John Maynard Keynes is no favorite of fiscal conservatives (There is more to like from Friedrich Hayek), but Mr. Keynes did have it right when he said, “The avoidance of taxes is the only intellectual pursuit that carries any reward”.
In two separate Texas suits, oil and gas producers are attempting to live out Mr. Keynes’ maxim. In TXOGA and TIPRO v. City of Arlington, two industry trade groups sued the city over an annual assessment on gas well operators. The rationale is denial of the operators’ constitutional right to equal protection of the laws and a taking of their vested rights in permitted wells – in short, they claim the city is taxing one industry to address risks posed by a wide range of other businesses and industries. The city’s stated rationale for the assessment is the need for more funds for firefighting, in particular for hazardous materials response teams to fight gas well fires and accidents.
In Southwest Royalties v. Combs a district court in Austin, Texas, ruled that the scope of an exemption from the Texas sales and use tax on equipment used in oil and gas extraction does not apply to downhole equipment such as casing and tubing. The trial court agreed with Southwest that oil and gas change their physical characteristics when they are produced, but did not agree that the downhole equipment causes those changes. Both of those factors must be present for the exemption to apply.
Bonus – Good News for PR Graduates
The Onion, by its own admission, “America’s Finest News Source”, had this encouraging article on PR grads and the gas industry. Serously, while the tongue-in-cheek “news” is funny, the comparison of the gas business to big tobacco and the gun lobby isn’t exactly good for the industry’s image among people - most of Americans – who don’t pay enough attention to the industry to understand what fracking is all about.