Tax exemption request from refinery giant stirs debate

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The possibility that Texas schools could lose tens of millions in taxes from refineries is drawing the attention and concern of lawmakers, environmental activists and educators.

Valero Energy Corp. is the first of what could be many companies requesting tax exemptions for installing sulfur-removing hydrotreaters at Texas refineries.

In 1993, voters approved an amendment to the state constitution exempting companies that install pollution control equipment from paying ad valorem taxes on the equipment.

Besides 10 requests from Valero, 11 similar requests are pending with the Texas Commission on Environmental Quality, agency spokesman Terry Clawson said. If the commission approves the tax break, various school officials fear, Texas schools could be out tens of millions in funding. The impact would likely be felt most by the school districts in South and West Texas where the refineries are.

“We understand what is at stake for the school districts and our children’s education,” Valero Chairman and CEO Bill Klesse said in September. “Our children’s education is extremely important, but it is also important to have a fair property appraisal. Even after our exemption is granted, Valero will remain one of the largest taxpayers — if not the largest taxpayer — in all the areas where we have refineries.”

Valero’s exemption request was initially rejected by the commission’s staff, which reported that hydrotreaters don’t reduce pollution at the refinery, but rather when consumers use fuel from refineries.

“The environmental benefit of these projects occurs when the consumer uses the low sulfur content fuels,” commission staffer Ronald Hatlett wrote in 2007. “These projects do not provide an environmental benefit at the site.”

The agency’s commissioners asked staffers to take another look at the exemption. Clawson could not say Friday when the commission might make a final decision.

Because the exemption wasn’t rejected outright when the agency reported objections to it, critics have said the energy industry’s political might is influencing the decision.

“With Texas schools already facing cuts of more than $5 billion over the next two years, we cannot afford to allow political maneuvering to bleed even more resources from our children’s classrooms,” state Sen. Wendy Davis, D-Fort Worth, said last week. “Favors to political cronies should never be allowed, particularly where they trump the interests of Texas’ schoolchildren.”

Clawson rejected any notion that agency Chairman Bryan Shaw was acting unethically.

“While Dr. Bryan Shaw is an appointee of the governor, he bases his decisions on sound science and the law,” Clawson said. “To suggest anything else is inaccurate.”

Last week, Davis and state Sen. Rodney Ellis, D-Houston, requested an official opinion from Texas Attorney General Greg Abbott on whether state law allows the agency to approve tax exemptions for equipment that does not provide on-site environmental benefits.

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