New Report: Tax Handouts to Wealthy LNG Developers Deprive Communities of Needed Funds

A new report details the extent to which the export industry for liquefied methane gas, known as LNG, benefits from billions of dollars in tax breaks, also called tax abatements, in Louisiana and Texas, with local communities suffering as a result. As the incoming Trump administration threatens to lift pollution safeguards and offer giveaways to the fossil fuel industry, this report brings much-needed scrutiny to the true harm LNG export projects cause by depriving communities of valuable tax revenue for critical infrastructure and services such as bridges, hospitals, schools, and climate resiliency.

Using data and in-depth interviews with community members, the report, titled The People Always Pay: Tax Breaks Force Gulf Communities to Subsidize the LNG Industry, tells the story of how tax breaks cause economic and social harm to marginalized, often heavily industrialized communities in these Gulf Coast states. This report was submitted to the Department of Energy to inform the update to the agency’s studies which they rely on to make their public interest determinations.

"The immense scale of tax breaks granted to billion-dollar LNG projects—millions of dollars per job—is mind-blowing. These deals essentially pay industry to inflict more suffering on already climate-ravaged communities by polluting the air and water while depriving Gulf Coast communities of vital revenue for schools, infrastructure, healthcare, emergency services, coastal restoration and protection,” said James Hiatt, founder of For a Better Bayou and a resident of Calcasieu Parish in Louisiana featured in the report. “These tax exemptions are a burden to our communities, and bring absolutely no economic prosperity. It's time to stop these giveaways, make polluters pay, and ensure that economic benefits serve the people, not just Big Gas corporations."

The report looks at the primary tax abatement programs that have been granted to LNG export projects: Louisiana’s Industrial Tax Exemption Program (ITEP) and Quality Jobs (QJ), and Texas’s Chapter 312 Property Tax Abatement Program and Chapter 313 Value Limitation Agreement Program.

The analysis finds that the nine operating and proposed LNG export terminals sited in the Louisiana LNG hotspots reviewed have together been gifted $21.6 billion in tax breaks from ITEP and QJ – though 41% of the giveaways under ITEP are for planned projects, meaning the subsidies could still be avoided if the projects never come online. In Texas, all the terminals in this report’s scope receive tax abatements under Chapter 312 and four have agreements under Chapter 313 that amount to $2.1 billion in corporate subsidies, 21% of which are for planned projects and thus could potentially be avoided if the harmful projects are never built. In both states, so few new jobs are promised by the LNG industry in exchange for these tax abatements that every promised job equates to millions of dollars in subsidies received by the LNG industry.

“For communities situated near LNG export projects, there are few facets of life that are not negatively impacted by these facilities. Yet, local and state officials forgo vast sums of public money in tax giveaways, sacrificing everything from public health to local fishing and tourism industries, in exchange for inadequate promises of jobs or investment,” said Alison Kirsch, Sierra Club senior analyst and report author. “This lopsided deal with the industry means that communities are left cleaning up the mess, literally and figuratively, without proper resources.”

The People Always Pay makes it clear that these massive tax exemptions deprive local communities of sorely needed funds for decades, all while subsidizing rich fossil fuel companies that disrupt local industries, causes premature deaths and millions of dollars in health costs, and threatens precious ecosystems. This story is told through data, but also through interviews with residents in the “hotspot” locations, areas most impacted by LNG, who share the harms caused by LNG exports in the area, as well as the impact of lost tax revenue to invest into their communities.

“In Texas it is common to disguise corporate tax handouts as job creation – and that’s exactly what is happening in the Rio Grande Valley,” said Bekah Hinojosa of the South Texas Environmental Justice Network. “Cameron County, for example, voted to allow one fossil fuel developer to avoid paying 100% of its property taxes for ten years – money that should instead be spent on critical community services. Tax breaks for LNG corporations result in pollution that causes numerous health conditions and premature deaths and degrades the environment and sacred land of the Carrizo Comecrudo Tribe of Texas. Meanwhile, they shift a huge burden to our low-income and middle-class people who must pay much more to get healthcare for themselves and their kids and to sustain basic county services. If the LNG industry wants to come in and ruin our air and water, tear up our roads, and deplete our water resources, they should at least pay their fair share of taxes.”

The facilities built with the tax abatement subsidies threaten the Gulf, and also have far reaching impacts on people across the United States and the world. As the US continues investing billions in LNG infrastructure, there are dire warnings that gas exports put climate commitments out of reach—commitments that are critical in order to mitigate the worst impacts of the climate crisis, such as fatal heat waves, mass extinction, and agricultural scarcity. LNG exports also have a clear link to higher domestic heating prices in homes and threaten to crowd out cheaper renewable energy from the market, adding to the economic burden of many people already struggling to afford their bills.

The report concludes that rejecting permits to build pending LNG export projects would be the best course of action to avert the worst of the climate crisis and keep tax revenue in local communities to enable many of the critical investments explored by frontline community members interviewed in the report.

The People Always Pay was released by Sierra Club with Better Brazoria, For a Better Bayou, Healthy Gulf, Ingleside on the Bay Coastal Watch Association, Port Arthur Community Action Network, Sierra Club Delta Chapter, Sierra Club Lone Star Chapter, South Texas Environmental Justice Network, and The Vessel Project of Louisiana.

Read the full report at sc.org/LNGtax.