Texas refineries may get back $135M

By Ramit Plushnick-masti

Associated Press

Published: Monday, Sept. 26 2011 8:35 a.m. MDT

In this Sept. 16, 2011 photo, a car leaves the Valero Houston Refinery in Houston. Three commissioners appointed by Gov. Rick Perry may grant some of the nation's largest refineries a tax refund of more than $135 million — money Texas' cash-strapped schools and other local governments have been counting on to help pay teachers and provide other public services.

Pat Sullivan, Associated Press

PASADENA, Texas — Three commissioners appointed by Gov. Rick Perry may grant some of the nation's largest refineries a tax refund of more than $135 million — money Texas' cash-strapped schools and other local governments have been counting on to help pay teachers and provide other public services.

The property tax refund would mean more pain for some communities after a year in which state lawmakers grappled with a $27 billion shortfall and slashed spending on public schools by more than $4 billion. Nearly half the refund would be taken from public schools, and those in cities where the refineries are based would be hurt most.

"We were already cut at the knees as it is, but more cuts? It's appalling," said Patricia Gonzales, a single mother of 13-year-old twins at Park View Intermediate School in Pasadena, a refinery town just south of Houston. Gonzales is president of the school's new parent-teacher organization, formed this summer after the state budget cuts left the school lacking everything from pencils to paper towels.

The Texas Commission on Environmental Quality is evaluating 16 requests for the refund, which concerns a piece of pollution-controlling equipment. If granted, the refund total for those requests could add up to more than $135 million, according to county tax data and application documents analyzed by The Associated Press. What's more, agency documents show that if the commission grants the requests, at least 12 other refineries that have not sought a refund also could qualify.

The three-person commission last year expressed some support for the refund, prompting concern the panel is preparing to side with the industry in the middle of a budget crisis.

Should the commission approve the request, it would fall in line with Perry's argument on the GOP presidential campaign trail that by being friendly to business he has attracted businesses and jobs to Texas while other states suffered.

"Gov. Perry appoints individuals who are qualified and willing to serve, and expects they will consider all of the facts and make the appropriate decision," said Lucy Nashed, a spokeswoman for Perry.

The refund request has to do with a piece of technology used by refineries to minimize pollution. Beginning in 2006, the U.S. Environmental Protection Agency began requiring refineries to remove sulfur dioxide from diesel and gasoline in an attempt to reduce vehicle pollution. Many refineries had to either upgrade existing "hydrotreater" units or purchase new, more effective equipment.

Valero first asked for the refund for six of its refineries in 2007, and wants payment retroactive to that year. Since then, at least four other companies have asked for the same retroactive refund.

Valero argues the units should be exempt under a Texas law that says industrial plants don't have to pay taxes on equipment purchased to reduce on-site pollution. The law saves companies millions, and is meant to encourage investment in new technology.

At first, the request was denied. The commission's staff said the hydrotreaters reduce pollution in diesel and gas, not necessarily at the plant. In fact, staff said, the hydrotreaters actually increased sulfur dioxide pollution near the refineries because the toxic gas is now burned off in a flare.

Valero appealed, and the panel's chairman, Bryan Shaw, said last April that the Legislature likely intended a broader interpretation of the law. He instructed his staff to research whether they could award partial exemptions to Valero. Shaw declined to be interviewed for this story, saying it could present a conflict because the issue will be brought before him again.

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