Economic Trends Jefferson, Hardin, and Orange Counties

June 2013

From 2007 to 2012, a time frame that includes the Great Recession, the areas economic savior was the resurgence of the refining industry, in particular, the three major expansions in Port Arthur Total, Valero, and the largest, Motiva. Now that all three expansions are complete, the likely new savior for the areas economy through 2017 will be LNG export facilities. Chenier has received federal approval for a $10 billion facility in southwest Louisiana, just a stones throw away from Southeast Texas. Construction will impact our areas economy with its anticipated jobs for thousands of skilled construction workers. Two other announcements for export facilities, not yet approved by the feds, include Sempras $6 billion project in Hackberry, Louisiana and Golden Pass Products $10 billion project by joint venturers, ExxonMobil and Qatar. Each of these is estimated to supply jobs for several thousand skilled construction workers at peak periods and a huge economic impact over three to five years. INDUSTRY In recent years, access to the forests of East Texas has attracted much interest in possible biofuel projects. German Pellets in Woodville is the first to reach construction stage. The $100 million manufacturing facility will produce dowel-sized pellets to be shipped to Europe to replace coal as a source of fuel for generating electricity. Between 250 and 300 permanent jobs will be created at the facility. The Port of Port Arthur will see increased activity resulting from export of the wood pellets. A carbon sequestration project in Port Arthur, backed by $431 million from Department of Energys 2009 economic stimulus fund, was dedicated in May. Air Products and Chemicals extracts carbon dioxide from two of Valeros steam methane reformers. The gas is then transported through Denbury pipeline to West Hastings oil field, about 20 miles south of Houston. The gas is pumped underground to extract crude oil. Valeros new $1.5 billion hydrocracker unit in Port Arthur began operations in December of 2012. The hydrocracker, designed to capitalize on high crude oil and low natural gas prices, primarily produces diesel for growing demand both domestically and overseas. Valero is pursuing permits to expand throughput capacity to 75,000 bpd with a completion date of 2015 pending successful permitting. In February of 2013, Motivas new crude unit began production at intended capacity after a chemical leak and fire in a new distillation unit on June 9, 2012, shortly after its commissioning. The new crude unit doubled the refinerys capacity to 600,000 bpd. The five-year, $10 billion and 14,000 construction-worker project was the largest single expansion in the U.S. in four decades. The projects estimated economic impact to the region during construction is estimated in excess of $17 billion. It also created 300 permanent jobs. Jefferson Refinery is still expected to continue with a project that has been in the planning phase for several years. The goal is to refurbish the abandoned Independent refinery between Hamshire and Winnie for production of jet fuel and diesel. The project is partially financed by $530 million in Hurricane Ike Disaster Area Revenue Bonds. The project would include new infrastructure, including a dock and storage tanks at the Port of Beaumont's Orange County terminal as well as pipeline and rail connections. The dock provides access to deep water and to the Intracoastal Waterway, where barges could go to transfer product to a terminal in High

Island from which the product will be transported via pipeline to the Winnie facility. The project is expected to create 300 construction jobs and 200 full-time jobs. DEVELOPMENT Victory Medical Center opened in mid-May in Beaumont bringing 100 jobs to the area. The $17-18 million facility is a state-of-the-art surgical hospital providing a variety of specialized services including neurological and spinal surgeries. The Beaumont Chamber announced recently that they have celebrated twice as many ribbon cuttings for new or expanding businesses as in the previous year. REGIONAL AIRPORT American Airlines began flights from Jack Brooks Regional Airport to DFW on February 14, 2013. Various entities in the region combined resources to provide a $1.5 million revenue guarantee to attract Americans service. The fund has already been tapped for $318,143 for February and March. Renewed passenger service at the airport means a new $1 million a year in funding from the FAA for airport maintenance and improvements that otherwise would not be available. Airport director, Alex Rupp, estimates that patrons of the new service have already saved approximately $250,000 in parking fees that they would have spent had they driven to Houston to catch a flight. (Note: United Airlines ended its air service from Beaumont to Houston in July of 2012.) HURRICANE FUNDS The South East Texas Regional Planning Commission (SETRPC) Disaster Recovery Division (DRD) started Hurricane Ike - Round 2 housing activities with federal funds. While Round 1 activities were concentrated on the reconstruction of single-family homes, Round 2 will have a broader focus with the inclusion of multi-family and single-family rental units. Round 2 funds will be reserved for very low, low and moderate-income families. Outreach activities were conducted during the months of March and April to spread the word about the program to target areas established late last year. Any applicants not served during Round 1 have been transferred to Round 2. Approximately 3,500 applicants have been received to date. Round 1funds expended were $83,334,767 for 756 housing projects. The cities of Port Arthur and Beaumont also completed demolition only projects of abandoned or dilapidated houses. They completed a combined 103 projects totaling $307,668. SABINE NECHES WATERWAY The Sabine Neches Waterways deepening and widening project was authorized by The U.S. Senates Water Resource Development Act in mid-May (WRDA) (S.601). The U.S. House of Representatives will consider the bill before the final step of presidential signature. The project supports critical U.S. energy and military infrastructure. It will also sustain growth by allowing larger ships to reach local ports and critical industry along the waterway. The waterway is the nation's fourth largest waterway, transporting more than 100 million tons of cargo each year. It is the nation's top crude oil import channel and home to the top commercial military out-load port.

COST OF LIVING For Q1 of 2013, the composite index for cost of living as sampled in Beaumont was 94.7. This is up slightly from 93.1 in Q3 of 2012. These figures are relative to the national average of 100. Source: Council for Community and Economic Research. SALES TAX Sales taxes reported in May, representing sales in March, showed an overall miniscule decrease over March of 2012.
City Beaumont Port Arthur Orange (city) Nederland Silsbee Lumberton Vidor Port Neches Groves Bridge City West Orange Pinehurst Kountze TOTAL Beaumont (excluding audit collection) Region Total (excluding audit collection for Beaumont) Mar-13 $4,484,157 $1,533,600 $311,376 $381,390 $283,975 $244,063 $216,666 $142,009 $167,545 $121,794 $95,732 $65,381 $79,910 $8,127,598 $3,655,318 Mar-12 % change $3,172,482 41.3% $1,908,919 -19.7% $344,307 -9.6% $487,402 -21.8% $269,010 5.6% $234,458 4.1% $224,028 -3.3% $122,488 15.9% $177,492 -5.6% $118,435 2.8% $95,750 0.0% $67,989 -3.8% $69,149 15.6% $7,291,908 11.5% $3,203,745 14.1%

$7,298,759

$7,323,171

-0.3%

HOTEL OCCUPANCY TAX The hotel receipts for March were up by 19% over a year ago in the City of Orange due to the Bass Masters tournament. REAL ESTATE Q1 2013 has shown an 11.7% increase in number of homes sold over Q1 of 2012. The median price is up 5.7% and average price is up 10.1%. The months of inventory continues to decline from 11.5 months in Q1 2012 to 9.0 in Q1 of 2013. Jan Mar 2013 2013 2012 # of homes 469 sold 450 Median price $125,766 $119,033 Average price $126,466 $133,733 Months 9.0 Inventory 11.5

EMPLOYMENT The level of employment is still riding high as compared to previous years. Though intuition might tell you that unemployment would be riding low, it is lower than 2010 and 2011, but about the same as 2012, and higher than 2005 through 2009. The areas unemployment rate continues a very long term trend of being higher than both the Texas and U.S. rate. Unemployment Rate Apr 2013 Beaumont MSA Texas US 9.8% 6.1% 7.1% Apr 2012 9.4 % 6.5% 7.7% Mar 2013 9.7% 6.3% 7.6%

Information in this report was provided by the named industries or through publicly available sources. Prepared by Karen Bourdier Entergy Texas economic development group