What local Texans pay to subsidize new gas terminals: $4 million per job

This story was originally published by Inside Climate News and is reproduced here as part of the Climate Desk collaboration.

Three low-income school districts in Texas have granted more than $2 billion in tax relief to new liquefied natural gas (LNG) terminals on the Gulf Coast, according to a report released Monday by the Sierra Club, which tallied publicly available data on agreements between companies and local public entities. 

Those tax breaks, intended to attract investment and employment opportunities, totaled about $4 million per permanent post-construction job promised by developers of the gas projects, said the 34-page report, “The People Always Pay: Tax Breaks Force Gulf Communities to Subsidize the LNG Industry.”

Sierra Club researchers compiled dozens of different tax agreements from 15 LNG projects in Texas and Louisiana that are currently operating, under construction or planned. Proponents of such incentive programs say offering tax breaks supports big business that fuels the economy, attracts investment and upholds American energy dominance. Critics say the tax breaks deprive local communities of important revenue. 

“Subsidies remain the norm in the U.S.’ buildout of massive, capital-intensive export terminals, concentrated on the Louisiana and Texas Gulf Coast,” the Sierra Club report said. “LNG developers in these areas typically receive lucrative tax breaks that deny the local community critical funds for social services and infrastructure.”

A collection of enormous LNG projects has cropped up along the Gulf Coast of Texas and Louisiana in recent years, fueled by booming gas production in the shale fields of Texas. The facilities pipe in shale gas, compress it into a super-cool liquid at -260 degrees Fahrenheit and then load it onto ocean tankers for sale overseas. Five new terminals in the Gulf have already helped make the US the world’s largest exporter of LNG. Another five are currently under construction, four of them in Texas. 

According to the Texas Comptroller, those four projects represent $49 billion in investments in the state, while Texas’ three operating LNG terminals exported more than $9 billion in 2023. 

“The liquefied natural gas industry in Texas is a crucial component of the state’s energy sector, driven by abundant natural gas reserves and extensive infrastructure. Texas’ location and robust export capabilities make it a key player in the global LNG market, contributing significantly to the state’s economy.”

Tax abatement agreements offer tax discounts to major projects in exchange for commitments of economic growth, jobs, and sometimes cash payments. Most states offer at least one business tax break incentive program, said Manish Bhatt, a senior policy analyst at the Tax Foundation, a nonpartisan tax research and policy organization in Washington, DC. 

“There is some question about whether they are effective,” Bhatt said. “In some cases it can prove difficult to measure the effectiveness of these incentives.”

In Texas, the Sierra Club report compiled tax agreements under the state’s Chapter 313 program, which is administered by local school districts. Even though that program expired in 2022 and was replaced, LNG projects hold more than a dozen 10-year agreements beginning as late as 2042. 

For example, developers of Port Arthur LNG secured two Chapter 313 tax agreements before the 2022 expiration with Sabine Pass Independent School District, set to take effect in 2028 and 2032, representing two phases of project construction.

The agreements levy school district taxes on just 1 percent of Port Arthur LNG’s taxable land value in exchange for annual cash payments of about $9.4 million and commitments of job creation. In each of its agreement applications, Port Arthur LNG promised about 1,400 construction jobs during four years of construction for each phase, then 10 permanent full-time jobs thereafter. 

Under the agreements, Port Arthur LNG would save $694 million in tax obligations over 10 years, according to the Sierra Club analysis. The nearby Golden Pass LNG project also holds three 10-year agreements with Sabine Pass ISD collectively worth $235 million.

Neither company responded to requests for comment.

“The idea of most local governments is that if we don’t give them what they want they will go somewhere else,” said John Beard, a former city council member in Port Arthur and founder of the Port Arthur Community Action Network. “We get shortchanged, we don’t get the money that we should get.”

In Brazoria County, Freeport LNG holds four Chapter 313 agreements with the Brazosport Independent School District. According to the Sierra Club analysis, without those agreements Freeport LNG would owe $767 million in school district taxes over 10 years. With the agreements, Freeport LNG will pay $157 million in school district taxes and $162 million in cash payments, netting $447 million in savings. In the agreements, Freeport LNG promised to create 218 full-time jobs after construction. 

Freeport LNG did not respond to a request for comment. 

Some of the largest school district tax breaks in all of Texas go to an LNG terminal outside Corpus Christi operated by Cheniere. Corpus Christi LNG holds eight Chapter 313 agreements which will take effect in various years between 2019 and 2042. Collectively they represent a $762 million tax discount, according to the Sierra Club analysis, annually equivalent to two-thirds of expenses at the surrounding Gregory-Portland Independent School District. In the agreements, the company commits to create 270 full-time post-construction jobs.

Despite the lost revenue, school districts and local governments in Texas almost always grant tax abatement applications from big industrial projects, said Dick Lavine, a former fiscal analyst with Every Texan who has researched tax policy at the Texas Capitol for 40 years.

“Everybody says yes,” Lavine said. “So if you say yes nobody is going to blame you. If you say no and for some reason the projects locate elsewhere, you’re going to be in trouble with your voters.”

Local tax breaks aren’t likely a major factor in the siting of LNG projects, Lavine said, because developers require locations with waterfront accesses in major ports and access to gas pipelines. 

Only one school district has denied tax abatement applications from LNG developers. In far south 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 that “condemns the potential granting of tax abatements to LNG facilities as being unnecessary and against the public interest.”

However, Chapter 313 isn’t the only tax break program in Texas. It’s just the easiest to track. 

Both Rio Grande LNG and Texas LNG secured tax relief from the Cameron County Commissioners Court under a program called Chapter 312, which is administered by county governments. 

In fact, every LNG project in Texas also holds tax relief agreements under Chapter 312, according to the Sierra Club report. 

But abatements through the Chapter 312 program are much harder to track, said Lavine, due to looser reporting requirements. While agreements and analysis of Texas’ Chapter 313 agreements are all available on the comptroller website, the details of Chapter 312 agreements can often only be accessed via records requests to county governments. 

That’s because Chapter 313 affects revenues from the budget of the state government, which funds many school districts. When districts face a tax revenue shortfall, the state makes up the difference. As a result, lawmakers have required transparent reporting for agreements under Chapter 313, Lavine said. 

In contrast, Chapter 312 agreements only affect county tax revenue, but don’t concern the state government. As a result, Lavine said, the full extent of tax breaks awarded under Chapter 312 in Texas remains unknown. 

“It’s no skin off the legislature’s back,” he said. “I don’t think anybody has an 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 excusing 100 percent of the projects’ county property taxes for 10 years, according to the Sierra Club report. 

Beard, the former city councilman, remembers awarding abatement agreements on behalf of the city during his terms between 2003 and 2012. But, he said, they were typically for a lesser discount rate and a shorter duration. “Now it’s a 100 percent abatement for 10 years, and that’s absolutely ridiculous and insane,” he said. “It’s not sound fiscal policy.”

Beard, a former ExxonMobil refinery worker, recommended tiered abatements that start at 100 percent during construction and gradually decline to zero over five or 10 years. 

Because, he said, most of the economic benefits promised by the projects often don’t reach the communities that provide the tax abatements. 

In Southeast Texas, he said, most growth and development is taking place in the counties surrounding the industrial core, not in the neighborhoods and school districts nearby where the refineries and chemical plants operate. 

The Beaumont-Port Arthur metro area has a population of 400,000 and hosts one of the country’s largest petrochemical complexes, as well as its largest oil refinery, collectively representing tens of billions of dollars of investment. Yet the area also has rates of unemployment and poverty above Texas’ statewide average. 

North of Jefferson County, Hardin County is experiencing rapid growth and development with an influx of new residents, many employed by growing businesses around Port Arthur’s industrial complex. 

“The oil and gas industry severely shortchanges communities of color like mine with promises of jobs and opportunities,” Beard said. “Growth and development in the Beaumont-Port Arthur area is virtually stagnant, yet the surrounding counties and communities are seeing an increase in value, in people buying homes and moving and living there.”