Proponents of an extraction tax on water in Maine compare it to severance taxes on oil drilling in U.S. petro-states, such as Texas and Alaska. The analogy is problematic, given the stark differences between oil and water as natural resources.
On its face, there are easy similarities. Both oil and water are liquids removed from the ground, and resources that are sold as commodities. Yet the parallels end there. Water is nowhere near as scarce (and therefore not as valuable), nor as environmentally damaging to remove from the earth, as oil. This should preclude further comparisons of the two.
Except it doesn’t. This week in Augusta, as legislation for a per-gallon tax on extracted water was heard, companies such as Poland Spring were held as roughly equal to ExxonMobil.
Rep. Jon Hinck, D-Portland, made the express comparison of oil severance taxes — named because they tax the “severing” of resources from the planet — for his bill, LD 237, which institutes the per-gallon tax on water extractors that remove more than 1 million gallons a year.
To us, this is a flimsy analogy. Other states levy severance taxes on natural resources — coal, oil, natural gas, or minerals — as Maine does, because they are finite resources, with definite values. The taxes are there because the resource is not being replenished; it’s the piper the severer pays.
Maine’s water resource is far too abundant to be equated to oil, gas or coal. Perspective is needed: Poland Spring extracted 700 million gallons of Maine water in 2007 (which would make their tax $7 million), or 0.4 percent of all water used in Maine that year, according to the U.S. Geological Survey.
Groundwater aquifers in Maine are recharged with between 2 and 5 trillion gallons of water every year, thanks to more than 20 trillion gallons of rainwater that fall across the entire Pine Tree State. If there is one natural resource we shouldn’t worry about losing, as we’ve said before, it is water.
A question lawmakers should ask is whether it’s fair to tax essentially one company — as LD 237 does with Poland Spring — for using a natural resource found in such abundance as to have, perhaps, little or no value? Or, in other words, what is Maine water really worth?
LD 237 seems to create a tax not based on economics, but just the wherewithal to pay it. Hinck said this himself, in comments to the Maine Public Broadcasting Network, in citing Poland Spring’s annual sales revenue of $878 million. His bill, he said, “wouldn’t hurt the company’s prosperity.”
Hinck is probably right on that. There is little doubt in our mind that Poland Spring, if so compelled, could pay a $7 million tax bill. But just because a tax seems small doesn’t make it right.
The bigger problem, though, are shaky comparisons that the water in Maine should be regulated and taxed like oil in Alaska (where oil pays 50 percent of all state revenues). If so, policymakers must be ready to tax all major users of Maine water, from the smallest bottler to the biggest industry.
Unless they want to do so, the thinking that water is oil simply doesn’t mix.
editorialboard@sunjournal.com