Responding to pressure from business and petroleum industry lobbying groups, as well as Gov. Greg Abbott, the Texas House of Representatives passed a bill last week to replace Chapter 313 — a controversial tax incentive program that expired in 2022. Under the “grid reliability” provisions of House Bill 5, it will be easier for manufacturing projects tied to the oil and gas industry to qualify for tax abatements than under Chapter 313, which critics described as “corporate welfare” and a “colossal giveaway” to industry. But for reasons that likely have little to do with economic realities and everything to do with top-down political pressure, renewable projects will be excluded from the new incentive program entirely.
According to an analysis of the Texas comptroller’s reporting by the Houston Chronicle, the manufacturing sector — chiefly oil, gas and petrochemical companies — reaped nearly three quarters of the $31 billion in tax savings awarded to private companies through local school districts over the 20-year lifespan of Chapter 313, but renewables accounted for two-thirds of agreements. While big-ticket hydrocarbon industry projects were centered in a handful of school districts in heavily industrialized areas along the Gulf Coast, renewable projects were scattered across the state and primarily located in rural areas.
The decision to shut out wind and solar from HB 5 follows a broader trend in the 2023 Texas legislative session, led by Lt. Gov. Dan Patrick, who presides over the Senate and is pushing a slate of anti-renewable bills. Patrick and Abbott have erroneously scapegoated wind and solar energy for deadly grid failures in 2021’s Winter Storm Uri. Both of the Texas Republican leaders are pushing to incentivize fossil fuel power generation projects under the cover of grid reform.
“Our focus is on dispatchable power,” Abbott told reporters in March, “to make sure that we will have the needed dispatchable power to provide reliable electricity to everybody in the state.” Dispatchable means power that can be switched on and off at will: natural gas, coal and nuclear. (Every power generation source in Texas faced problems during Winter Storm Uri, but natural gas plant failures were the No. 1 cause of the grid collapse.)
Getting in line with Abbott’s call for a new incentive program, House Speaker Dade Phelan gave priority status to HB 5 and broke his normal policy of abstention to vote for it. But its passage may mark only a temporary victory for Phelan. In the 2021 session, Chapter 313 reauthorization also passed the House, but it died in the Senate. The same fate may await HB 5, which has been assigned to the Senate Business and Commerce Committee, chaired by Sen. Charles Schwertner, a Republican from Georgetown whose large district includes College Station and suburbs north of Austin.
Schwertner and his vice chair, Republican Sen. Phil King, are the primary authors of four Senate bills passed this session and currently in the House State Affairs Committee that have been labeled “anti-renewable” by environmentalists. King is the lead author of a fifth anti-renewable bill that is also awaiting a hearing in the House.
Phelan’s office did not respond to a request for comment on whether he is personally opposed to the inclusion of renewables under the new program. Oil, gas and petrochemical companies in Phelan’s district — including ExxonMobil, Enterprise Products, Chevron, the German chemical giant BASF and the state-owned Saudi company SABIC — enjoyed windfall tax savings under the old program and will stand to benefit similarly if HB 5 becomes law.
There are at least 30 active Chapter 313 agreements in Phelan’s East Texas district, which includes industry-dense Beaumont and Port Arthur. The value of Chapter 313 agreements in “heavy metal” districts like Phelan’s is staggering. One agreement signed by the Beaumont Independent School District in December 2022 — just weeks before the program’s expiration — awarded a $395 million tax abatement to Houston-based Enterprise Products for the construction of a $5 billion ethylene plant.
According to Austin-based attorney George Christian — who drafted HB 5 on behalf of industry groups — renewables were specifically cut out of the program in order to improve its chances in the Senate. The industry groups included the Texas Association of Oil and Gas, the Texas Association of Manufacturers, the Texas Chemical Council, the Texas Association of Business, and the Texas Tax and Ratepayers Association, which worked under the umbrella of a now-disbanded coalition called Jobs for Texas.
Christian said the Jobs for Texas members were not the source of the opposition to the inclusion of renewables and that he didn’t think the opposition came from the House either. “Everybody was favorable, the energy industry in particular,” Christian said of conversations about a Chapter 313 replacement that began in June 2022. “We kept a placeholder in the bill for renewables, hoping we could work the issue and get to some point where the Senate would go for it,” he said, “but the Senate said they would not go for it with renewables in it.”
None of the former Jobs for Texas members responded to a request for on-the-record comment, though an employee of the Texas Chemical Council speaking on condition of anonymity did say that the group was not opposed to the inclusion of wind and solar projects. “Our industry is critical in the creation of renewables,” the employee said. “You can’t have renewables without the chemical industry.”
“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,” Texas Oil and Gas Association President Todd Staples told the Texas Tribune. “But the political reality is there is resistance to their inclusion, and the Legislature will have to make their decision.”
“No renewables,” said Rep. Todd Hunter, one of HB 5’s primary authors, in his opening remarks at the start of the floor debate. “It is not a negative message. It is basically a program so that we can get various groups on board.” Hunter is a Republican whose district includes Corpus Christi and parts of its surrounding counties that have seen booming oil and gas industry construction over the last decade. “Between us, I have no problems with the renewable industries and I work with them,” Hunter said.
Hunter did not elaborate on what he meant by working with renewable industries, and his office did not respond to a request for comment. Schools in Hunter’s district have at least 19 active Chapter 313 agreements, 15 of which are for oil, gas and petrochemical industry projects, including three for an Exxon-SABIC ethane cracker and eight for a Cheniere liquid natural gas plant. Solar and wind projects account for the remaining four.
“I want you to understand this isn’t renewable versus nonrenewable,” Hunter’s co-author, Rep. Hugh Shine, a Republican from Belton, halfway between Austin and Waco, said during a tense exchange over an amendment. “There was an agreement made, and we’re going to honor the agreement.” Shine’s office did not respond to a request for comment.
Hunter and Shine did not describe the nature of the agreement or identify the parties involved, but they did successfully oppose amendments that they implied would spoil it — including a side-door for future renewable projects tied to dispatchable battery storage facilities and a provision that would have altered the language about battery storage projects to lock out wind and solar even more decisively.
“It’s unusual to hear a member invoke a deal like that on the floor,” said one longtime Texas environmental lobbyist who asked not to be named. “I was shocked that he brought it up because it’s so explosive.”
Opposition to HB 5 on the floor last week was muted. The Democrat-heavy Texas Energy and Climate Caucus — which includes a few outspoken Republican supporters of clean energy among its 50 members — had prepared a list of six amendments in the run-up to the floor hearing. The group’s first amendment would have opened the new program to renewables; another would have required applicants to factor environmental costs into their financial impact statements and would have given the comptroller the authority to deny approval to projects that posed unacceptable environmental risk. Another amendment sought to exclude environmental bad actors by restricting eligibility to companies with “satisfactory” or “high performer” compliance ratings from the Texas Commission on Environmental Quality. The remaining three addressed transparency, public participation and legislative oversight.
By May 3, the day before the floor hearing, the Energy and Climate Caucus had given up on the inclusion of renewables and the safeguard against rewarding reckless polluters with tax breaks. The group had settled on just two amendments: one extending the timeline for school districts to approve agreements and another shortening the sunset date of the new program from 2036 to 2029. Neither amendment made it to the floor, though Rep. Donna Howard’s amendment to sunset the program in 2033 was successful. Howard, a Democrat, represents a part of western Austin and is a member of the Energy and Climate Caucus. She voted for the bill.
The Republican-led HB 5 passed by a wide margin on May 4, with 29 out of 64 House Democrats signed on as sponsors. The rumor at the statehouse was that renewable industry advocates had agreed to pull back from the HB 5 fight in exchange for Hunter’s help in confronting the anti-renewable Senate bills that are currently awaiting a hearing in the House State Affairs Committee, which Hunter chairs — bills authored by Sens. Schwertner and King and others that the renewable energy sector calls “industry killers.”
Now that HB 5 is headed to Schwertner and King’s committee, it is likely to become a bargaining chip as the senators try to wrest concessions from the House for their pro-fossil fuel grid-related bills.
A letter dated May 1 and addressed to Hunter from the Advanced Power Alliance — the trade group representing the renewable industry — seems to confirm the rumor and explain the retreat of Energy and Climate Caucus members from their planned amendments:
“APA members were certainly disappointed to be largely excluded from the program outlined in House Bill 5,” writes APA Texas Vice President Judd Messer in the letter. “That said, it has become clear that our inclusion makes it unlikely that this legislation would ultimately pass, and we believe Texas would suffer greatly if no new program was put in place to attract large-scale capital investment to our state. For that reason, we have called on our members and other supporters of clean energy to support House Bill 5 in its current form, and to refrain from offering amendments to include wind and solar power production.”
“The renewable industry appears willing to accept a bill that kills a few projects, versus bills that come out of the Senate that kill a lot of projects,” the environmental lobbyist said. “They don’t want to do anything to upset that kind of agreement.”
