new additional jobs in the first quarter of 1998 (Louisiana

Department of Labor, 1998). The sector has been, and continues to be, one of the largest sources of

employment in the parish. It was directly responsible for 6.7 percent of all employment in Lafourche

Parish (with 2,176 jobs) in 1992. By the first quarter of 1998, the percent of parish employment directly

attributable to water transportation increased to 3,394 jobs, or 8.4 percent of total employment in the

parish. Regression analysis based on quarterly employment data from 1995 through the first quarter of

1998 showed that water 
27

Source: Louisiana Department of Labor

&

&

& &

&

&

&

&

& & &

& &

&

&

&

&

1982 1984 1986 1988 1990 1992 1994 1996 1998

Year

0

1000

2000

3000

4000

Jobs

&Jobs

Fi gure

11 .

W ater

Tr anspo

rta tion

E mploy

m ent in

La fourc

he Parish

, 198

2- 1998. 

transportation in Lafourche Parish was a function of OCS exploration wells and deep water production

plans (Table 3). That is, the regression analysis indicates that the increase in employment in the sector

since 1995 has been attributable to growth in deep water oil industry exploration and production activity.

Major water transportation firms at Port Fourchon are often also classified as intermodal terminal

transportation companies. That is, usually using cranes, they either offload equipment and other material

from inland barges or trucks to ocean going vessels for transport to offshore rigs or offload materials
28

from such vessels that have been picked up from offshore rigs. Such firms include Edison Chouest, which

operates the recently constructed C-Port facility designed to service its own supply vessels. Hence, such

companies provide crane loading, fuel delivery, and other services. Some companies provide such

services to subleases; for example, Brown and Root operates crane services as a sublease from Martin

Terminal (Falgout, 1997). Five companies were identified as operators of intermodal terminal facilities at

Port Fourchon (Table 2).

A variety of other services are provided by other companies classified as water transportation

firms. At least five companies in the area provide barge lines while six companies provide barge fleets

(Louisiana Dept. of Economic Development, 1998). Liquid bulk items, such as water, fuel, oil field

waste, and oil field fluids, are generally moved by inland barge either into or out of Port Fourchon

(Falgout, 1997). More than forty firms in the Port Fourchon region were identified as providing tugboat

services for barges and other shipping activity (Louisiana Dept. of Economic Development, 1998). 

5. Motor Freight (Trucking) Companies: Five firms that all specialize in providing motor

freight or trucking services to the petroleum industry have dispatchers at Port Fourchon. All of these

companies have headquarters and major dispatch centers elsewhere in places such as Morgan City and

Lafayette. However, a review of the dispatch records for several companies indicated that a few drivers

reside in Lafourche Parish. Trucking companies are responsible for the transportation of less bulky items,

(liquid bulk items are delivered to the port by inland barge if possible) (Falgout, 1997). Trucking

companies transport most of the pipe, other equipment, groceries and other worker supplies that move

through Port Fourchon to offshore rigs. While the five firms are undoubtedly the most important

providers of motor freight services to Port Fourchon, other trucking firms, such as SAIA, also make a

significant number of deliveries to the port. Because the only alternative mode of transportation is inland

barges, trucking companies provide a vital link to Port Fourchon. As discussed in more detail in the

companion document, “An Analysis of LA Highway 1 in Relation to Expanding Oil and Gas Activity in

the Central Gulf of Mexico” (Guo et al., 2000), the dramatic recent increase in truck traffic to Port

Fourchon has strained the quality of services provided by LA 1, the only road leading directly to Port

Fourchon.

6. Air Transportation (Helicopter Companies): Five companies were identified as providing

helicopter transportation services to offshore facilities from Port Fourchon (Table 2). These firms all

specialize in providing oil industry air transportation support services, often throughout the Gulf Coast. 

The companies usually belong to either SIC Code Classification 4512 (Air Transportation Scheduled),

SIC 4522 (Air Transportation Nonscheduled), or SIC 7359 (Miscellaneous Equipment Rental and

Leasing, NEC). Such firms ferry workers and other as needed to and from offshore oil rigs. An

estimated 6,000 workers annually move through Port Fourchon by helicopter to offshore rigs. These

workers work on rigs for two weeks and then have two weeks off (Falgout, 1997). 

Three helicopter companies at Port Fourchon responded to our inquiries in the Spring of 1998. 

Assuming the three companies are representative of all five helicopter companies at the port, helicopter

transportation firms employed a total of 222 workers at Port Fourchon. Of the three companies

responding to our inquiries, an increase of 31.8 percent in employment in the 
10 Because Port Fourchon has a low population base, most indirect and induced effects would

occur elsewhere in the Parish. In terms of direct growth, increases in water transportation and

air transportation would be for firms located at the port. Some growth in petroleum extraction,

nonresidential construction, ship building and repair, eating and drinking establishments, and

services industries would be in facilities located at Port Fourchon. The percent of growth at

the port would vary between industries. 

29

near future was expected because of increased deepwater OCS activity. Based on company inquiries

and unpublished state employment for Lafourche Parish through 1997, more modest increases in

employment and output were assumed for the sector.

F. LCIM Model Results

Results from the LCIM are provided in terms of the input-output module, labor force module,

and fiscal impacts module. Model results are used to assess the impact of the OCS petroleum industry

on the Lafourche Parish economy. To properly evaluate the impact of OCS activity, one should account

for economic growth that would have occurred in the parish without it. Such a baseline estimate is the

change in the local economy and fiscal sector that would have occurred without the recent and projected

growth in OCS petroleum activity.

It is assumed that the economy of Lafourche Parish would have grown at an annual rate of 1.0

percent from 1995-1998 and at 0.5 percent from 1999-2002 without the development of the OCS

petroleum industry. These growth rates were based on discussions with local government and business

leaders and examination of population and employment trends. Employment data for major employers

oriented toward outside markets and with no connection to the OCS oil industry were especially

scrutinized. Employment data for other industries important to the Lafourche Parish economy, such as

sugar mills and farm machinery manufacturing, indicated little or no growth. Overall population growth

also indicated a slow growing economy without any growth in the OCS oil industry.

G. Results From the Input-Output Module

As previously discussed, direct growth in employment and output was estimated for numerous

parts of the Lafourche Parish economy due to OCS petroleum activity. IMPLAN sectors experiencing

direct growth included Petroleum Extraction, Nonresidential Construction, Ship Building and Repair,

Water Transportation, Air Transportation, Eating and Drinking Establishments, and Services. All other

sectors provided in Table 4 and Table 5 experienced purely indirect and induced impacts in jobs and

output.10

The OCS petroleum industry has and will continue to have a significant impact on the Lafourche

Parish economy according to model results. The industry was responsible for estimated direct and

indirect employment impacts of 531 jobs in 1995, 864 jobs in 1996, 1,270 jobs in 1997 (Table 4). 

Employment impacts are predicted to peak at 1,424 jobs in 1998. Lower impacts in 1999 through 2002

are a result of conservative estimates (made based on volatile oil prices) concerning future growth in OCS
30

petroleum activity. Growth in output showed a similar pattern as output growth peaked at $147 million

(1995 constant dollars) in 1998 (Table 5). It is 

Table 4 

Direct, Indirect, and Induced Changes in Employment due to OCS Petroleum Industry Activity 

in Lafourche Parish, 1995-2002

IMPLAN

SECTOR 1995 1996 1997 1998 1999 2000 2001 2002

1 Agriculture 4.2 6.8 10.1 11.2 4.7 4.8 4.9 5.0

28 Mining 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

38

Petroleum

Mining 41.4 88.3 33.1 39.6 7.6 7.7 7.7 8.0

48 Construction 0.8 1.4 2.0 2.3 0.7 0.7 0.7 0.8

49

Nonresidential

Construction 29.9 74.3 124.2 183.1 123.7 123.6 123.7 123.9

58 Manufacturing 6.3 11.1 17.3 18.6 7.5 7.6 7.8 8.0

392 Ship Building 16.5 73.7 107.8 37.4 37.7 39.7 41.8 43.8

433

Transport and

Utilities 15.5 23.6 38.0 43.9 12.7 13.1 13.5 14.0

436

Water

Transportation 132.8 166.5 322.3 400.9 82.1 85.5 89.0 93.6

437

Air

Transportation 0.0 7.0 7.3 2.6 2.1 2.1 2.1 2.1

447 Trade 51.4 89.1 135.0 149.5 58.1 59.4 60.7 62.2

454

Eating and

Drinking 82.3 93.1 105.2 108.9 81.8 82.2 82.6 83.1

456

Finance and

Real Estate 22.9 37.0 54.1 61.4 19.2 19.8 20.3 21.0

463 Services 112.1 168.2 276.1 322.8 95.7 98.4 101.1 104.6

510 Government 15.0 23.7 37.0 42.2 13.4 13.8 14.2 14.6

Total 531.1 863.8 1,269.5 1,424.4 547.0 558.5 570.1 584.7

Source: Louisiana Community Impact Model(LCIM), Input-Output Module, IMPLAN.

Note: direct changes in employment are in petroleum mining, ship building, water transportation, air 

transportation, nonresidential construction, eating and drinking establishments, and services. Changes in 

agriculture, manufacturing, and transport and utilities are primarily indirect effects while changes in construction, 

finance and real estate, services, and government are primarily induced effect changes.

important to note that impacts are assumed to be additions to growth in previous years. Hence, over the

entire eight-year period, employment impacts are estimated at 6,349 jobs while total changes in output

are estimated to be $603 million.

 

Estimated direct employment impacts due to the OCS petroleum industry in Lafourche Parish

were 289 jobs in 1995 (54.4 percent of 531 total jobs), 476 jobs in 1996 (37.5 percent of 864 total

jobs), 732 jobs in 1998 (57.6 percent of 1,270 total jobs), and 330 jobs in 2001 (57.9 percent of 570

total jobs) (Table 4). Accordingly, an “average” job in industries with direct links to OCS petroleum

production lead to 1.837 total jobs (531 total jobs divided by 289) in the parish in 1995 (or 0.837
31

additional jobs for one direct job). Likewise, in 1998, 1.735 total jobs and in 2001 1.727 total jobs

were generated by an average OCS petroleum related job. Among sectors with purely indirect and

induced impacts, finance and real estate and trade experienced relatively large job impacts. Fairly large

job impacts in services (323 jobs in 1998) were primarily due to the indirect and induced effects of the

OCS petroleum industry on Lafourche Parish.

Table 5

Direct, Indirect, and Induced Changes in Output due to 

OCS Petroleum Industry Activity in Lafourche Parish, 1995-2002

IMPLAN SECTOR 1995 1996 1997 1998 1999 2000 2001 2002

1 Agriculture 118,010 191,305 281,665 313,913 131,567 134,028 136,490 139,573

28 Mining 371 623 1,016 1,219 478 487 496 506

38 Petroleum Mining 5,953,370 12,689,510 4,751,326 5,689,134 1,094,849 1,101,419 1,107,990 1,150,442

48 Construction 74,165 119,850 175,614 199,282 62,381 64,108 65,836 68,072

49

Nonresidential

Construction 1,930,960 4,806,941 8,033,479 11,843,560 7,995,308 8,000,572 8,005,836 8,012,560

58 Manufacturing 1,196,732 2,105,997 3,271,762 3,532,117 1,416,582 1,448,684 1,480,786 1,520,004

392 Ship Building 1,346,230 5,999,970 8,779,054 3,045,815 3,073,855 3,239,215 3,404,575 3,570,718

433

Other Transport and

Utilities 2,546,139 3,894,207 6,259,432 7,225,241 2,098,405 2,161,164 2,223,923 2,305,280

436

Water

Transportation 25,644,802 32,131,138 62,210,520 77,364,184 15,842,864 16,511,623 17,180,382 18,072,058

437 Air Transportation 44,876 1,066,688 1,122,347 403,138 321,053 322,268 323,484 324,996

447 Trade 2,729,803 4,730,583 7,164,705 7,935,991 3,083,769 3,151,656 3,219,542 3,304,033

454 Eating and Drinking 2,466,967 2,792,038 3,156,510 3,262,391 2,454,132 2,465,374 2,476,617 2,490,778

456

Finance and Real

Estate 3,359,889 5,430,565 7,952,549 9,023,963 2,824,318 2,902,541 2,980,764 3,082,023

463 Services 5,533,917 8,306,355 13,632,294 15,941,126 4,723,668 4,857,169 4,990,671 5,163,155

510 Government 427,785 677,955 1,057,866 1,205,357 383,335 393,718 404,101 417,432

Total 53,374,016 84,943,725 127,850,139 146,986,431 45,506,564 46,754,026 48,001,493 49,621,630

Source: Louisiana Community Impact Model(LCIM), Input-Output Module, IMPLAN.

*All Values in 1995 dollars.

Note: direct changes in employment are in petroleum mining, ship building, water transportation, air 

transportation, nonresidential construction, eating and drinking establishments, and services. Changes in 

agriculture, manufacturing, and transport and utilities are primarily indirect effects while changes in construction, 

finance and real estate, services, and government are primarily induced effect changes.

1. Changes in Parish Population: Model predictions from the LCIM model indicate growth in

population due to the effects of the OCS petroleum industry (Figure 12). Population estimates made by

the U.S. Census Bureau through 1997 indicate that the Lafourche Parish population has continued to

experience slow growth despite the growth in the OCS petroleum industry. For example, the U.S.

Census Bureau estimated the population at 87,391 in 1994 and 88,360 in 1997 (Louisiana Dept. of

Economic Development, 1998) (an increase of only 1.1 percent over four years). As previously

discussed, public and private school enrollment data in the parish confirmed the slow growth in

population as did discussions with local government officials. Dramatic declines in the level of

unemployment in the Parish (starting in 1995) indicate that much of the job increase in the local economy

has gone to the previously unemployed and to workers commuting into the parish.

As of June 1998, unemployment was at very low levels (roughly 2.2 percent of the current labor

force) (Louisiana Dept. of Economic Development, 1998). According to the results from equation 2 in
32

Source: Louisiana Department of Economic Development, Louisiana Community Impact Model

$

$

$

$

$

$

$

$

$

87.13 87.085

87.523

88.246

89.242

89.695

90.156

90.624

91.102

'

'

'

'

'

'

'

'

'

87.13 87.112

87.239

87.401 87.516 87.631 87.747 87.863 87.98

&

&

&

&

87.13

87.886

88.113

88.36

1994 1995 1996 1997 1998 1999 2000 2001 2002

Year

85

86

87

88

89

90

91

92 Population 

&Actual ' Baseline $Oil Shock

the labor force model, as unemployment reaches such low levels, population levels should begin to show

strong growth (Figure 12). For example, model results predict an increase in population of 4.2 percent

(3,714) from 88,263 in 1997 to 91,977 in 2002. Increases in 

residential water main hookups (Barrios, 1998) of 2 percent from 1997 to 1998 provide additional

evidence of very recent population growth not yet reflected in published population estimates.

Figure 12. Actual versus Predicted Population Change, Lafourche Parish, 1994-2002.

2. Local Government Revenue and Expenditure Impacts: The fiscal component of the 

LCIM model was used to estimate the effects of the OCS petroleum industry on the ability of local

government to deliver publicly provided goods and services. Growth in a local economy will inevitable

place additional pressures on and hence increase the cost of providing services such as roads and

schools. At the same time, growth should also increase local government revenues such as property and

sales taxes. As previously discussed, net changes in local government spending and revenue in Lafourche

Parish due to the OCS petroleum industry are evaluated in comparison to the baseline change in

economic activity.

2.a Changes in local government expenditures: Results from the fiscal module of the LCIM

model indicate increases in the various expenditure categories due to the OCS petroleum industry (Table
33

6). Results are based on direct, indirect, and induced increases in economic activity (in particular

population) due to the OCS petroleum industry. Total expenditures by local government were projected

to increase by $5.325 million (1995 constant dollars) in 1998 from 1995 levels (a 3.6 percent increase)

and by $9.551 million in 2002 from 1995 levels (a 6.4 percent increase). The school system was the

largest government expenditure item as it was responsible for 45.4 percent of all local government

spending in 1995 and 45.0 percent in 2002. By 2002, 

expenditures on the public school system are predicted to increase to $71.152 million from $67.803

million in 1995 (a $3.349 million increase equal to 4.9%). 

Expenditures on local public schools had the largest absolute increases from 1995 to 2002 among

the ten expenditure categories accounted for in the model. Other categories with large absolute increases

in spending from 1995 to 2002 included health care ($1.722 million), law enforcement ($1.300 million),

and general administration ($1.259 million). In relative (percentage) terms, general administration (17.4

percent) had the largest increase from 1995 to 2002 among the ten expenditure categories accounted for

in the model followed by law enforcement (12.6 percent) and waste disposal (12.0 percent).

Table 6

 Predicted Changes in Local Government Expenditures for Lafourche Parish Under 

OCS Oil Industry Development, 1995-2002

ITEM 1995 1996 1997 1998 1999 2000 2001 2002

Schools 67,803,374 68,215,394 68,834,204 69,647,711 70,015,649 70,388,676 70,767,048 71,152,432

Roads 5,893,196 5,871,521 5,849,560 5,892,238 5,912,727 5,934,347 5,957,215 5,981,546

General

Administration 7,216,990 7,423,809 7,700,174 7,971,014 8,094,095 8,219,118 8,346,123 8,475,637

Law Enforcement 10,327,916 10,520,355 10,790,402 11,082,011 11,214,867 11,350,025 11,487,535 11,627,975

Waste Disposal 6,636,528 6,759,949 6,929,256 7,104,291 7,183,865 7,264,709 7,346,850 7,430,627

Healthcare 37,325,518 37,513,344 37,823,329 38,249,931 38,444,177 38,641,691 38,842,526 39,047,506

Levees and

Drainage 2,176,751 2,187,705 2,205,782 2,230,661 2,241,989 2,253,508 2,265,220 2,277,174

Fire Protection 1,148,909 1,154,690 1,164,232 1,177,363 1,183,342 1,189,421 1,195,603 1,201,913

Parks 1,900,503 1,910,067 1,925,850 1,947,571 1,957,462 1,967,519 1,977,744 1,988,181

Utilities 8,225,803 8,334,764 8,493,892 8,678,092 8,762,101 8,847,619 8,934,678 9,023,646

TOTAL 148,655,488 149,891,598 151,716,681 153,980,884 155,010,274 156,056,632 157,120,543 158,206,637

*All Values in 1995 dollars.

Source: Louisiana Community Impact Model(LCIM).

2.b Changes in local government revenues: Results from the fiscal module of the LCIM

model indicate increases in the various revenue categories due to the OCS petroleum industry (Table 7). 

Like the expenditure estimates, results are based on direct, indirect, and induced increases in economic

activity (in particular population) due to the OCS petroleum industry. Total revenues received by local

government were projected to increase by $11.874 million (1995 constant dollars) in 1998 from 1995

levels (a 6.6 percent increase) and by $20.028 million in 2002 from 1995 levels (a 11.2 percent

increase). 
11 Local government entities in Louisiana can not have budget surpluses or deficits over the long

run. Hence, assuming that model results are correct, either government spending must increase

or tax levels decrease to provide a balance budget for all forms of local government in

Lafourche Parish.

34

Table 7 

Predicted Changes in Local Government Revenues for Lafourche Parish Under 

OCS Oil Industry Development, 1995-2002

ITEM 1995 1996 1997 1998 1999 2000 2001 2002

Total Sales Tax Revenue 16,974,524 17,626,203 18,495,386 19,345,254 19,731,298 20,123,338 20,521,508 20,927,461

Net Advoloreum Tax

Revenue 23,329,084 23,908,271 24,688,196 25,464,974 25,818,014 26,176,643 26,540,977 26,912,526

Total Severance Tax 500,835 500,835 500,835 500,835 500,835 500,835 500,835 500,835

Total State

Transfer(Transport) 724,546 728,192 734,209 742,490 746,261 750,095 753,994 757,973

Total State

Transfer(School) 41,649,257 41,618,296 41,661,868 41,351,387 41,212,202 41,212,202 41,212,202 41,212,202

Total Federal Transfer 9,931,268 9,981,243 10,063,722 10,177,229 10,228,912 10,281,465 10,334,901 10,389,441

Other tax Revenue 70,648,088 71,694,496 73,143,662 74,670,369 75,363,507 76,067,129 76,781,429 77,509,328

Other State Transfer 12,793,013 13,730,581 14,958,177 16,110,699 16,634,069 17,165,487 17,705,139 18,255,268

Total Federal

Transfer(Other) 2,469,727 2,482,155 2,502,666 2,530,893 2,543,745 2,556,814 2,570,103 2,583,666

TOTAL 179,020,342 182,270,273 186,748,721 190,894,130 192,778,843 194,834,008 196,921,088 199,048,699

*All Values in 1995 dollars.

Source: Louisiana Community Impact Model(LCIM).

2.c Net costs to local government: Model results in Figures 13 through 15 indicate a marked

increase in both expenditures ($9.551 million by 2002) and revenues ($20.028 million by 2002) due to

the effect of to the OCS petroleum industry. As expected, changes in both variables are much larger

than under the baseline scenario. Further, under the OCS scenario, the effect of increased population

causes revenues to increase more rapidly than expenditures (Figure 15).11 Hence, model results imply

that ongoing activity in the Gulf of Mexico should not place additional strains on the ability of local

governments to deliver publicly provided services. However, this result should be tempered by the fact

that certain costs -– such as construction of new infrastructure -- being incurred by local governments due
12 It is also possible that a lag may occur between immediate service needs and a government

revenues (such as growth in property taxes) that do not occur immediately. However, given

their reliance on sales taxes as a revenue source, this is probably not a problem for Lafourche

Parish Governments.

35

to the OCS petroleum industry are not accounted for in model results.12 Such costs should be seen as an

addition to costs increases predicted by the model.
36

Source: Louisiana Community Impact Model (LCIM)

,

,

,

, , , , ,

&

&

&

&

&

&

&

&

1995 1996 1997 1998 1999 2000 2001 2002

Year

145

150

155

160 Sp

&Spending,Baseline Spending

Figure 13. Estimated Local Lafourche Parish Government Spending under Baseline and Oil Shock 

Scenarios, 1995-2002.
37

Source: Louisiana Community Impact Model (LCIM)

,

, & , , , , , ,

&

&

&

&

&

&

&

1995 1996 1997 1998 1999 2000 2001 2002

Year

170

180

190

200

210 Revenue 

&Receipts ,Baseline Receipts

Figure 14. Estimated Local Lafourche Parish Government Revenue under Baseline and Oil Shock 

Scenarios, 1995-2002.
38

Source. Louisiana Community Impact Model (LCIM)

, , , , , , , ,

+

+

+

+

+

+

+

+

1995 1996 1997 1998 1999 2000 2001 2002

Year

20

30

40

50 Bu

+Oil Shock Net,Baseline Net

Figure 15. Estimated Local Lafourche Parish Government Revenues Less Costs under Baseline 

 and Oil Shock Scenarios, 1995-2002.
39

H. Additional Pressures on Publicly Provided Services

Certain publicly provided services are tied to the unique needs of the offshore oil industry. 

Schools, city water, and roads have been especially impacted by certain aspects of growth unique to the

offshore oil industry, especially in Lafourche Parish. By and large, these additional pressures were not

accounted for in the previously discussed LCIM model results. Hence, efforts were made to assess the

impact of OCS industry growth on the quality, quantity, and additional expense of providing such

services.

1. City Water: The provision of clean water has become a critical local need for the offshore

oil industry based out of Port Fourchon. According to Dirk Barrios, supervisor of Lafourche Parish

Water District #1 at Lockport, between 1.2 million and 1.5 million gallons of water per day is being

delivered to Port Fourchon. However, firms at the port indicate a minimum need of 4.0 million gallons

per day. Firms have even brought water in barges into Port Fourchon in some cases, although the water

is still provided by parish government. Water usage has increased dramatically because of use in drilling

muds and in washing down equipment and infrastructure at the Port and offshore. As noted earlier,

employment in shipbuilding has increased dramatically in the recent past. Shipbuilders in the parish, such

as Bollinger, also use large amounts of water in their operations. Also, residential demand for city water

services has increased recently.

A $10 million bond is in place to pay for increasing the capacity of the water district plant and the

ability to deliver water to the Port Fourchon area. An 18-inch pipe to the port has been installed, two

new storage tanks have been built at the Port, and booster pump improvements have also been made. 

These improvements were finished in the summer of 1999. The ability to deliver water to the area

increased by 1.0 million gallons per day as a result. The capacity of the water plant also increased from 8

million to 12 million gallons per day. Two construction projects in the winter of 1998 and 1999 also led

to necessary improvements in filtering and pumping capacity (both needed to support the long-run

increase in capacity). The 12 million gallons per day production goal was obtained by the end of the

summer of 2000. The improvements are being supported by a $10 million bond and by water usage

charges in the Port Fourchon area. Sale tax revenues from throughout the parish (with the exception of

the cities of Thibodaux and Lockport) are being used to payoff the bond.

2. Roads: The quality of roads in Lafourche Parish, especially LA 1, has become an important

concern for local government officials. Because it is a state road, local government is not responsible for

any new construction on LA 1 or for its upkeep and maintenance. Still, the serviceability of the road is of

vital importance to local residents and to the OCS offshore petroleum industry based out of Port

Fourchon. The companion study “An Analysis of LA Highway 1 in Relation to Expanding Oil and Gas

Activity in the Central Gulf of Mexico” (Guo et al., 2000), has indicated that the large growth in truck

traffic to Port Fourchon due to OCS petroleum activity was significantly affecting the quality of the road. 

At the very least, current and projected growth in truck traffic was expected to increase the need to

repave and upgrade the road in a number of respects.
40

3. Additional Costs to Local School System: The local school system is also bearing

additional costs due to the OCS petroleum industry, some of which are not accounted for in model

results. In migration of foreign national workers has resulted in additional demand for locally provided

educational services in the form of English as a second language class and expansion of vocational

education programs (Minerals Management Service, 1997). Changes in school expenditures due to

population growth are accounted for in LCIM model results reported in this study. However, certain

increased expenditures, such as English as second language classes, are extraordinary costs that are not

accounted for in model results. Hence, increases in expenditures by the local school system due to such

extra activities are an additional cost for local government.

VI. SUMMARY AND CONCLUSIONS

The OCS petroleum industry is causing substantial levels of growth at Port Fourchon and in the

Lafourche Parish economy in general. Model results are based on the assumption that the level of activity

for the OCS petroleum industry will increase at an annual rate of 4 percent. These assumptions may or

may not be correct given changes in key factors, such as crude oil prices. However, this growth is

predicted to continue at least through the year 2002. As a result, increases in economic activity and

population growth through the year 2002 are predicted to be substantial.

Model results also included estimates of resulting changes in revenues paid to and expenditures

made by local government in Lafourche Parish. Model results indicated that the expanding OCS

petroleum industry will lead to marked increases in both expenditures by and revenues to local

government. By themselves, results imply that local government should be able to continue to meet

increases in expenditures caused by that activity. In comparison to baseline growth, increases in revenues

increased at a more rapid rate than did increases in expenditures. However, additional costs, such as

English as a second language classes in the school system, may not always be reflected in model results. 

Hence, in the final analysis, the ability of parish government to meet increases in costs due to the

expansion of the OCS petroleum industry could be problematic.

Finally, the history of the development of the OCS petroleum industry and the resulting impacts

on economic activity and population levels in Lafourche Parish has been boom and bust. Projected

increases in population and economic activity could and in some categories are already requiring

substantial new investment in local infrastructure. If activity in the OCS petroleum industry should

decrease rapidly in the future, local government may incur the costs of infrastructure development without

obtaining the levels of revenue needed to meet such costs.
41

REFERENCES

American Petroleum Institute. 1998. Energy and the Gulf of Mexico. Website: www.api.org/chs/gulf/.

Barrios, D. 1998. Supervisor, Lafourche Parish Water District #1 at Lockport. June 1998. Oral and

Written Communications. Lockport, LA.

The Baton Rouge Advocate. 1998. Oilfield Supply Boat Orders Drop Off as Oil Prices Decline. 

Saturday, August 1.

Baud, R.D., R.H. Peterson, C. Doyle, and G.E. Richardson. 2000. Deepwater in the Gulf of Mexico:

America’s Emerging Frontier. U.S. Dept. of the Interior, Minerals Management Service, Gulf of

Mexico OCS Region, New Orleans, LA. OCS Report MMS 2000-022. 

Bollinger Shipyards Inc. 2000. Bollinger Shipyards, Inc. Lockport, LA. Website:

www.bollingershipyards.com. 

California Commission on State Finance. 1988. Impact of Federal Expenditures on California.

Sacramento, CA.

Cranswick, D. and J. Regg. 1997. Deepwater in the Gulf of Mexico: America’s New Frontier. U.S.

Dept. of the Interior, Minerals Management Service, Gulf of Mexico OCS Region, New Orleans,

LA. OCS Report MMS 97-0004.

Deller, S.C. and M. Shields. 1996. The Wisconsin Extension Fiscal Impact Model: Preliminary Results.

Presented at the Community Economic Modeling Conference, June, Madison, WI.

Giarratani, F. 1990. Summary Comment. International Regional Science Review. 

13(1990):221-223. 

Greene, W.H. 1997. Econometric Analysis. Third Edition. Englewood Cliffs, NJ: Prentice Hall.

Guo, J., D.W. Hughes, and W. Keithly. 2000. An Analysis of LA Highway 1 in Relation to Expanding

Oil and Gas Activity in the Central Gulf of Mexico. Report Prepared for the U.S. Dept. of the

Interior, Minerals Management Service, Gulf of Mexico OCS Region, New Orleans, LA. OCS

Report MMS 2001-0019. 

Falgout, T. 1999. Executive Director, Greater Lafourche Port Commission. Written testimony to

Committee on Resources, U.S. House of Representatives, Washington DC, May.
42

Falgout, T. 1997. Executive Director, Greater Lafourche Port Commission. Oral communication, Baton

Rouge, LA, November.

Hughes, D.W. and L.J. Guedry. 1993. Fundamental Economic Structure and Central Place Theory in the

Construction of Regional Hybrid Input-Output Models. Paper Presented at the Annual Meeting

of the Southern Agricultural Economics Association, Tulsa, OK. January.

Isard, W., I.J. Azis, M.P. Drennan, R.E. Miller, S. Saltzman and E. Thorbecke. 1998. Methods of

Interregional and Regional Analysis. Brookfield, VT: Ashgate Publishing.

Johnson, T.G. 1991. A Description of the VIP Model. Unpublished manuscript, Department of

Agricultural Economics, Virginia Tech, Blacksburg, VA, April.

Johnson, T.G. 1996. Federal Policy Analysis with Representative Rural Community Models. Presented

at the Rural Policy Research Institute Modeling Conference, November, Kansas City, MO.

Johnson, T.G. 1997. The Community Policy Analysis System (COMPAS): A Proposed National

Network of Econometric Community Impact Models. Presented at the Community Policy

Analysis Network, November, Kansas City, MO.

Jones, L.L., S. Murdock, and F.L. Leistritz. 1998. Economic-Demographic Projection Models: An

Overview of Recent Developments for Infrastructure Analysis. Local Infrastructure Investment

in Rural America. Boulder, CO: Westview Press.

Louisiana Dept. of Economic Development. 1998. Parish of Lafourche, State of Louisiana, Certain

Financial and Statistical Data. Baton Rouge, LA.

Louisiana Dept. of Education. 1997a. Annual Financial and Statistical Report 1992-93 – 1995-96.

Office of Research and Development, Bureau of School Accountability. Bulletin No. 1472. 

Louisiana Dept. of Education.1997b. Minimum Foundation Program Handbook 1996-97. Office of

Management and Finance, Bureau of Educational Finance Services. Bulletin No. 1947. 

Louisiana Dept. of Labor, Office of Employment Security, Research and Statistics Division. No Date.

Louisiana Labor Market Information. Various Issues. Baton Rouge, LA.

Louisiana Dept. of Labor, Office of Employment Security, Research and Statistics Division. 1998. 1998/

Unpublished ES202 Employment Data. 1982-2nd Quarter 1997. Baton Rogue, LA. 

Louisiana Dept. of Transportation and Development. 1998. All About LOOP. Website:

www.dotd.state.la.us/about/loop/loop.html, Baton Rouge, LA.
43

Louisiana Electronic Assistance Program. Center for Business and Economic Research, Northeast

Louisiana University, Monroe, LA. http://leap.nlu.edu//.

Louisiana Mid-Continent Oil and Gas Association. 1996. Louisiana Oil and Gas Facts. 34th ed., Baton

Rouge, LA.

Louisiana Revised Statues. 1997. LSA-R.S. 1:11. R.S. 48:756. St. Paul, MN: West Publishing Co.

Louisiana State University Agricultural Center, Louisiana Cooperative Extension Service. 1998. 1997

Louisiana Summary: Agriculture and Natural Resources. Louisiana State University Agricultural

Center, Baton Rouge, LA.

Ma, J.C., J.K. Scott, and T.G. Johnson. 1996. The Show Me Community Impact Model:

Specification, Estimation, Simulation, and Application. Presented at the Rural Policy

Research Institute Modeling Conference, November, Kansas City, MO.

Melancon, J.M. and D.S. Roby. 1998. Gulf of Mexico Outer Continental Shelf Daily Oil and Gas

Production Rate Projections from 1998 through 2002. U.S. Dept. of the Interior, Minerals

Management Service, Gulf of Mexico OCS Region, New Orleans, LA. OCS Report MMS 98-

0013.

Miller, R.E. and P.D. Blair. 1985. Input-Output Analysis: Foundations and Extensions. 

Engelwood Cliffs, NJ: Prentice-Hall Inc.

Minerals Management Service. 2000. Gulf of Mexico Fast Facts: Offshore Statistics by Water Depth.

U.S. Dept. of the Interior, Minerals Management Service, Gulf of Mexico OCS Region. New

Orleans, LA. Website: www.gomr.mms.gov/homepg/fastfacts/WaterDepth/WaterDepth.html. 

Minerals Management Service. 1999. Deepwater Information. U.S. Dept. of the Interior, Minerals

Management Service, Gulf of Mexico OCS Region, New Orleans, LA.

Minerals Management Service. 1997. Gulf of Mexico OCS Oil and Gas Lease Sales 169, 172, 175,

178, and 182 Central Planning Area, Final Environmental Impact Statement. U.S. Dept. of the

Interior, Minerals Management Service, Gulf of Mexico OCS Region, New Orleans, LA.

Powell, R., M. McGovern, and J. Morison. 1990. A Microeconomic Input-Output Analysis of Regional

Economic Instability. International Regional Science Review. 13(1990):205-214. 

Richardson, H.W. 1972. Input-Output Analysis and Regional Economics. New York, NY: John

Wiley and Sons.

Schaffer, W.A. 1989. General Considerations in Building Regional Input-Output Tables. SocioEconomic Planning Science. 23(1989):251-259. 
44

Stallmann, J.I., S.C. Deller, and M. Shields. 1998. The Impact of Young-Old and the Old-Old on a

Small Rural Region: An Application of the Wisconsin Economic Impact Modeling System. Paper

Presented at the Annual Meetings of the Southern Regional Science Association, April,

Savannah, GA.

Swenson, D. 1996. The Iowa Economic/Fiscal Impact Modeling System: An Overview. Presented at the

Community Economic Modeling Conference, June, Madison, WI.

University of New Orleans. 1997. Statistical Abstract of Louisiana. 10th ed. University of New

Orleans, Division of Business and Economic Research, New Orleans, LA. 

U.S. Army Corps of Engineers and Greater Lafourche Port Commission. 1994. Draft Report, Port

Fourchon Feasibility Study Main Report Environmental Impact Statement. New Orleans District

Corps of Engineers, New Orleans, LA.

U.S. Army Corps of Engineers. 1997. Waterborne Commerce of the United States. New Orleans

District Corps of Engineers, New Orleans, LA.

U.S. Bureau of the Census. 1991. Journey to Work Data 1990. U.S. Dept. of Commerce, Bureau of

Economic Analysis, Washington, DC.

U.S. Bureau of the Census. 1992. Census of Governments. Vol. 4, Nos. 3 and 4. 

U.S. Bureau of the Census. 1998. Residential Construction Permits. U.S. Dept. of Commerce,

Construction Statistics Division, Washington, DC.

U.S. Forest Service. 1996. IMPLAN Software Manual. United States Dept. of Agriculture, Forest

Experiment Station, Fort Collins, CO.

U.S. Dept. of Commerce, Bureau of Economic Analysis. 1998. Regional Economic Information System

CD-ROM, 1969-1996.

Walls, M.A. 1994. Using a ‘Hybrid’ Approach to Model Oil and Gas Supply: A Case Study of the Gulf

of Mexico Outer Continental Shelf. Land Economics 70(1):1-19. 

Weber, M., R.T. Townsend, and R. Bierce. 1990. Environmental Quality in the Gulf of Mexico: A

Citizen’s Guide. Center for Marine Conservation, Washington, DC. 20036.
13 The commodities for which the regional purchase coefficients (rpcs) were changed are listed as

follows: Hay and Pasture, Natural Gas & Crude Petroleum, Natural Gas Liquids, Sugar,

Confectionery Products, Concrete Block and Brick, Concrete Product, N.E.C., Ready-mixed

Concrete, Business Associations, Labor and Civic Organizations, and U.S. Postal Service.

14 Following standard practice, individual industries can be aggregated into a single industry group

by summing rows and columns in the I-O flows table. For example, for agriculture in this study

is a compilation of data for 27 individual agricultural industries in the original IMPLAN

database. 

45

APPENDIX A 

Input-Output Module of LCIM 

The I-O model was altered in several different ways to improve the accuracy of results. Original

employment and output estimates for petroleum industries were changed in light of published and

unpublished employment data for Lafourche Parish (U.S. Dept. of Commerce, 1998; Louisiana Dept. of

Labor, 1998). IMPLAN provides information on trade for 528 commodities. Estimates of shipments in

and out of the parish for eleven commodities were changed in view of economic theory and knowledge of

the regional economy.13 Finally, the model of the Lafourche Parish economy was aggregated based on

standard procedures and using the IMPLAN software to 15 sectors (aggregate industries) for ease of

analysis and for presenting model results.14 Industry detail was retained for sectors with strong ties to the

OCS petroleum industry, such as shipbuilding.

Besides the I-O module, the CIM contains a labor market module and a fiscal module. The labor

market module examines labor demand and supply, and the fiscal module measures effects of labor

markets and general economic activity on taxing ability and public service provisions (Ma et al., 1996).

Empirical Specification of the Labor Force Module

The labor force module serves to direct output from shocks in the input-output model into

changes in government revenue and expenditures in the fiscal module. Both the place of residence and
46

External Employment Index jExternal Employmenti/Distancei

i

n

=

=

∑

2

1

place of work of the population are important to distinguish in the labor force module. Thus similar to

Johnson (1991, 1996) and Swenson (1996), the Louisiana model empirically specifies seven equations

for these variables, including external labor force and external employment index equations, which were

calculated using gravity models.

Gravity models have been used extensively to model interactions between regions where distance

has been an important factor in determining the costs and the benefit of the interaction (Isard et al.). For

example, individuals are much less likely to commute 20 miles to a job than 10 miles. The opportunity

costs of commuting can be seen as increasing at an exponential rate. Hence, driving the 20 miles might be

seen as four times (rather than twice) as costly by the worker than the 10 mile trip. The level of interaction

between the regions is also governed by the size (mass) of the variable in question. That is, the bigger the

set of available workers in a given region, the greater the number of workers that may commute to jobs in

another region. In this way, a gravity model can be used to produce an index that reflects the interaction

between a particular region and all other regions in a given set. That is, assuming we had three regions in

our gravity model, then the gravity index for region one would be the size (such as size of work force) in

region two divided by the squared distance between region one and two plus the size in region three

divided by the

squared

distance

between region

one and region

three.

In the labor market module, gravity equations are used to estimate external labor force and

external employment indices. The former is an independent variable in the in-commuting earnings

equation while the latter is an independent variables in the out-commuting earnings equation. Formally,

we can write the two gravity equations as

External Labor Force Index (1) jExternal Labor Forcei i

i

n

=

=

∑ / Distance2

1

 (2)

where: i ...j; and where, for the ith observation, the contribution to the labor force (employment) index for

j is the size of the work force for i (job base) divided by the straight line distance between the geographic

centers of i and j. The external labor force index and the external employment index are calculated for all

64 Louisiana parishes. The external labor force and external employment variables are defined to include

all 64 Louisiana parishes plus any out of state county with at least 100 commuters to the jth Louisiana

parish in 1990 (U.S. Bureau of the Census, 1991).
15 That is, changes in earnings by local residents equals the change in earnings estimated with the

I-O, minus the estimated change in in-commuter earnings (from the labor market model) plus

the estimated changes in out-commuter earnings (from the labor market module). Tax and

47

For the other five equations in the Labor market model, we have population (as a function of the

level of employment and the level of unemployment), in-commuter earnings (as a function of place of

work employment and external labor force index), and out-commuter earnings (as a function of labor

force and external employment index), or

Population = f (Employment, Unemployment) (3)

In-commuter Earnings = f (Place of Work Employment, External Labor Force Index) (4)

Out-commuter Earnings = f (Labor Force, External Employment Index) (5)

In-Commuters = In-Commuter Earnings / Average Parish In-Commuter Earnings (6)

Out-Commuters = Out-Commuter Earnings / Average Parish Out-Commuter Earnings (7)

where: in-commuter earnings is total pay (employee compensation plus proprietary income) to individuals

working but not living in the parish; place of work employment is the number of jobs in the parish; labor

force is the level of employed plus unemployed residents in the parish; and 

parish in-commuting and out-commuting average earnings are calculated based on 1990 Census data

(total in-commuting earnings divided by the total number of in-commuters and total out-commuting

earnings divided by the total number of out-commuters).

Estimates of population, place of work employment, and unemployment were obtained from

publications by the Louisiana Department of Labor and the Louisiana Department of Economic

Development. (Estimates for 24 years of data (Louisiana Dept. of Economic Development, 1998) for

Lafourche Parish were used in estimating the relationships in equation 1). Estimates of in-commuter

earnings and out-commuter earnings came from the Census Bureau, Journey to Work data set for 1990. 

In addition, equations 6 and 7 are used to convert commuter earnings into estimates of the actual number

of in-commuters and out-commuters, based on average commuter earnings derived from the Journey to

Work data set. The estimated labor force module is provided in Appendix A Table 1. 

The labor force variable serves as the “link” between the input-output module and the fiscal

module. That is, a final demand shock from the input-output module will lead to a change in the labor

force. The change in labor force will lead to changes in population, in-commuter earnings, and outcommuter earnings. Changes in earnings are also used to derive changes in household spending (induced

effects) in the input-output model after accounting for leakages out of the local economy (to incommuters), interjections from out-commuters and spending leakages in the form of income taxes,

savings, and purchases from elsewhere.15 The round of induced effects spending occurs into the
spending leakages are removed from the change in earnings to local residents to arrive at an

estimate of the change in disposal earnings (incomes) to local residents. The change in local

economic activity (one round of the induced effect) is then calculated by assuming that the

pattern of expenditures (including purchase of local goods versus purchase versus goods

produced elsewhere) given for medium income households in the IMPLAN model holds true.

48

estimated total change in employment is very small (less than one job). Thus, the I-O model and labor

market model are operated interactively, as results from the I-O feed into the labor market module and

the resulting changes in variables from the labor market module feed back into the I-O model, until the

changes in variables approach zero.

Changes in variables in the fiscal component of the model are also based on changes in variables

from the combined I-O and labor market model. That is, changes in population, in-commuter earnings,

and out-commuter earnings are independent variables in the fiscal component of the model. Thus, the

community impact model works in a block recursive fashion.

Previous research (Deller and Shields, 1996), a likelihood ratio test (Greene, 1997), and

economic theory were used to determine the functional forms for equations (2) – (4) in the labor force

module. It was determined that in-commuter earnings and out-commuter earnings would be estimated

using a Cobb-Douglas functional form, whereas population would be estimated using a linear functional

form.

Empirical Specification of the Fiscal Module

To estimate the changes in local government revenues and expenditures, the theoretical derivation

of the fiscal module must be empirically specified. The empirical specification used in this module closely

follows the fiscal modules of Johnson (1991, 1996) and Deller and Shields (1996). The structural

equations identifying public service demand and supply are not observed. Rather, the equilibrium levels

of public goods are what is observed in the local economy. Thus, by estimating a set of reduced form

equations, changes can be followed in the provision and production of publicly provided goods and

services even when the parameters for the structural equations are unidentifiable (Stallmann et al., 1998).

Previous research provides a starting point for estimating the public good expenditure equations. 

Fiscal modules developed by Johnson (1991, 1996), Deller and Shields (1996), and Swenson (1996)

were used as starting points for empirical specification of the Louisiana fiscal module. However, as

Johnson (1997) explains, the underlying structure surrounding the production and delivery of publicly

provided goods and services varies from state to state, and thus empirical specification will differ.

Sixteen equations are included in the Louisiana fiscal module. The primary forms of local taxes in

Louisiana are real estate property (based on assessed value) and retail sales taxes. Two equations

measure revenue capacity--assessed property value and retail sales (Appendix A Table 2). Four direct

revenue equations are included--severance tax revenue, state transfer revenue, federal transfer revenue

(for both schools and other functions), and other tax revenue. Severance tax revenue includes all tax
16 Equations were estimated for per capita variable values, such as per capita spending on

schools. For four spending categories (hospitals, levee and drainage, fire, and parks and

recreation), no relationship was found between changes in local population and earnings and

per capita spending. Hence, expenditures were assumed to increase at a constant rate with

population, and a regression approach was not used.

49

revenue collected from the extraction of oil, natural gas, other minerals, and timber and pulpwood. 

Federal transfer payments include Medicare, Medicaid, and school lunch program payments. State

transfer revenue consists of public school transfers from the state minimum foundation program, local

public road transfers from the parish transportation trust fund, and all other state transfer revenue. Other

tax revenue includes revenue generated from license taxes, general charges, hospital charges, special

assessments, interest earnings, fines and forfeitures, and miscellaneous general revenues (Appendix A

Table 3).

Ten expenditure equations are estimated in the fiscal model (Appendix A Table 4). These

equations attempt to explain changes in spending for school, road, general, administration and other, law

enforcement, waste disposal, utility, hospital, levee and drainage, fire, and parks and recreation

expenditures. Hospital expenditures also include other health care expenditures. Waste disposal

expenditures include solid waste expenditures and sewer expenditures. Law enforcement expenditures

include expenditures for judicial, police, and corrections. General, administration, and other expenditures

include financial administration, general services/buildings, library, public welfare, general debt interest,

insurance trust, and liquor store expenditures.16 

One year of data for assessed value, retail sales, and severance tax revenue came from the

Statistical Abstract of Louisiana (1997). Estimates of other tax revenue, federal transfer revenue, and

other state transfer revenue came from the 1992 Census of Governments (U.S. Bureau of the Census

1992). State school transfer revenue was derived from the Louisiana Department of Education minimum

foundation formula (Louisiana Department of Education 1997b) whereas federal school transfer revenue

came for the Louisiana Department of Education Annual Financial and Statistical Report (Louisiana

Department of Education 1997a). Parish transportation trust fund revenue was derived from the formula

given in the Louisiana Revised Statues (1997).

All expenditure estimates except for school and levees and drainage came from the 1992 Census

of Governments (U.S. Bureau of the Census, 1992). Expenditures for an individual parish were

calculated as the sum of expenditures from the parish governing body and all municipalities within the

parish. This aggregation was necessary because different public goods and services are produced by

different government entities. School revenues and expenditures came from the Louisiana Department of

Education Annual Financial and Statistical Report (Louisiana Dept. of Education, 1997b). Expenditures

on levees and drainage were assumed to equal revenues explicitly collected for such activity. Revenues

often do not equal expenditures in a given year, but it is assumed that on the average, a local government

will be in fiscal balance; that is, no long-term surpluses or deficits will exist.
50

Again, previous research, economic theory, and a likelihood ratio test were used to test for

functional form. A Cobb-Douglas functional form was used to estimate the school expenditure equation

whereas a linear functional form was used for the other five regression-based expenditure equations. The

Cobb-Douglas functional form used is based on the assumption that the average (per capita) cost of

supplying publicly provided goods and services increases at a decreasing rate as population increases

(i.e., economies of scale exist).
51

Table A1 

Estimation Results from the Labor Force Module of the Louisiana Community Impact Model

 ----------------- Dependent Variable--------------

Independent Variable Population In-Commuter Earnings Out-Commuter Earnings

Labor Force Na Na 0.973**

Place of Work Employment 0.618**

(3.28) 

1.094**

(18.03) 

Na

Place of Work Unemployment 0.907**

(3.44) 

Na Na

External Labor Force Index Na 

 

0.002**

(3.27) 

Na 

External Employment Index Na 

 

Na 0.00229**

(15.88)

Constant 272.84 

(1.31) 

6.780**

(11.49) 

1.324*

(2.41)

R-Square 0.45 0.82 0.81

Condition Index 2.21 N/A N/A

Heteroskedasticity Tests:

B-P-G Test 4.49 N/A N/A

Harvey Test 6.047* N/A N/A

Glejser Test 5.184* N/A N/A

** - Significant at "=.01 * - Significant at "=.10

Note: T-Statistics are in Parenthesis.

Population equation estimated with first difference for all variables to correct for autocorrelation. In-commuter

and out-commuter equations were transformed to account for heteroskedacity. Na means the equation in

question does not contain that independent variable. N/A means the test does not apply.
52

Table A2 

 Least Square Results of Assessed Value and Retail Sales from the Louisiana Community Impact Model

 ----------- Dependent Variable---------

Independent Variable Assessed Value Retail Sales 

Arable Land Density 115,280*

(1.87) 

-41,180

(-1.63) 

In-commuter Earnings Na -0.15473**

(-3.62) 

Out-commuter Earnings 0.10223**

(11.02) 

0.36299**

(7.76) 

Resident-Employed Earnings 0.29459**

(44.80) 

0.78686**

(34.96) 

Constant 44,032,000**

(5.54) 

-14,743,000**

(-10.01) 

R-Square 0.93 0.98 

** - Significant at "= .01 * - Significant at " = .10

Note: T-Statistics are in Parenthesis. Both equations were transformed to account for heteroskedacity. Na

means the equation in question does not contain that independent variable.
53

Table A3 

Estimation Results of Per Capita Other Tax Revenue and Per Capita Other State Transfer Revenue 

from the Louisiana Community Impact Model

 ------------------ Dependent Variable----------------

Independent Variable Per Capita Other 

Tax Revenue

Per Capita Other State Transfer Revenue

Per Capita Assessed Value 0.918**

(10.84)

0.017**

(5.98)

Per Capita Retail Sales 0.615**

(12.55)

0.051

(1.35)

Arable Land Density -0.038

(-0.75)

Na

Constant -6.658**

(-4.70)

-18.837

(-0.83)

R-Square 0.24 0.39

Heteroskedasticity Tests

B-P-G N/A 2.942

Harvey N/A 9.970**

Glejser N/A 11.503**

** - Significant at "= .01 * - Significant at " = .10

Note: T-Statistics are in Parenthesis.

The per capita other tax revenue equation was transformed to account for heteroskedacity. Na means the

equation in question does not contain that independent variable. N/A means the test does not apply.
54

Table A4 

Per Capita Expenditure Equations from the Louisiana Community Impact Model

-------------------------------------------------------Dependent Variable-----------------------------------------

---------------

Independent Variable School Road General,

Administratio

n, and Other

Law

Enforcement

Waste Disposal Utilities

Per Capita Assessed Value 0.24873**

(5.21) 

0.01505**

(3.51) 

0.03083*

(2.22) 

0.02272**

(3.43) 

0.01718**

(3.19) 

0.00995

(1.49) 

Per Capita Retail Sales -0.00891*

(-2.09) 

-0.00033

(-0.05) 

Arable Land Density 0.03000

(1.35) 

0.13854*

(2.56) 

0.11456*

(1.70) 

0.09681

(1.15) 

Per Capita Public School

Registration

0.87287**

(4.43) 

Pupil to Teacher Ratio -0.65749**

(-2.93) 

Per Capita Local Road

Miles

823.28000

(1.32) 

Per Capita All Other

Expenditures

0.11446*

(2.053) 

Non-Wetland Acres -0.00001

(-0.23) 

Percent Urban 120.27000*

(2.55) 

Public Electricity Dummy 113.83000**

(3.95) 

Public Gas Dummy 9.95460

(0.35) 

Public Transportation

Dummy

64.35600

(1.51) 

Constant 7.92**

(8.91)

49.24

(1.44)

-9.89

(-0.15)

53.27

(1.45)

-22.15

(-0.61)

22.39

(0.63)

R-Square 0.4605 0.1957 0.2083 0.1828 0.2621 0.2381

Standard Error 0.16352 80.761 243.86 124.64 100.85 127.11

White' Test 15.12 13.68 2.82 1.38 3.17 20.36

LM Test for Contemporaneous Covariance of the System of Equations = 118.95**

** - Significant at "= .01 * - Significant at " = .10

Note: T-Statistics are in Parenthesis.
The Department of the Interior Mission

As the Nation's principal conservation agency, the Department of the Interior has responsibility 

for most of our nationally owned public lands and natural resources. This includes fostering 

sound use of our land and water resources; protecting our fish, wildlife, and biological diversity; 

preserving the environmental and cultural values of our national parks and historical places; 

and providing for the enjoyment of life through outdoor recreation. The Department assesses 

our energy and mineral resources and works to ensure that their development is in the best 

interests of all our people by encouraging stewardship and citizen participation in their care. 

The Department also has a major responsibility for American Indian reservation communities 

and for people who live in island territories under U.S. administration. 

The Minerals Management Service Mission 

As a bureau of the Department of the Interior, the Minerals Management Service's (MMS) 

primary responsibilities are to manage the mineral resources located on the Nation's Outer 

Continental Shelf (OCS), collect revenue from the Federal OCS and onshore Federal and Indian 

lands, and distribute those revenues. 

Moreover, in working to meet its responsibilities, the Offshore Minerals Management Program 

administers the OCS competitive leasing program and oversees the safe and environmentally 

sound exploration and production of our Nation's offshore natural gas, oil and other mineral 

resources. The MMS Minerals Revenue Management meets its responsibilities by ensuring the 

efficient, timely and accurate collection and disbursement of revenue from mineral leasing and 

production due to Indian tribes and allottees, States and the U.S. Treasury. 

The MMS strives to fulfill its responsibilities through the general guiding principles of: (1) being 

responsive to the public's concerns and interests by maintaining a dialogue with all potentially 

affected parties and (2) carrying out its programs with an emphasis on working to enhance the 

quality of life for all Americans by lending MMS assistance and expertise to economic 

development and environmental protection.