Could Houston-area homeowners end up paying more taxes for more pollution?


by Jeremy Rogalski / 11 News Defenders

Posted on March 23, 2010 at 9:14 AM

HOUSTON—Taxes and pollution.

Apparently, those are touchy subjects. When 11 News tried talking to the Texas Commission for Environmental Quality about it, we had the door shut in our face – literally.

TCEQ Security: "Please let me close this door."

11 News: "No you’re not going to close the doors on us sir this is a public meeting."

But the head of the agency’s security did just that.

So what’s going on? It begins with Texas homeowners like Lonnie Holton, whose neighbor is the Valero refinery in the 9700 Block of Manchester Street in southeast Houston.

The pollution it creates has Holton concerned for his family.

"I worry about their health, I worry about their safety," he said.

But something else is bothersome. Valero is asking the state for a multi-million-dollar tax break, for something that ultimately could make the air his family breathes dirtier.

"Plain layman’s terms, that’s crazy," Holton said.

At its Texas refineries, Valero claims it installed an expensive piece of equipment, called a hydrotreater, to meet stricter emissions standards. The hydrotreater strips sulfur out of crude oil and helps make a cleaner gasoline and diesel. So, citing a section of the Texas Tax Code that rewards businesses for improving our local environment, Valero now wants the hydrotreater—valued at $250 million -- 100-percent tax exempt.

But guess what? Those cleaner emissions aren’t happening here, because Valero doesn’t sell that cleaner fuel in Texas. Instead, the ultra-low sulfur gasoline and diesel is shipped to New Jersey and California, where it helps improve their air quality. But what about back in Texas, where Valero wants those breaks?

"Hydrotreaters do not provide an environmental benefit to the site," said Tim Reidy, an attorney representing the TCEQ Executive Director, at a January 13 hearing on the case.

In fact, they do just the opposite.

"They hydrotreaters themselves, which they (Valero) are calling pollution-control equipment, actually increase pollution," said TCEQ Engineer Minor Hibbs, citing a sulfur impact analysis by the Environmental Protection Agency.

It’s why the stat regulatory agency denied Valero’s bid for a tax break three years ago. Just a few months ago, TCEQ staff recommended the same.

"Deny Valero’s appeal," said Garrett Arthur with the TCEQ Office of Public Interest Counsel.

Despite that, the three presiding environmental commissioners decided otherwise, remanding Valero’s appeal application back to the TCEQ staff, to consider a way to give Valero at least a partial tax break.

"It just seems that this warrants looking at further," said TCEQ Chairman Bryan Shaw.

It makes no sense to people like Bernardo Garcia, with the Harris County Appraisal District.

"It doesn’t benefit Harris County, it increases pollution," said Garcia.

He said he believes the law is clear on what qualifies for a tax break.

"The widget (hydrotreater) is to control pollution at the site, and it simply does not," Garcia said.

At stake, Garcia said, is approximately $5 million a year in taxes in Harris County alone. That is money Valero has already paid and money school districts and local governments have already used. But it would have to be refunded to Valero.

The potential consequence for average homeowners?

"Increase taxes or cut services to make up the refund that they’re going to give Valero," Garcia said.

"You know, there’s really no logical reason why this is in the best interest of Texas," said Matthew Tejada of GHASP, the Greater Houston Association for Smog Prevention. He believes something else is going on with the TCEQ’s actions—marching orders from above.

"I absolutely think that these are coming from the governor’s office, those commissioners are hand-picked by the governor," Tejada said.

Hand-picked to carry out a mission—"pro-business, pro-business," Tejada said.

Valero, the largest refinery in North America, is annually one of the biggest campaign contributors to Governor Rick Perry, according to the non-profit watchdog group Texans for Public Justice.

That brings us back to that TCEQ hearing in Austin. Before security closed the doors on 11 News cameras, we tracked down TCEQ commissioner Carolos Rubinstein. 

11 News: "Are you protecting big business over protecting the environment?"

Rubinstein: "Again, I take issue with the question because I think you’re mischaracterizing what the intent of the discussion was."

But when we wanted to talk to Bryan Shaw, the Chairman of the TCEQ:

TCEQ Security: "Please conduct your meeting out here, please let me close this door."

11 News: "No, you’re not going to close the doors on us sir, this is a public meeting, we have every right to be in here and question public officials about public business."

TCEQ Security: ‘I understand."

11 News: "Well then keep the door open."

And when we later approached Chairman Shaw during a recess in the hearing, we were blocked again. Andrea Morrow, TCEQ Spokesperson, grabbed this reporter’s arm while Chairman Shaw slipped out a side door.

The commissioners may take weeks or months to ultimately rule on the Valero case, but tax appraisers warn of what even a partial tax break could bring.

"Then that opens up Pandora’s box and the other refineries will say, well, we have similar widgets, give us our exemption," said HCAD’s Garcia.

"They’ll line up at the door, absolutely," he added. 

And with that cleaner fuel sold in other states, homeowner Lonnie Holton questioned why he should foot the tax bill for cleaner air he won’t get to breathe.

"Let California pay their tax break, let their taxpayers pay their tax break," Holton said.

Meanwhile, Allison Castle, spokesperson for Governor Rick Perry, offered the following comment: 

"The governor appoints qualified individuals to oversee TCEQ and does not micromanage them. He expects TCEQ to follow the law in every circumstance."

Bill Day, Executive Director for Media Relations for the Valero Energy Corporation, made the following points:

Valero’s Tier-II hydrotreaters are EPA-mandated pollution control property and are therefore not subject to taxation under a 1994 Texas law and constitutional amendment approved by the citizens of Texas.

Valero’s Tier-II hydrotreaters represent an unwanted expenditure for Valero and are not an investment.  They are neither productive for the company nor are they income-generating.  Their sole function is to remove sulfur from fuels for environmental purposes. 

Residents of Harris, Galveston and Jefferson counties realize an environment benefit as a result of Valero’s installation, operation, and maintenance of these Tier-II hydrotreaters.

Valero’s Tier-II hydrotreaters, because they are mandated pollution control property, should never have been added to county tax rolls, and any taxes paid on them have been paid under protest.

Valero is working through the normal appeal process to defend its plants from an improper and unfair tax appraisal—just as any homeowner in Texas is able to do.