Before leaving town this week, the Mississippi Legislature approved several law changes designed to leverage Mississippi energy assets into jobs and investment. With near unanimous and bipartisan support, the bills send a clear and rightful message that energy development is valued in our state.
One measure, HB 1698, encourages investment in horizontally drilled wells by offering a temporary severance tax reduction. Such legislation allows for Mississippi to compete with other states that have lowered, and in some instances fully exempted, energy severance taxes for periods of time to encourage investment in this emerging industry. Tight formations in Mississippi have, so far, been challenging and expensive to develop. With the reduced tax, several southwest counties located within the Tuscaloosa Marine Shale formation will hopefully now attract more investment capital related to oil production using horizontal drilling.
HB 844 will eliminate sales tax paid on energy used by manufacturers. With America’s newfound energy advantage, the manufacturing sector is active and growing. Eliminating the sales tax paid on energy, mostly natural gas and electricity, puts Mississippi on a level playing field with most other states and in a more competitive position in a growing manufacturing sector. Economists have recently been writing about potential competitive advantages for manufacturing in the U.S., with abundant natural gas being a significant contributor. Because of energy supply strengths through natural gas pipelines and electric power capacity, manufacturing should be a disproportionate area of focus for economic developers.
HB 1281 updates energy building codes for commercial buildings bringing them to the ASHRAE 90.1-2010 standard. Largely already done in practice in commercial construction, this legislation officially sets a legal standard for energy efficient construction. The economics of ASHRAE standards are well-understood and significant, especially in climates like Mississippi. Standardized and smarter construction practices, both in commercial and residential, will be economically beneficial for homeowners and businesses, and through time, will effectively expand Mississippi’s energy supply capacity through conservation.
Each of these measures and others will play a role in assisting the growth of Mississippi’s energy sector, which in turn will aid the growth of the state economy. In short, good policy.