AUSTIN, Texas - The original purpose of a state tax break that has been in place since 1989 was to encourage innovation and risk-taking by a struggling natural gas industry. Business boomed after new drilling techniques such as "fracking" became commonplace, tapping massive reserves of shale gas.

Still, the tax incentive remains, and it's depriving state coffers of more than $1 billion a year in revenues, according to state data analyzed by Dick Lavine, senior fiscal analyst with the Center for Public Policy Priorities.

"It's obviously no longer an incentive, but it has reduced the state's revenue from the natural gas tax by half. Nearly three-quarters of all natural gas in Texas gets some kind of tax break."

Thanks to the exemption, he says, about one-third of the state's wells pumped out zero tax dollars in the past few years. While the official tax rate is 7.5 percent of the value of a well's output, the true contribution averages less than 2 percent statewide, according to the Legislative Budget Board.

The Harris County director of the Texas Organizing Project, Christopher Young, says lost revenues from 2010 and 2011 were approximately the amount needed to keep up with public-school enrollment growth.

"We want to support new technologies, but these companies are now making monstrous profits. At a time when schools and state services are being cut, and working people seem to be paying more and more, there's just no reason to justify a giveaway to energy companies like this."

Lawmakers last year slashed education aid by $5 billion, while rejecting a measure to suspend the gas-tax exemption. Initially, the legislature had to renew the subsidy every few years, but it was quietly made permanent a decade ago, Lavine notes.

"It's a classic example of why it's important for the legislature to go through the tax code periodically and 'sunset' it. The natural gas operators, they need to chip in with everybody else to keep the state going."

A growing number of lawmakers from both parties agree the tax breaks are no longer necessary. Even some operators have said it might make more sense to allow market conditions to trigger incentives.





get more stories like this via email

A round of public testimony wrapped up this week as part of renewed efforts by a company seeking permit approval in North Dakota for an underground pipeline carrying carbon emissions. Economic benefits were again touted but the plan still has opponents.

Last year, North Dakota's Public Service Commission denied a permit request from Summit Carbon Solutions, which wants to build a maze of pipelines in several Midwestern states. Emissions from ethanol plants would be captured for underground storage in North Dakota.

Skott Skokos, executive director of the Dakota Resource Council, said they remain unconvinced it would be a worthwhile project.

"It felt like déjà vu," Skokos observed. "I don't think Summit did anything to relax the concerns of the public."

Company officials have submitted a new application with a revised route as they try to ease concerns about safety and landowner rights. During comment periods, Summit leaders and other speakers discussed how the project would provide economic boosts, including corn prices. However, skeptics restated their concerns about potential ruptures and lasting negative effects on the landscape.

Skokos pointed out large carbon-capture projects like these have yet to prove themselves, noting smaller initiatives are not as likely to rile up opponents. He pointed to the Red Trail ethanol plant in North Dakota.

"They're storing it, basically, almost on-site, next to the facility and they're not affecting a bunch of landowners in the process," Skokos emphasized.

The Summit regulatory case has two upcoming public hearings in North Dakota, one scheduled for May 24 and the other on June 4. The company has run into similar opposition and permitting headwinds in other states, including South Dakota.

Leaders concerned about pollution and climate change are raising awareness about a ballot measure this fall on whether the state should mandate buffer zones around new oil and gas wells.

Voters will be asked to uphold or revoke Senate Bill 1173, which would require a 3,200 setback around any new well near schools, neighborhoods and hospitals.

Meghan Sahli-Wells, former mayor of Culver City and a leader with the group Elected Officials to Protect America, fought to phase out the Inglewood oil field and said no community should be a sacrifice zone.

"A study from Harvard found that in California 34,000 people have died in 2018, prematurely from fossil fuel air pollution," Sahli-Wells pointed out. "These figures are three times higher than other studies."

The Stop the Energy Shutdown campaign, supported by the California Independent Petroleum Association, opposes the setback rule, arguing it could constrict local supply and cost jobs in the industry. A court put the bill on hold pending the outcome of the November election. A "yes" vote would keep the setbacks. A "no" vote would rescind them.

Clean energy advocates are also speaking out against companies operating older low-producing wells rather than pay to shut them down and seal them up properly.

Ahmad Zahra, a city council member in Fullerton, said Assembly Bill 2716 would incentivize their closure by charging companies $10,000 a day to operate so-called "stripper wells."

"We have over 40,000 oil wells currently sitting orphaned or idle, leaking methane and volatile organic compounds into the air, water and soil," Zahra emphasized.

Other states are following California's lead. Rep. Debbie Sariñana, D-Albuquerque, New Mexico, is sponsoring a bill to require setbacks near sensitive locations since more than 32,000 children in the state attend school within a mile of an oil and gas extraction site.

"Over 80 schools in northwestern New Mexico, where the San Juan Basin and the southeastern New Mexico the Permian Basin, are within one mile of an oil and gas well," Sariñana noted. "Some schools are surrounded by dozens and even hundreds of wells within a single mile."

The construction of more solar farms in the U.S. has been contentious but a new survey shows their size makes a difference in whether solar projects are favored by neighbors.

South Dakota's largest solar installation, the Wild Springs project in New Underwood, began operations in March and covers more than 1.5 square miles. The survey showed projects under 100 megawatts are generally favored by neighbors, while larger ones like Wild Springs are unpopular.

Kristi Pritzkau, finance officer for the City of New Underwood, said the construction traffic was tough on the town of just over 600 but the project's builder, National Grid Renewables, is giving back to the community.

"They had to use our well, so they paid for the water, and they paid for a new pump for it, too," Pritzkau pointed out. "They've been really great with the city."

Prtizkau noted the company donated to the town's pool and Lions Club and has created a school scholarship program, all part of the more than $500,000 of charitable giving it has promised in the project's first 20 years of operation. It is also expected to bring in $12 million of tax revenue to the county in the same time frame.

Sioux Falls-based Missouri River Energy Services has plans to build a new solar project near Brookings and build a transmission line from South Dakota into Minnesota.

Tim Blodgett, vice president of member services and communications for the company, said federal grant programs and tax credits provide incentives and South Dakota produces more energy than it can use.

"With the development of more wind, the development of solar, there's a lot planned right now to get these resources out of this area," Blodgett explained. "Into Minneapolis and other places where there's larger demand for the energy."

Currently, more than half the state's power generation comes from wind, followed by hydropower.


get more stories like this via email