American Oil and Gas Reporter - September 2023 - 41

ConventionSec tion: Texas Alliance of Energy Producers
Tax Reform Made Possible
By Vigorous Industry
By Del Torkelson
FORT WORTH-For the Texas Alliance
of Energy Producers, making the
case to state policymakers that a thriving
oil and gas industry means a flourishing
Texas economy and an abundance of tax
revenues may seem like arguing that fire
is hot or water is wet. Even if the audience
tends to agree, restating the obvious
entails a risk: What if the truth starts to
lose its so-called " oomph? "
But if the common knowledge about
the oil and gas industry's meaning to
Texas ever ran the risk of degenerating
into a vapid cliché, Texans received a
stirring illustration of the industry' importance
during the most recent biennium,
considers Alliance Chairman Houston
Sullivan.
" Texas always has been an operator-friendly
state, " observes Sullivan,
co-chief executive officer of Veritas
Permian III LLC in Fort Worth. " But
this year it has more than $30 billion
in extra revenue. "
Speaking in advance of the Alliance's
2023 Annual Conference-scheduled for
Oct. 4-5 at the Hotel Drover in Fort
Worth-President Jason Modglin notes
the state's official numbers reveal a $32.7
billion budget surplus for the biennium.
" The majority of that was generated by
the oil and gas sector, " he reports. " It
was not only a matter of severance tax
collections and royalty payments, but
also overwhelming sales tax revenue that
blew the comptroller's estimates out the
water nearly every month. "
That abundance also enabled Governor
Greg Abbott to sign a monumental tax
reform bill this summer. The package,
which passed after a pair of special legislative
sessions, will go before Texas
voters on the November ballot. Modglin
notes it contains significant relief from
homestead property taxes, but also aims
to ease property taxes on businesses.
" The small business exemption was
increased from about $1.2 million to $2.5
million, which will benefit some of our
members, " he details. " Texans who own
their homes will benefit-the high estimate
" The vibe out of Washington is a complete
contrast to the state level. A lot of the problems
created at the federal level not only make life
harder for our businesses, but sure seem
designed to eliminate them. "
-Houston Sullivan
Texas Alliance Chairman
puts the savings around $1,300-which
will help our members and the entire
economy. "
Sullivan spent some time in Austin
during the 2023 Texas Legislature, and
he says the clear synergy between a
healthy industry and state was apparent
to all. " The Alliance has been hammering
that point home for almost 100 years,
but legislators and regulators breathe a
lot easier when they have a surplus, " he
recounts. " It is nice to be able to put
something on the scoreboard. We can
talk a lot about our contributions to jobs,
schools, hospitals and other services, but
concrete evidence goes a long way toward
spreading the message. "
Long Time Coming
For decades, property tax reform has
been a perennially popular issue in the
Lone Star State, Sullivan observes. " Since
Texas does not have state income taxes,
property taxes are always atop everyone's
mind, from homeowners to businesses, "
he relates.
But since property taxes are the primary
revenue stream for Texas education,
public safety, emergency services, and
city and county government, Modglin
notes, collections face considerable upward
pressure.
" Substantial as those taxes are, they
grow every year, often moving beyond
peoples' ability to pay. On top of that,
businesses are taxed according to their
sales, " he describes. " Although we often
point to Texas as a relatively low-tax
state, its property tax is very high, which
can hurt lower-income Texans. It also
can hurt capital-intensive businesses such
as oil and gas. "
While property tax reform has enjoyed
massive support among Texans for
decades, Modglin cautions that specific
proposals have tended to splinter that
support's universality. That was the case
this year, as the state's top policymakers
took up the issue. " Since both legislative
chambers are governed by Republicans
and Governor Abbott also is a Republican,
it seemed like they should be able to
come together and iron this out, " Modglin
recounts. " But each corner was fundamentally
dug-in on certain aspects. "
Even though the state's tax structure
has a major influence on Texas oil and
gas companies, its broader scope as an
issue affecting all Texans could have
prompted the Alliance to pursue a lowkey
stance, Modglin reflects. However,
he says, the association deemed active
advocacy worthwhile.
" Businesses, in particular oil and gas,
needed to make sure we were constantly
reminding (policymakers) where all that
revenue was coming from, " he explains.
" We also had to be supportive of the
Senate, House and Governor as we
searched for a solution that would reduce
taxes without setting up a situation that
potentially could lead to deficits soon. "
" Jason asked if we could take this
subject up with the Board of Directors, "
SEPTEMBER 2023 41
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