HOUSTON — The Texas environmental agency has rejected a request by oil giant Valero to get a large tax break at six refineries, exemptions that could have triggered refunds of up to $92 million that would have come out of the budgets of cash-strapped school districts and municipalities.
The Associated Press on Wednesday obtained letters dated Dec. 14 that were sent by Mark Vickery, executive director of the Texas Commission on Environmental Quality, to Valero's six Texas refineries. The letters state the agency has rejected the request for a partial tax exemption on equipment that removes sulfur dioxide from crude oil.
A TCEQ review of information provided by Valero Energy Corp. "does not demonstrate that the hydrotreating equipment provides a partial environmental benefit at the site" as required by Texas rules, Vickery wrote.
The agency's move indicates it will also reject 10 other similar requests. An AP analysis of the applications and tax information indicated that if granted, Texas school districts and municipalities could be forced to refund up to $135 million. Some county officials estimate that if granted, the tax breaks would have resulted in a loss of revenue of about $100 million to regions where the refineries are located.
Valero has 20 days — beginning on the date of the letter — to appeal the ruling. Company spokesman Bill Day did not immediately respond to phone messages and emails seeking comment, but has in the past argued that the tax break and refund would not be as large as the AP analysis indicated. He did not, however, provide an estimate as to how much money the company would save or be refunded if the tax exemption were to be granted.
Valero argued it should be granted the tax exemption under a Texas rule that gives such breaks to companies that install pollution-control equipment at its plants. The rule is designed to encourage them to make expensive upgrades at old, dirty plants and refineries.
School district and municipal officials have long opposed the requests. School districts were especially concerned because if a refund had been granted it would have come on the heels of a $4 billion cut in state funding to public schools.
La Porte ISD Superintendent Lloyd Graham, who serves as a school district representative on the TCEQ's tax relief for pollution control property advisory committee, called the agency's decision "very sound."
"The executive director's decision to limit multi-million dollar property tax exemptions to only those times when exemptions are fully supported by the statutes and rules is greatly appreciated, especially at a time when schools, junior colleges, cities, and counties have already had to face and manage severe budget shortfalls that directly affect the citizens of this state," Graham said in a statement provided to the AP.
Valero's request has been pending since 2007, when Valero first asked for a full exemption on hydrotreater units it installed at its six Texas refineries. It argued that the units reduced pollution.
But the hydrotreaters were installed after the U.S. Environmental Protection Agency in 2006 began requiring refineries to remove sulfur dioxide from crude oil.
The Texas Commission on Environmental Quality rejected Valero's request, stating the pollution reductions were being enjoyed in other regions, not where the refineries are located. Valero appealed and the commissioners asked the agency's staff to consider a partial rejection. That is what has now been turned down.
"The Executive Director's decisions are appropriate, well-reasoned and legally supported by the applicable statue and agency rules" said David Hodgins, attorney from Thompson and Horton LLP, who serves as legal counsel to several school districts and community colleges directly affected by the refineries' requests.
You can follow Ramit Plushnick-Masti at — https://twitter.com/RamitMastiAP