NC Commerce officials say proposed fracking tax would fund corporate incentives

acurliss@newsobserver.comAugust 1, 2013 

  • Sharon Decker

    Commerce Secretary Sharon Decker was appointed to the position this year by Gov. Pat McCrory. They both are former employees of Duke Energy. Decker worked there for 27 years, leaving in 1997 as chief communications officer. Since then, she led a clothing company and several nonprofits. She is a past chairwoman of the Charlotte Chamber of Commerce.

    Decker has served on the board of directors of SCANA, parent company of PSNC Energy, as well as Family Dollar and Charlotte-based Coca-Cola Bottling Consolidated.

The administration of Gov. Pat McCrory is pushing a proposed tax on fracking as a substantial piece of its economic recovery strategy, with key Republicans saying it would raise millions for financial incentives to recruit companies or help them expand in North Carolina.

Commerce Secretary Sharon Decker said this week the state’s biggest competition in luring business is from Texas, where Gov. Rick Perry has what she called a “big slush fund,” financed by energy taxes, to spend on recruiting companies there. Her comments were to a group of business and community leaders Wednesday afternoon during a question-and-answer session at Robeson Community College near Lumberton.

Decker told the group she wants a similar piggy bank here and that “energy partners” are ready to “provide us with the money” in a climate where increasing traditional funding streams for incentives, such as income and corporate taxes, isn’t likely. She said the money would be used to lure major projects to the state.

“I’m very selfish – the governor gets tired of hearing it,” Decker told the group. “He says, ‘Lordy, mercy, you’re the greatest advocate for fracking I’ve ever seen.’ And I said it has nothing to do with fracking. I want those dollars in economic development.”

Texas has a long history of energy development, with vast shale gas reserves estimated to be at least 50 times larger than North Carolina’s.

Decker said she would not “go as crazy” as Perry in Texas, where officials have spent billions on incentives for corporations.

But she said more flexibility and more money for incentives in North Carolina are important as the state tries to improve wages and grow jobs.

“When you hear some conversation about hydraulic fracturing and offshore drilling, recognize that we’ve got to do it safely and there’s power in the energy,” Decker said. “But there’s also a revenue stream there that folks are eager to offer us for greater economic growth in the state.”

She added: “I’m glad the press isn’t here.”

An aide then pointed out a News & Observer reporter and the session shifted to other economic concerns.

In an interview, Decker explained her position on fracking-for-incentive money as aimed at finding a new approach to creating jobs. And she pointed out pending legislation that she said would accomplish that goal.

The bill, SB 127, emerged in the waning days of the legislative session with language she said the administration helped craft that would raise the incentive money from fracking. The bill did not pass as lawmakers said time to study it ran out and they adjourned last week.

Lawmakers are scheduled to reconvene in May and could take up the bill then. There has been discussion recently that McCrory, a Republican in his first term, may call a special session of the legislature to deal with energy and economic development matters.

A tax on fracking

The latest version of the bill appears to combine the controversial topics of corporate incentives and fracking.

The term fracking is short for hydraulic fracturing, a process used to extract natural gas from deep in the ground that has raised concerns across the nation about its possible impacts on the environment, including water pollution and a correlation with earthquakes.

Incentives have drawn bipartisan debate for years. The state’s Republican Party recently adopted a platform that again says it is against “corporate welfare” and that targeted tax incentives are “contrary to the free enterprise system.”

For much of the legislative session, the legislation dealt with efforts by Decker and McCrory to streamline and reorganize economic development functions across the state. On July 24, two days before the official adjournment, a committee of lawmakers from the House and Senate proposed the fracking tax in the bill and added other language about fracking.

The legislation says the purpose of the new tax would be to “provide revenue to administer and enforce the provisions” of the legislation.

A leading lawmaker handling the bill, state Sen. Harry Brown, a Jacksonville Republican, said that language ties back to the economic development efforts spelled out in the bill. That’s what would create the new funding for incentives. The bill contains no other specifics about the incentive plan.

The new tax would apply to industries “engaging in the severance of energy minerals from the soil or water of this state,” and the revenues would also go to other purposes: a gas and oil regulatory program; environmental needs; and to reclaim land affected by drilling and gas exploration.

Brown said estimates vary on how much money could be raised by the tax, underscoring uncertainty about how fracking would play out in North Carolina. He thought it could bring in as much as $1 billion, but wasn’t certain over what period. He said it could be much less.

“It’s anybody’s guess,” he said.

Incentive money

Brown confirmed that a major outcome of the bill would be to generate money for corporate incentives, specifically aimed at large projects.

Traditionally, lawmakers have been heavily involved in deciding the biggest incentive deals in the state. When the Dell computer company received an incentive package of more than $200 million in the last decade, a special legislative session finalized the deal. In recent years, North Carolina recruiters lost out to other states as lawmakers here debated the merits and sizes of incentives packages.

Decker said the idea for new incentive money sprung from looking at some of those efforts in other states. She said the money would be used for grants, loans, infrastructure or other uses that would assist companies with jobs.

She said she reviewed 10 big-ticket incentive projects around the country, then met with current legislative leaders and told them: “You all don’t have a stomach for this.”

Governors in North Carolina have had some sources for incentives all along, with millions available from two main programs known as the One North Carolina fund and Job Development Investment Grants.

Both Decker and Brown said a large new source of incentive money would help North Carolina compete and act with more speed.

“We were looking for a way to fund big projects within the state where we had an opportunity to recruit these big projects, such as a car manufacturer or, you know, something in that realm,” Brown said.

He said it would help circumvent political debates on a project-by-project basis.

“When you come back to the legislature – that’s always been difficult,” he said. “So that’s when the fracking piece got added to the bill. What that did was added the tax structure. This would have created a pot of money for commerce to use in recruitment.”

Jeanette Doran, executive director and general counsel at the N.C. Institute for Constitutional Law, said she was unfamiliar with the plan but that her group opposes incentives, no matter the source of funding or how large the project, and would be concerned about a new state-run incentive program.

“I know that Texas does have a giant, oil-funded slush fund,” she said. “I had not heard about this here … Wherever (the money) comes from isn’t the thing that is most important. Most important is how that money is given out, how it’s given away. I don’t think incentives are going away. But if they are going to be around, the public should definitely get the benefit of what the companies are promising in order to receive the incentive.”

She said state audits have already raised issues with current programs, and isn’t sure the results of another effort would be much better.

Staff writer John Murawski and news researcher Peggy Neal contributed to this report.

Curliss: 919-829-4840

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