Texas Tribune recently reported that several petrochemical companies who are beneficiaries of a tax incentive program designed to lure industry to the state are also frequent violators of state and federal air quality regulations. The article refers to a report by the Environmental Integrity Project, which investigated emissions at petrochemical facilities along the Gulf Coast.
The incentive program the article refers to, HB5, a tax incentive program for industrial developers that was signed into law at the end of the 88th regular session. HB5 replaces an earlier program known as Chapter 313, which expired at the end of 2023 after two decades (More about Chapter 313 and HB5 here and here).
HB5 offers a tax break to companies who invest in a new facility or in expanding an existing facility in the State of Texas. The purpose is to spur investment in the state, which supporters of the bill says will create jobs.
The tax break comes from a reduced valuation of the facility, which lowers the amount paid in property tax to support local school districts. Facilities eligible for the program get a 50% reduction in the market value of their property. If the facility is located in state-designated “opportunity zones,” which are low-income areas, the company receives a 75% reduction in the valuation of their facility for the purpose of school property taxes.
In exchange for the tax break, companies are expected to create a certain number of jobs which pay the market rate for other jobs in the same industry and which provide some level of health insurance benefits.
The state then makes up the lost revenue for the school district using other funds.
On paper this sounds like an arrangement that benefits multiple constituencies. In practice, there are some important limitations.
One major change to HB5 from Chapter 313 is that HB5 specifically excludes projects related to renewable energy from eligibility. The reasoning behind this change is that renewable generation is not considered “dispatchable” energy the same way as a gas-fired power plant is. The emphasis on dispatchable generation, or generation that can be brought online quickly in times of excess demand, during the 88th session was because of grid reliability concerns after Winter Storm Uri.
However, battery storage facilities, which store energy generated by renewables so that it can be used as needed, are also excluded from the HB5 incentive, even though battery storage has been shown to be an important source of dispatchable power, saving the state from grid trouble during the hottest parts of the summer of 2023, for example.
Chapter 313 was a big part of the reason for the growth and success of wind and solar energy in Texas up to this point. And renewables have proven to be a critical part of the grid during peak demand, especially in the summer. Why exclude this important part of the electrical grid now, given recent calls for increased renewable generation and energy efficiency from the Texas Commission on Environmental Quality?
The matter of excluding renewables is minor compared with the practice of giving companies additional incentive to locate new facilities in federally designated opportunity zones, or low-income neighborhoods.
The Environmental Integrity Project reports that petrochemical companies along the Gulf Coast are flagrant violators of the Clean Air Act, federal legislation which regulates emissions of air pollutants from the industrial sector (among other areas like the transportation system).
These so-called “opportunity zones” are by definition low-income neighborhoods. They are often neighborhoods inhabited predominantly by people of color. Study after study has shown that such neighborhoods are already more likely to be impacted by poor air quality due to their proximity to industrial facilities which emit air pollutants. (examples here, here, and here to name a few).
According to the EIP report, “more than 66 percent of the people living within three miles of the factories that manufacture the main ingredients in plastic products are people of color, living in communities that are over-exposed to air pollution while schools and other public services are chronically underfunded.”
Petrochemical companies, including ones who receive tax incentives at the expense of public schools, are notorious for violations of the Clean Air Act and for lax monitoring of emissions, which leads to underreporting.
The environmental justice concerns raised by HB5 are significant, but there is also a climate change component. Petrochemical companies use petroleum products, like natural gas and oil, as raw materials. These raw materials are produced in Texas by oil and gas operators. Oil and gas operations have been shown to be a main culprit in the problem of fugitive methane emissions, which threaten air quality and are a main driver of climate change.
The EPA’s new methane rule (Section 111) aims to stop fugitive methane emissions and end routine flaring of methane by the oil and gas industry in an effort to reduce methane emissions in the US. This is an important goal for the international goal of limiting global warming to 1.5C above preindustrial levels. The strong methane rules are made possible by readily available technology which can eliminate methane leaks and capture natural gas for economic use.
Texas Attorney General Ken Paxton is part of a multi-state coalition suing the EPA to block implementation of the new rules.
Given the bipartisan support for HB5, it seems like the Texas Legislature missed an important opportunity to cultivate the kinds of industrial practices that would benefit both the economy and the residents living in the vicinity of these facilities. Incentivizing companies to site polluting facilities in neighborhoods already struggling with the effects of poor air quality, and especially using school district funding to do so is unnecessarily hostile.
At minimum HB5 should come with a requirement to adhere to all state and federal air quality regulations, including appropriate monitoring and reporting of emissions.
Without such a provision, and without appropriate penalties for violating environmental regulations, HB5 serves to promote development of the sector of the Texas economy most responsible for air and water pollution, climate-harming emissions, excessive use of water, and the greatest strain on the electrical grid. It promotes the financial interests of already wealthy multi-national corporations over low-income public school students and their families. And by design it worsens an already significant environmental injustice problem.
As people of faith in Texas, this situation violates both our concern for Creation and our care for our neighbors. You can follow the Air Alliance Houston to learn more about opportunities to provide public comment on new air permit applications at TCEQ. And watch this space for information about how you can join the new Climate Action Team at Texas Impact to learn about new opportunities for engagement on climate issues every week. We will start meeting in April.
Stay engaged! The faith voice is critical in identifying these kinds of gaps in the impacts of legislation.