This article was originally published by Inside Climate News and is republished here as part of the Climate Desk collaboration.
Three low-income school districts in Texas have been awarded more than $2 billion in tax breaks for a new liquefied natural gas (LNG) terminal on the Gulf Coast, according to a report released Monday by the Sierra Club. Companies, local governments, etc.
These tax breaks, aimed at attracting investment and job opportunities, amount to about $4 million per permanent post-construction job promised by gas project developers, the 34-page report says. People always pay: Tax cuts force subsidies to the Gulf region.” LNG industry. ”
Sierra Club researchers compiled dozens of different tax agreements from 15 LNG projects currently operating, under construction or planned in Texas and Louisiana. Supporters of such incentive programs argue that tax cuts can boost the economy, attract investment and help big companies maintain America’s energy dominance. Critics argue that the tax cuts deprive local communities of vital revenue.
“Subsidies remain the norm in the construction of large, capital-intensive export terminals by the United States, concentrated on the Gulf Coast in Louisiana and Texas,” the Sierra Club report said. “LNG developers in these regions typically receive expensive tax breaks that deny critical funding to social services and infrastructure in local communities.”
“The thinking of most local governments is that if we don’t give them what they want, they’re going to go elsewhere. We’re going to run out.”
Huge LNG projects have sprung up along the Texas and Louisiana Gulf coasts in recent years, driven by a surge in gas production from Texas shale fields. The facility transports shale gas through pipes, compresses it into a cryogenic liquid at minus 260 degrees Fahrenheit, and loads it onto ocean tankers for sale overseas. Five new terminals in the Gulf have already helped make the United States the world’s largest LNG exporter. Five more are currently under construction, four of which are in Texas.
These four projects represent $49 billion in investment in the state, and Texas’ three operating LNG terminals exported more than $9 billion in 2023, according to the Texas Comptroller.
“Texas’ liquefied natural gas industry is driven by abundant natural gas reserves and extensive infrastructure, making it a key component of the state’s energy sector. Texas’ location and strong export capabilities make Texas The state has become a major player in the global LNG market, contributing significantly to the state’s economy.”
Tax abatement agreements provide tax breaks for major projects in exchange for promises of economic growth, jobs and, in some cases, cash payments. Manish Bhatt, senior policy analyst at the Tax Foundation, a nonpartisan tax research and policy organization in Washington, D.C., said most states offer at least one corporate tax cut incentive program.
“There are questions about whether they are effective,” Butt says. “In some cases, measuring the effectiveness of these incentives can prove difficult.”
In Texas, a Sierra Club report outlined tax agreements under the state’s Chapter 313 program administered by local school districts. The program expires in 2022 and even though it has been replaced, LNG projects still have more than a dozen 10-year contracts starting by 2042.
For example, the developer of Port Arthur LNG entered into two Chapter 313 tax agreements with the Sabine Pass Independent School District prior to the 2022 expiration, scheduled to take effect in 2028 and 2032; corresponds to two stages of project construction.
“This is a 100 percent cut for 10 years, which is completely ridiculous and insane. It’s not sound fiscal policy.”
The agreement imposes a school district tax of just 1 percent of Port Arthur LNG’s taxable land value in exchange for approximately $9.4 million in annual cash payments and a promise to create jobs. In each contract application, Port Arthur LNG committed to approximately 1,400 construction jobs during the four-year construction of each phase, and 10 permanent full-time jobs thereafter.
Under the agreement, Port Arthur LNG will reduce its tax liability by $694 million over 10 years, according to a Sierra Club analysis. The nearby Golden Pass LNG project also has three 10-year contracts with Sabine Pass ISD worth a total of $235 million.
Neither company responded to requests for comment.
“The mindset of most local governments is that if we don’t give them what they want, they’re going to go somewhere else,” said former City of Port Arthur City Council member and Port Arthur says John Beard, founder of the Community Action Network. “We’re running out of money and we’re not getting the money we’re supposed to get.”
In Brazoria County, Freeport LNG has four Chapter 313 agreements with the Brazosport Independent School District. Without these agreements, Freeport LNG would pay $767 million in school district taxes over 10 years, according to a Sierra Club analysis. Under the agreement, Freeport LNG will pay $157 million in school district taxes and $162 million in cash payments, resulting in net savings of $447 million. In the agreement, Freeport LNG promised to create 218 full-time jobs after construction.
Freeport LNG did not respond to requests for comment.
Part of the largest school district tax break in all of Texas will go to an LNG terminal outside Corpus Christi operated by Cheniere. Corpus Christi LNG has eight Chapter 313 agreements effective in various years from 2019 to 2042. Together, these amount to $762 million in tax breaks, or two-thirds of the annual costs of the surrounding Gregory Portland plant, according to a Sierra Club analysis. Independent School District. In the agreement, the company promises to create 270 full-time jobs after construction.
Dick Lavin, a former Every Texan fiscal analyst who spent 40 years researching tax policy at the Texas State Capitol, said that despite the decline in revenue, Texas school districts and local governments still receive tax breaks from large industrial projects. It is said that applications are almost always approved.
“Everyone says yes,” Lavigne said. “So if you say yes, no one will blame you. If you say no and for some reason the project gets installed elsewhere, you could be in trouble with voters. It will be.”
Rabin said local tax incentives are unlikely to be a major factor in the siting of LNG projects, as developers need locations with waterfront access to major ports and access to gas pipelines. .
Only one school district has rejected a tax break request from an LNG developer. Far south in Texas, Port Isabel ISD rejected applications from Rio Grande LNG and Texas LNG in 2016 and 2022. In 2024, the city of Port Isabel even passed a resolution “decrying potential tax breaks for LNG facilities as unnecessary.” It is against the public interest. ”
However, Chapter 313 is not the only tax relief program in Texas. It’s the easiest to track.
Both Rio Grande LNG and Texas LNG secured tax breaks from Cameron County Commissioners Court under a program administered by county government called Chapter 312.
“It’s a no-brainer for Congress. I don’t think anyone has any incentive to do anything about it.”
In fact, all LNG projects in Texas also have Chapter 312 tax abatement agreements, according to the Sierra Club report.
But savings from the Chapter 312 program are much harder to track because of lax reporting requirements, Lavin said. Although all agreements and analyzes of Texas Chapter 313 agreements are available on the Comptroller’s website, the details of Chapter 312 agreements are often only accessible through records requests to county governments.
That’s because Chapter 313 affects revenue from the state budget that funds many school districts. If a locality faces a tax revenue shortfall, the state will make up the difference. As a result, lawmakers are demanding transparent reporting on Chapter 313 agreements, Lavin said.
In contrast, Chapter 312 agreements only affect county tax revenue and not state government. As a result, the full extent of tax breaks granted under Texas Section 312 remains unclear, Lavin said.
“It’s perfectly fine with Congress,” he said. “I don’t think anyone has any incentive to do anything about it.”
In Port Arthur, both Golden Pass LNG and Port Arthur LNG have agreements with Jefferson County under Chapter 312 to waive 100 percent of the project’s county property taxes for 10 years, according to a Sierra Club report. .
Beard, a former City Council member, remembers negotiating abatement agreements on behalf of the city during his terms from 2003 to 2012. But the discount rates were typically low and the terms were short, he said. “We’ve now had a 100 percent reduction for 10 years, which is absolutely ridiculous and insane,” he said. “That’s not sound fiscal policy.”
Beard, a former ExxonMobil refinery worker, recommended gradual reductions, starting at 100 percent during construction and tapering down to zero over five or 10 years.
That’s because most of the economic benefits promised by projects often don’t reach the communities they provide tax breaks, he said.
In Southeast Texas, he said, most growth and development is occurring in counties surrounding industrial centers, rather than in neighborhoods or school districts where refineries and chemical plants operate.
The Beaumont-Port Arthur metropolitan area has a population of 400,000 and is home to the nation’s largest petrochemical complex and the nation’s largest oil refinery, with a combined investment of tens of billions of dollars. However, the area’s unemployment and poverty rates are higher than the average for Texas as a whole.
Hardin County, north of Jefferson County, is experiencing rapid growth and development with an influx of new residents, many of whom are employed by growing businesses around the industrial park in Port Arthur.
“The oil and gas industry is severely shortchanging communities of color like mine for the promise of jobs and opportunities,” Beard said. “While growth and development in the Beaumont-Port Arthur area has essentially stagnated, surrounding counties and communities are increasing in value as more people buy and move into their homes.”