Regulatory hurdles also continue to plague the project. An environmental impact statement is likely to have to address the issue of water pollution caused by discharges of plastic pellets; a federal judge recently ordered Formosa to resume cleaning waters contaminated by its petrochemical complex in Port Comfort, Texas.
IEEFA first identified financial, market, regulatory and political risks to the project in a March 2021 report. Although some improvement has occurred in the commodity price environment since then, four key conditions have changed: Construction prices have risen; regulatory scrutiny has intensified; credit agency support has withered; and community opposition has heightened questions among stakeholders.
Formosa Plastics is a financially strong corporation with a solid dividend history. The project proposed for the St. James parish of Louisiana would manufacture several types of plastic resins, using ethane as its primary feedstock. It faces staunch opposition by community groups and environmental advocates because it would add significant toxic emissions to an already heavily polluted community.
The company has not yet made a final investment decision (FID) to proceed with the Louisiana project. This update of IEEFA’s March 2021 report shows that on-and offbalance sheet issues have converged to make the project less likely to move forward.
