The undersea internet cables connecting continents could soon help fund public schools as Oregon proposes charging millions in new fees to tech companies
After decades of charging only a one-time fee for undersea cables along its coast, the Oregon Department of State Lands have recently begun 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 coastline and will be using that money to benefit public schools.The currently existing fee structure dates back to about 25 years ago in 2001, and is a simple $5,000 application fee.
While the new pricing is still undergoing discussion, the simplified version is $3 per linear foot of cable laid within the 3 miles of coastal areas under the state's jurisdiction. This is in addition to $7 per section of bore pipe, the protective structure that covers the portion closest to the shore.Oregon's Department of State Lands (DSL) estimates that on a 20-year lease, this would bring in millions per undersea cable over that time span.
That could bring in more than $1 million per new cable laid, according to Dana Hicks, a planning and policy manager at the department. The DSL did some rough math with 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 fees would help the agency cover the costs of technical reviews, surveys, inspections, public outreach and other coordination and administrative work while the compensation fees would flow to the Common School Fund and Oregon’s public K-12 schools.The abovementioned rates were revised from an earlier, more expensive proposal that would take a broader cross-section into consideration, but was dismissed as too complicated.
The plans are a part of the state's larger goals to continue attracting investment to its tech sector, which includes around 140 data centres and 16 undersea cables of various types, while being mentioned among the top 10 states for housing massive server farms. The bulk of the state’s undersea leases for cables were permitted in recent years.
The state approved three new easements for cables in the 1990s, which grew to 13 in the last two decades and two in just the last few years, Hicks said. Most connect Asian countries with American tech and telecommunications companies.Oregon also doesn't have a sales tax and its enterprise zoning incentives have made it an attractive location for players like Amazon, Microsoft and Google.
It has saved these tech giants hundreds of millions of dollars in property taxes during the last two decades. All three companies have an ownership stake in undersea cables off the Oregon Coast, and representatives from Google and Amazon were on the state’s committee tasked with providing input on the rules.The DSL calls the revised rate "competitive-to-low", reinforcing the notion that Oregon is trying to stay competitive with its southern neighbour, California, which charges an estimated $5 per cable foot on an annual basis.It's worth noting that spending a million or two over two decades is peanuts compared to the initial outlay required to put an undersea cable down in the first place, especially one coming from across the world.
These reportedly ring in at around $250 million for a transatlantic connector — and a whopping $400 million to cross the Pacific.While it's not set in stone, it seems that already-approved cables might be almost entirely exempted from the new fees. Though some recently drawn contracts, such as the one for Amazon Bifrost, did include a clause that said that any fees applied by new state laws must be paid for.
However, the contract also included a specific $300,000 "out" for this clause, which Amazon paid at the time.The department is also proposing new rules requiring companies to submit more information in their applications, including plans for replacing or decommissioning the cable infrastructure and for responding to emergencies, such as the anticipated Cascadia Subduction Zone earthquake.The new updates to Oregon’s rules and fees come in response to a 2020 incident in which a Facebook subsidiary executed a disastrous new cable construction project off the coast at Tierra Del Mar.
Workers broke drilling equipment while boring into the seafloor and were unable to retrieve it, ultimately abandoning 1,100 feet of pipe and 6,500 gallons of drill fluid in the ocean. State regulators didn’t find out about the incident until county officials alerted them two months later.A year later, the drilling caused another leak, followed by two sinkholes along the cable route.
The company paid $250,000 to the state lands department for the earlier breaches and about $135,700 for permission to leave the broken equipment in the ocean for 50 years. In 2021, state lawmakers passed a bill requiring an advisory council to propose updates to the Oregon Territorial Sea Plan, which governs regulations over Oregon’s seafloor.
It had not been updated in more than two decades. Those updates came in 2023, which set off new rule-making processes, including the now-proposed updates to fees and rules for undersea cables.Catch the latest World News and Live updates. Download the TOI app.