Carbon Capture School Dollars
Carbon capture and rising temps are a hot topic among climate change enthusiasts but short sighted policy takes much needed revenue in billions from school districts to support these unproven ventures
Subsidies are a hot news topic in recent years and come in many different forms in the energy sector and vary across states. One that attracted my focus recently is the Texas Chapter 313 property tax abatement that reduces property taxes for up to 10 years paid to school districts for maintenance and operations that funds the day-to-day operations of a district. First, it must be stated that this program is set to sunset on December 31st 2022, but as time runs out for this program many solar, wind, and carbon capture projects that make up nearly 30% of the program are being rammed through the system to capture tens of billions in unpaid money to Texas schools in need.
According to a report in 2019 by the Texas Comptroller, $10.8 Billion had been allowed to not be paid in property value for these projects to school districts across Texas while creating 9,116 jobs which is one of the primary goals of the program. Since 2020, 82 projects have been awarded active status while 433 are in the application stage, 433 applications is a huge increase compared to the previous decade as the program comes to an end.
While digging through the applications in an attempt to understand the true benefit of this program to the counties that they occupy, it was interesting to see the value of many of these solar farms after depreciation of the equipment in the ten year abatement timeframe. For many of these projects the property value is set to be worth half of the original installs property value, meaning these school districts will receive very little once the agreements expire.
My interest was initially sparked on the topic of abatement while sitting in on a school board committee meeting for Ector County in the heart of the Permian Basin about a month ago. The Nacero gasoline from natural gas plant($6.5-7B project) and the Occidental Resources carbon capture plant were the main focus of the discussion as the community was accessing gaps in tax dollars in the area. Recently Occidental(Oxy) stated they plans to have 70 carbon capture plants, an announcement on the heels of Warren Buffett’s massive increase to roughly 30% in Berkshires equity position of the publicly traded company. Living in West Texas for the better part of 4 decades I can walk outside my front door and be within spitting distance of a couple Oxy plugged wells as they litter the west side of Odessa, TX(Ector County) where their presence is heavily felt. As the community of Ector County fights for new schools to be built in West Odessa due to overcrowding, the same area that these plants are expected to be erected, I decided to venture into what the cost of just Occidental’s mad dash to get these agreements completed before the 313 Abatement program ends later this year.
1pointFive P1, LLC is the foreign entity name chosen by Oxy for the projects application and incorporation. Below are the current applications for 7 different pending sites that are all located within the same region of West Odessa near Penwell.
Some buzz in the media came up around the project when the first application was approved for a cap of $100M in property value and a loss of $50M to the school district over 10 years. However since that initial news broke little has been mentioned about the 6 other corresponding applications for the same site that each have a $30M limitation cap and roughly $296 Million per install of taxes not paid towards Ector County Independent School District Maintenance and Operations over 10 years or an accumulative total of $1.8 Billion. That doesn’t even take into account the loss in revenue to the local community college in Odessa where the Gary Johnson, the chair of the college’s board of trustees, said any lost revenue would be well worth it if it attracts investment and jobs.
Unlike the solar project referenced earlier, this plant does not lose more than 50% of its property value after the ten year abatement expires and such a large plant does contribute to the interest and sinking (I&S) tax rate which provides funds for payments on the debt that finances a district's facilities. This could potentially be a net positive for the district after 10 years if the projects work out and aren’t abandoned.
Oxy’s six plants are expected to bring in 7,500 temporary construction jobs and 175 new permanent jobs that qualify under the 313 agreement for an average salary of $51,640 per year which is well above the average area income of $34k but below the $61k/year average for oil and gas workers in Odessa, TX. With enhanced employment being a key driver to the programs existence, it’s hard to understand why so many government and school officials would put so much support behind little added value.
If all six builds were to be constructed, they would be capable of capturing and permanently sequestering approximately 26 million tonnes per annum (Mtpa) of atmospheric CO2 where 35 billion tonnes of CO2 is emitted per year by humanity. The plant would be able to capture 0.00074% of yearly CO2 subsidized by tax dollars. The benefits written into US law seem endless for Oxy’s bottom line where the per-metric ton 45Q tax credit is substantially increased, now up to $85 for sequestered CO2 and $60 for CO2 that is reused. Oxy will essentially be awarded $60 per metric ton of carbon captured and reused even for enhanced oil recovery to produce more oil and gas. OXY also has plans a near carbon copy plant, pun intended, near Corpus Christi for Riviera ISD.
Currently a carbon capture program run by Climeworks sells credits for $1k euros per metric ton to companies like Microsoft, Audi, and Shopify to offset their impact and work towards net zero. Climeworks forecasts an eventual global carbon price of $100-200/ton, and expect to get their costs down to $250-300/ton by 2030.
As the tax dollars add up it’s apparent that some of these programs are not needed, especially at the expense of our greatest social programs such as public education. Vicki Hollub will YOLO into some investment to cement her name as a prominent oil and gas CEO but if Oxy’s technology does work it will be significant to their bottom-line as they expand these planned installs. But who checks these numbers on the amount of carbon captured that pays out so well? With a claim of 6500x the carbon capture capacity of the currently largest constructed plant makes this project sound like science fiction.
