After decades of charging a one-time fee for submarine cables along its coast, the Oregon Department of State Lands recently began discussing a new opportunity for tax revenue.
Now, the state is set to charge cable operators a one-time fee for cable installations within three miles of its coast, and will use that money to benefit public schools.The current fee structure dates back about 25 years to 2001, and is a simple $5,000 application fee. While the new price is still under discussion, the simplified version is $3 per linear foot of cable laid within 3 miles of coastal areas under state jurisdiction.
This is in addition to $7 for each section of pipe, which is the protective structure that covers the section closest to shore.The Oregon Department of State Lands (DSL) estimates that in a 20-year lease, this would bring in millions per undersea cable over that time period. That could bring in more than $1 million for each new cable laid, according to Dana Hicks, the department’s director of planning and policy. The DSL service did some rough math using Amazon’s Bitfrost cable and came up with a grand total of $1,450,380 for two decades, paid in one lump sum.
The application fee will help the agency cover the costs of technical reviews, surveys, inspections, public outreach and other coordination and administrative work while the reimbursement fee will flow to the Joint School Fund and Oregon K-12 public schools.The above rates were revised from an earlier, more expensive proposal that would have taken a broader segment into account, but it was rejected as too complex.
The plans are part of the state’s larger goals to continue attracting investment into the technology sector, which includes about 140 data centers and 16 submarine cables of various types, while being named among the top 10 states for housing massive server farms.
The bulk of subsea cable leases have been permitted in the state in recent years. The state approved three new cable easements in the 1990s, which rose to 13 in the past two decades and two in just the past few years, Hicks said.
Most Asian countries are linked to American technology and telecommunications companies.Oregon also has no sales tax, and zoning incentives for enterprises have made it an attractive location for players like Amazon, Microsoft and Google. It has saved tech giants hundreds of millions of dollars in estate taxes over the past two decades. The three companies have an ownership stake in submarine cables off the Oregon coast, and representatives from Google and Amazon were on the state committee tasked with providing input on the rules.DSL describes the revised price as “competitive to low,” reinforcing the idea that Oregon is trying to remain competitive with its southern neighbor, California, which charges an estimated $5 per foot of cable on an annual basis.It is worth noting that spending a million or two over two decades is a pittance compared to the initial outlay required to lay an undersea cable in the first place, especially one coming from around the world.
These costs are reported to be about $250 million for the transatlantic connector – and $400 million for the Pacific crossing.Although it’s not set in stone, it appears that already approved cables may be almost entirely exempt from the new fees. Although some recent contracts, such as the one for Amazon Bifrost, have included a clause stating that any fees implemented by the new state laws must be paid. However, the contract also included a set amount of $300,000 for this clause, which Amazon paid at the time.The department is also proposing new rules that would require companies to provide more information in their applications, including plans to replace or decommission cable infrastructure and respond to emergencies, such as an expected subduction zone earthquake in Cascadia.The new updates to Oregon’s rules and fees come in response to a 2020 incident in which a Facebook affiliate undertook a disastrous new cable construction project off the coast of Tierra del Mar.
Workers destroyed drilling equipment while drilling on the seafloor and were unable to recover it, ultimately leaving 1,100 feet of pipe and 6,500 gallons of drilling fluids in the ocean. State regulators did not discover the incident until county officials alerted them two months later.A year later, a drilling operation caused another leak, followed by two holes along the cable route. The company paid $250,000 to the Department of State Lands for previous violations and about $135,700 for permission to leave the malfunctioning equipment in the ocean for 50 years. In 2021, state lawmakers passed a bill requiring an advisory board to propose updates to the Oregon Regional Sea Plan, which governs regulations related to Oregon’s seabed.
It has not been updated in more than two decades. These updates came in 2023, triggering new rulemaking processes, including now proposed updates to submarine cable fees and rules.
