Council Urges Continuation of High-Cost Gas Tax Credit
Posted/updated on: April 28, 2011 at 1:26 pm
TYLER — The Tyler City Council has adopted a resolution urging the Texas Legislature to support the continuation of the high-cost gas investment tax credit. In 1989, the Legislature created the credit to encourage natural gas exploration and production in areas that are difficult and expensive to develop. The credit was extended several times and made permanent in 2003. Under the current credit, natural gas producers receive a partial tax reduction for each qualifying gas well, certified as “high-cost” by the Texas Railroad Commission, based on the actual drilling and completion costs for that well. “The Oil & Gas industry is important to Tyler’s economic future,” said Tyler Mayor Barbara Bass. “We have a vested interest in ensuring we are proactive in supporting its success because it means jobs and revenue for our community.”
It is estimated that the high-cost gas tax credit currently generates $4 of economic growth for every dollar invested and generates nearly 40,000 jobs a year. City officials say the investment tax credit is critical to the state’s position as a national energy leader. They say it has encouraged the development of important new sources of Texas natural gas. Between 1990 and 2009, high-cost gas production, as a percentage of statewide gas production, increased from 5.5 percent to 56 percent. During this time, according to city officials, Texas was the only major producing state to increase natural gas production.
In early 2010, the Tyler City Council and several other community boards and elected bodies came together to jointly adopt a measure to support the Industry Growth Initiative (IGI). The IGI is a twenty-year plan that contains strategic tactics focused on achieving an Innovation Economy which brings higher paying jobs, economic growth, job creation and a higher standard of living. One of the IGI’s ten building blocks is 21st Century Energy.
“For generations, the Oil & Gas sector has been a mainstay in the Tyler economy; it has provided jobs and stability when other areas of the country have struggled in tough economic times,” added Mayor Bass. “This legacy industry still has so much more in store for us. With the development of horizontal drilling and the discovery of the Haynesville Shale, the Oil & Gas sector will play an important role in Tyler’s economic future.”
City officials say discontinuing the investment tax credit would increase taxes on natural gas – termed one of the state’s most vital economic engines – and have what officials call negative consequences. Officials say it would discourage investment in new production and expansion of natural gas operations and would put Texas at a competitive disadvantage with states like Louisiana and Arkansas that have substantial high-cost gas incentives.
