Three low-income Texas school districts have provided over $2 billion in tax relief to new liquefied natural gas (LNG) terminals on the Gulf Coast, as detailed in a recent Sierra Club report. The report, titled “The People Always Pay,” highlights the agreements between companies and local public entities.
The tax breaks aim to attract investment and create jobs but amount to about $4 million per permanent job promised post-construction by LNG developers, according to the report. Researchers analyzed tax agreements from 15 LNG projects across Texas and Louisiana, which are at various stages of development. While proponents argue these incentives boost the economy, critics claim they drain essential local revenue.
The report notes that such subsidies are typical for the U.S.’s extensive LNG export terminals along the Louisiana and Texas Gulf Coast, often resulting in significant tax breaks at the expense of local community funds for services and infrastructure.
Several large LNG projects have emerged on the Gulf Coast, driven by Texas’s robust shale gas production. These facilities process and export liquefied gas globally. The U.S. has become the largest LNG exporter, with several terminals currently under construction.
The Texas Comptroller reports that four new Texas projects account for $49 billion in state investments, while existing terminals exported over $9 billion in 2023. The LNG industry significantly contributes to Texas’s economy, utilizing abundant natural gas reserves and extensive infrastructure.
Tax abatement agreements provide tax discounts for commitments to economic growth and job creation. However, the effectiveness of these incentives is debated, with some questioning their true impact, as highlighted by Manish Bhatt from the Tax Foundation.
The Sierra Club reviewed tax agreements under Texas’s Chapter 313 program, administered by school districts. Although the program expired in 2022, LNG projects maintain agreements lasting until 2042. For example, Port Arthur LNG secured agreements that impose taxes on just 1% of its land value, promising $9.4 million in annual cash payments and job creation in exchange.
Port Arthur LNG’s agreements would save $694 million in taxes over ten years, with similar arrangements for Golden Pass LNG valued at $235 million. Neither company responded to comment requests.
John Beard, a former Port Arthur city council member, criticized the strategy of granting such deals, arguing they shortchange communities. He noted that the benefits often bypass local neighborhoods.
Freeport LNG has similar agreements with the Brazosport school district, saving $447 million in taxes over a decade. The company did not respond to inquiries for comment.
Cheniere’s Corpus Christi LNG terminal benefits from $762 million in tax discounts through multiple agreements, reducing funding for the Gregory-Portland school district. According to Dick Lavine, former fiscal analyst with Every Texan, local governments rarely reject these agreements due to pressure to attract industrial projects.
Despite these deals, areas like Beaumont-Port Arthur face higher unemployment and poverty rates than the state average. Neighboring regions, however, experience growth, underscoring the disparities in economic benefits.
In 2016 and 2022, Port Isabel ISD denied tax abatement applications from Rio Grande LNG and Texas LNG, reflecting rising opposition to such incentives. Nevertheless, Chapter 313 is not the only tax break program; Chapter 312 agreements, managed by county governments, offer additional relief but are harder to track.
Jefferson County, for instance, has Chapter 312 agreements with Golden Pass LNG and Port Arthur LNG, exempting the projects’ property taxes for ten years. Beard recommends phased abatements to ensure communities benefit economically.
In summary, while tax abatements aim to stimulate economic development, their actual impact on local communities remains contentious, with many questioning the long-term benefits versus immediate fiscal costs.
Original Story at insideclimatenews.org