New economic incentive plan clears hurdle in Texas House

The Texas House on Thursday voted 118-22 to create new economic incentives to attract large companies to come to the state or expand current projects in Texas after lawmakers allowed a similar 20-year-old program to expire in December.

House Bill 5 replaces the former tax-discount program known as “Chapter 313” with a plan that still allows the companies to enter into agreements with school districts — but restricts renewable energy projects from being able to easily access the incentives.

For Republicans, including Gov. Greg Abbott and Lt. Gov. Dan Patrick, one of the most contentious aspects of the old program was how much it was benefiting renewable energy projects. But opponents on both sides of the aisle said it was rife with abuse and derided the program as “corporate welfare” that conferred benefits on some school districts while others were left out.

The new legislation, dubbed the Texas Jobs and Security Act, won preliminary approval on Thursday and is expected to get final approval on Friday before then heading to the Senate.

House Speaker Dade Phelan, a Republican, has made the new plan a priority bill for his chamber and cast a rare vote for it on the floor Thursday.

On Thursday, the bill’s sponsor, House State Affairs Chair Todd Hunter sought to separate the new program from the controversial Chapter 313 plan.

“Chapter 313 does not exist anymore. It is out in the cold,” he said. “This is brand-new legislation.”

The legislation would allow school districts to offer limited, temporary property tax discounts to eligible companies for projects that bring jobs and investment into the district. The state pays the school districts the difference, and the district also gets to collect extra money from the company as part of any tax-discount deal they strike.

The program would be up for renewal in 2036, similar to the 12-year sunset cycle of state agencies.

Eligible projects would include a manufacturing project, or a project that would require an investment in a Texas school district of more than $1 billion. They also include projects that add more on-demand electricity to the power grid, such as a natural-gas-fueled generator or batteries, a project to produce hydrogen fuel or a seawater desalination project.

Hunter called the program a “modern, transparent economic development tool that will keep Texas at the top of the nation in job creation and new business investment.”“Texas’ economic future depends on our ability to compete not only with other states but with other countries around the world,” he said.

On Thursday, House members led by Democratic state Reps. Trey Martinez Fischer and Jarvis D. Johnson tweaked the legislation to address concerns that the new program did not go far enough to protect the quality of the jobs the companies would be required to create in order to get the property tax discounts.They pushed through changes that raised the wages of those jobs, required the employers to offer and contribute to health benefits for those jobs and stiffened the penalties for noncompliance.

The bill has the support of business groups and the Texas oil and gas industry.

Todd Staples, president of the Texas Oil and Gas Association and a former Texas senator and commissioner of agriculture, said it would be an important economic development tool.

“There’s just simply no reason Texas, the world’s ninth-largest economy, should be dependent on foreign countries to meet its needs,” Staples said. “We believe this bill will help us reduce our dependence on foreign supply chains that will bring manufacturing back to Texas and keep our state a national and global economic leader.”

The bill was criticized by Democrats and some rural Republicans for specifically excluding renewable energy projects. Hunter told House members that the main reason renewable energy sources like wind and solar were sliced out of the program’s eligibility criteria was to create a program that would “get various groups on board.”“I have no problem with the renewables industry, and I’ll work with them, but in this bill, they are not included,” Hunter said. “It is not a negative message.”

Co-author state Rep. Hugh Shine, a Temple Republican, said under questioning during the floor debate that it was “reasonable” to conclude the bill’s inclusion of grid projects that create more dispatchable power — which means power that can be turned on at any time and would include battery storage — could eventually open the door to wind and solar companies if they one day develop battery technology.

Amarillo Republican state Rep. John Smithee viewed such a possibility as a good thing, telling his colleagues that the state shouldn’t be “picking winners and losers” when it comes to shoring up the grid and storing power for emergencies, such as what the state saw during Winter Storm Uri in February 2021.

If renewable companies can create dispatchable power one day, he said, why not incentivize them to come to Texas?

“If we can create dependable, reliable, dispatchable energy from whatever source it might be, that’s what we need to be doing,” Smithee said. “All of the above. When we need energy here in this state, we can’t discriminate against any source.”

But Tyler Republican state Rep. Matt Schaefer argued that without language in the bill that specifies renewables can’t be included through the batteries loophole, the state is essentially continuing to invest in energy sources that opponents within the Republican party say are wholly unreliable.

“Battery production is heavily subsidized,” Schaefer said. “And the reason it’s heavily subsidized by the federal government is that it benefits wind and solar projects, and my concern is [House] members think that wind and solar are not included in this bill, and they really are.”But an attempt by Schaefer to specify in the legislation that renewable energy sources could not be eligible failed on a 20-107 vote. Hunter opposed it because, he said, “there was an agreement made with particular groups on this bill, and we’re going to honor the agreement.”Hunter did not say which groups or what the agreement was. Schaefer said he was “not privy” to those discussions but that he wanted to make sure the chamber was able to decide independently on the issue.

Staples told The Texas Tribune in an interview on Thursday that his association takes an all-inclusive philosophy about where the state should get its power, and that his group did not lobby against renewables being part of the bill.

“The oil and natural gas industry supports an all-of-the-above energy approach. And we have been neutral on House Bill 5 with regard to inclusion of wind or solar,” Staples said. “But the political reality is there is resistance to their inclusion, and the Legislature will have to make their decision.”

Staff writer Emily Foxhall contributed to this report.

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