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With billions of dollars at stake, the Texas Supreme Court heard arguments Tuesday in a tax showdown whose outcome could shake up the next legislative session while straining the historically friendly relationship between state lawmakers and the iconic oil and gas sector.
Throughout a spirited debate over arcane accounting rules and oil-tinged science, the justices offered few clues as to how they might rule.
“They’re all great poker faces,” said James LeBas, an economist with the Texas Oil & Gas Association and a former chief revenue estimator for Texas, following arguments.
The case ultimately focuses on a single question: Are metal pipes, tubing and other equipment used in oil and gas extraction exempt from sales taxes?
Texas Comptroller Glenn Hegar has warned state lawmakers that a yes to that question, brought by Midland-based Southwest Royalties in an appeal of a lower court’s ruling, could trigger a flood of refunds that would wipe out the state’s projected $4 billion budget surplus.
“This one’s as big as they come,” the Republican said ahead of the arguments.
