The Arguments: The Valero Tax Break

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There’s a request for a tax refund currently under consideration by the Texas Commission on Environmental Quality (TCEQ) from the Valero Energy Corporation, one of the world’s largest oil refiners. Valero is asking for money under a state law that says companies don’t have to pay taxes on equipment (in this case, something called a hydrotreater) that reduces on-site pollution. The request was originally made in 2007, when Valero bought the equipment. The catch? The property tax refunds would come from appraisal districts, which means money taken back from cities and schools that are already struggling.

Here are the arguments, both for and against:

FOR: It’s the law. “These hydrotreaters were required by the Environmental Protection Agency to remove sulfur from transportation fuels like gasoline and diesel,” Valero said in a statement last month. “The constitution and statutes of the State of Texas provide for a property tax exemption on pollution control equipment like the federally mandated hydrotreaters.” So, under Texas law, Valero believes they are entitled to the tax break.

AGAINST: Except they don’t actually reduce on-site pollution. That’s according to the TCEQ itself, when they initially denied Valero’s request for the tax break. Commission staff said that “the hydrotreaters actually increased sulfur dioxide pollution near the refineries because the toxic gas is now burned off in a flare.” So while the equipment purchased by Valero does reduce vehicle emissions in the gas it sells, it doesn’t actually reduce any pollution on site.

FOR: Valero has already settled. Valero says that they have already settled the matter with all of the appraisal districts affected by the tax break except one. “If the Texas Commission on Environmental Quality grants its exemption request, Valero will only apply the exemptions going forward, as the company negotiates with appraisal districts,” Valero said. Although Valero could theoretically get a refund of more than $92 million, their spokesman Bill Day told the Associated Press that “the final refund — if approved — would be much smaller”. Even though Valero has asked for those high amounts, once appraisers assess the value of the refineries the amount of the rebate may go down.

AGAINST: But it could still add up to $135 million lost for schools already facing huge cuts.  Spending for schools was already cut by more than $4 billion during the last legislative session, so there is not just no extra cash lying around. According to the Associated Press, “nearly half the refund would be taken from public schools, and those in cities where the refineries are based would be hurt most.” What’s worse, if TCEQ approves the refund, there are several other refineries that could also seek a refund, setting a costly precedent.

FOR: But they knew this was coming. Valero maintains that the tax refunds should be no surprise to the school districts. Valero’s Chairman and CEO Bill Klesse said in a statement: “Even though school districts in the areas where our refineries pay millions of dollars in property taxes knew we had the application for an exemption pending, they went ahead and assessed those taxes, which we paid. Our settlements should reassure them that we will not require them to pay back the over payment going back to 2007.” Valero likens their request for a refund to a homeowner appealing their property tax, “just on a larger scale,” their spokesman told the Associated Press.

AGAINST: Valero doesn’t even need the money. The company ranks twenty-fourth on the Fortune 500 list and the company made $923 million last year. It’s revenue grew 52% during the second quarter of this year. There is also the question of the company’s influence over Governor Rick Perry.They are a major contributor to Perry, and Perry chose the current TCEQ commissioners that decided to revisit the tax break in 2010. Opponents of the refund argue that since Valero donates to Perry, and Perry appointed the board, there’s a conflict of interest at hand. Texas State Senator Wendy Davis has filed a legislative request for all of the documents, emails and evidence involved in the TCEQ’s decision to reconsider the tax break.

So there are the arguments. There is a meeting this Wednesday at the TCEQ that will hear testimony from parent and school organizations as well as environmentalists. StateImpact Texas will be reporting on the meeting later that day.