Perry on Power

Seemingly $1.4 billion in state and local tax breaks, subsidies and incentives to Texas energy firms does not add up to "subsidizing energy"

"We don’t need to be subsidizing energy in any form or fashion," Gov. Rick Perry said during last week's presidential debate.

Spit take time. It is little secret that Texas has always been financially supportive of the energy industry, and Perry's administration has been no different. In fact, he has helped usher plenty more incentives into place.

According to the comptroller's Energy Report 2008, energy producers received $1.4 billion in state and local incentives in 2006, including special tax credits and grants. Environment Texas director Luke Metzger said, "One of the key takeaways from that is that 99.6% of the subsidies go towards towards oil and gas."

So what did Perry and his Republican-dominated legislature do about that? According to the Railroad Commission, they added more permanent tax breaks for the oil and gas industry. In 2005, the 79th legislature passed House Bill 2161, which introduced three major tax incentives for oil and gas manufacturers: Severance tax relief for marginal wells, an enhanced efficiency equipment severance tax credit and the orphaned well reduction program. Two years later, they came back and passed HB 2982, which made the severance tax relief permanent. They also added a new incentive for reuse or recycling of hydraulic fracturing water into the water conservation measures in HB4, and added the advanced clean energy EOR tax reduction under HB3732.

Guess what? Every single one of those bills was signed by Gov. Rick Perry. Shurely shome mishtake?

As if that was not bad enough, energy companies are now suing school districts to demands even bigger tax breaks. Back in May the Beaumont Enterprise reported that Port Arthur ISD is on the hook for a $14.6 million legal settlement after being sued by Premcor Refining Group and Valero Energy Corp. Now the Texas AFT reports that Valero is trying the same tax exemption maneuver to pull back $63 million from school districts around the state.

The firm claims that they are owed tax breaks because of investment in pollution reduction technology. For example, they bought a sulfur-scrubbing hydrotreater at the Valero McKee Refinery in Moore County: That is a piece of machinery that pulls sulfur out of fuel, meaning your car or truck or natural gas electricity turbine produces less sulfur dioxide when it burns it. They are now pushing the Texas Commission on Environmental Quality (which Texas AFT noted is run by Perry appointees) to grant them a backdated tax exemption for that and other facilities. The Texas AFT estimates that exemption could pull $63 million out of district coffers, but the Associated Press puts that number nearer $92 million. Throw in similar suits from other companies, and the number could get as high as $135 million.

Valero argues that the property tax exemptions it seeks are a matter of fairness, and that they were overassessed in the first place. However, Metzger said, "These are incentives for air quality improvements at refineries. What Valero's been doing means basically that the air quality benefits are gained where the fuel is burned. They're trying to claim a tax credit for that even though what they're doing is increasing pollution on-site."

Obviously, we expect Perry to come out against this state-imposed tax subsidy to energy firms any day now.