AP NEWS

Port Arthur LNG approved for tax break

March 26, 2019

Port Arthur LNG has been added to the list of industrial companies offered tax abatements by Jefferson County.

Commissioners Court on Monday approved offering the company 100 percent tax abatements for the first 10 years of its operation at 2904 W. Gulfway Drive in Port Arthur.

Sempra Energy plans to build two production units known as trains at the site that are capable of producing up to 11 million metric tons of LNG each year. The new plant is expected to be completed in January 2023 as part of an investment estimated to be worth at least $5.6 billion.

The possibility of similar tax breaks for a potential Chevron Phillips plant in Orange County caused much debate and even the resignation of Orange County Judge Dean Crooks earlier this month. Crooks, who said he was never outright against abatements, suggested commissioners take a critical look at the potential investment before deciding to offer the breaks.

The issue is also being debated at the statehouse as the provision of the tax code that allows local governments to give tax abatements is set to expire in September. A similar clause that gives school districts the same authority expires at the end of 2022.

Some advocates say the breaks are necessary to maintain the state’s economic health, while opponents call them expensive handouts to private businesses for actions the businesses would take with or without the help.

Jefferson County Judge Jeff Branick said tax abatements are practically a necessity due to competition the county faces to attract new industry.

“Especially in the refining and petrochemical industry, these projects are on a global scale,” he said. “We’re not just in competition with other states, we’re in competition with other countries.”

Texas already struggles because such nearby states as Louisiana and Mississippi have lower property taxes, said Dale Craymer, president of the Texas Taxpayers and Research Association. Low labor and construction costs in other countries make the state even less competitive globally, he said.

And although the nation is generally a more politically stable option, emission standards can be more strict in the U.S. as well.

So tax abatements are a key incentive to bring jobs and investment into the area that likely will stay long after the breaks expire, Branick said.

“We’re going to continue, unless there are three members of the court that change their mind, to be supportive of abatements,” he said. “Maybe if tomorrow Mississippi, Louisiana and Alabama weren’t offering tax abatements, we’d look at changing it.”

Aside from being a tool to attract new business, these agreements can also allow counties to shape a company’s workforce and how it invests in the community.

The agreement signed by the commissioners this week mandates that Port Arthur LNG maintain at least 80 new, full-time jobs. If the company falls below that number, the abatement will be reduced by a number proportionate to the employment requirement.

It also will be required to give local labor, vendors, suppliers and subcontractors a timely opportunity to bid on contracts in addition to preference and priority over non-local options.

Port Arthur LNG “understands the importance of utilizing suppliers located in the state of Texas and employing local labor and other personnel from the communities in which the LNG facility is located,” the company said in its application for tax abatement.

The company pledged to “make reasonable efforts to encourage the utilization of such suppliers and employment of such personnel.”

Commissioner Michael Sinegal, whose district the plant will be in, said the county and other regulatory partners must do a better job of enforcing requirements in the abatement agreements for using minority-owned local contractors and hiring locals who belong to minority groups.

“There’s always some loophole or politicking so they’re not getting a fair shake,” he said.

kaitlin.bain@beaumontenterprise.com

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