PAID TO PUMP: How a tax credit could discourage conservation of the High Plains Aquifer

In 1965’s United States v. Shurbet case, an irrigator from Texas asserted his claim for a depletion tax deduction for groundwater pumped from the High Plains Aquifer. He argued that the unique conditions of the southern High Plains region - a plateau where the shallow aquifer is recharged only through precipitation at a slow rate - meant the groundwater resource would be depleted in time. The state argued that groundwater was not fundamentally an exhaustible natural deposit, but the Supreme Court concluded the tax deduction was appropriate given the “peculiar” conditions in the area. It was stated the decision was not meant to establish a precedent regarding cost depletion of groundwater. The findings of the Shurbet case were intended to be limited to the southern High Plains region. However, in a 1980 lawsuit against the IRS, the Gigot brothers of Kansas sought to expand the deduction to allow depletion of the aquifer beneath their 30,000 acre farm in Kansas. The case was settled in the district court with a ruling allowing the brothers’ deductions to continue, thereby extending the Shurbet decision to include all landowners extracting from the approximately 174,000 square miles of land overlying the High Plains Aquifer. Currently, the estimated value of the credit is highest in parts of northern Texas, eastern Colorado, western Kansas, and south central Nebraska

The Tax of the Century

The current economic standing of the United States is nothing like it was back in the 20’s when “business was booming”. There are some businesses today that are still above water despite these difficult times and they are mainly fossil fuel companies. The United States, along with other developed and developing countries, has a strong and crippling addiction to these cheap and dirty fuels. The goal of several recent environmental conventions has been to find a way to decrease the amount harmful gas that is emitted from these fuels into our atmosphere. Clean energy technologies always seem to be the solution but first we must incentivize the market to fund these innovations. William Nordhaus, an economist and Yale economics professor, wrote a paper titled “Carbon Taxes to Move Toward Fiscal Sustainability” where he paints a picture of what this tax needs to look like to be effective. It is extremely important that this tax be implemented correctly, and that it be aimed at the carbon emissions and not the fossil fuels. As Sedjo points out “taxing the fossil fuel provides no incentive to develop or utilize technologies such as carbon capture and storage.” The carbon tax has a great amount of potential to raise revenue over the next decades, inspire innovation for clean technologies, and help to meet environmental standards for climate change

PAID TO PUMP: How a tax credit could discourage conservation of the High Plains Aquifer

In 1965’s United States v. Shurbet case, an irrigator from Texas asserted his claim for a depletion tax deduction for groundwater pumped from the High Plains Aquifer. He argued that the unique conditions of the southern High Plains region - a plateau where the shallow aquifer is recharged only through precipitation at a slow rate - meant the groundwater resource would be depleted in time. The state argued that groundwater was not fundamentally an exhaustible natural deposit, but the Supreme Court concluded the tax deduction was appropriate given the “peculiar” conditions in the area. It was stated the decision was not meant to establish a precedent regarding cost depletion of groundwater. The findings of the Shurbet case were intended to be limited to the southern High Plains region. However, in a 1980 lawsuit against the IRS, the Gigot brothers of Kansas sought to expand the deduction to allow depletion of the aquifer beneath their 30,000 acre farm in Kansas. The case was settled in the district court with a ruling allowing the brothers’ deductions to continue, thereby extending the Shurbet decision to include all landowners extracting from the approximately 174,000 square miles of land overlying the High Plains Aquifer. Currently, the estimated value of the credit is highest in parts of northern Texas, eastern Colorado, western Kansas, and south central Nebraska