                                ATTORNEY GENERAL OF TEXAS
                                              GREG        ABBOTT



                                               December 20, 2007



Mr. Buddy Garcia, Chair                                         Opinion No. GA-0587
Texas Commission on Environmental Quality
Post Office Box 13087                                           Re: What limitations, if any, the Legislature
Austin, Texas 78711-3087                                        has imposed on the Texas Commission on
                                                                Environmental Quality with regard to tax
                                                                exemption and tax rollback relieffor pollution
                                                                control property (RQ-0635-GA)

Dear Mr. Garcia:

        You ask what, if any, limitations the Legislature has imposed on the Texas Commission on
Environmental Quality ("TCEQ") with regard to tax exemption and tax rollback relieffor pollution
control property. Specifically, you ask whether the implementation ofTCEQ's rule is restricted to
"pollution control property associated with advanced clean energy projects."l

        House Bill 3732, an act "relating to the implementation of advanced clean energy projects
and other environmentally protective projects in this state," was enacted by the most recent session
ofthe Legislature. See Act of May 28, 2007, 80th Leg., R.S., ch. 1277,2007 Tex. Gen. Laws 4261,
4261. Among other things, House Bill 3732 amended the Clean Air Act, chapter 382 ofthe Health
and Safety Code, by adding a definition for "advanced clean energy project." See id. § 2, at 4262
(codified at TEX. HEALTH & SAFETY CODE ANN. § 382.003(l-a) (Vernon Supp. 2007».2


         lLetter from Buddy Garcia, Chair, Texas Commission on Environmental Quality, to Honorable Greg Abbott,
Attorney General of Texas, at 2 (Oct. II, 2007) (on file with the Opinion Committee, also available at
http://www.oag.state.tx.us).

         2,,, Advanced clean energy project' means a project for which an application for a permit under this chapter is
received by the [TCEQ] on or after January 1,2008, and before January I, 2020, and that:

                  (A) involves the use of coal, biomass, petroleum coke, solid waste, or fuel cells
                  using hydrogen derived from such fuels, in the generation of electricity, or the
                  creation ofliquid fuels outside ofthe existing fuel production infrastructure while
                  co-generating electricity:

                  (B) is capable of achieving on an annual basis a 99 percent or greater reduction of
                  sulfur dioxide emissions, a 95 percent or greater reduction of mercury emissions,
                  and an emission rate for nitrogen oxides of 0.05 pounds or less per million British
                  thermal units; and
                                                                                                          (continued...)
Mr. Buddy Garcia - Page 2                            (GA-0587)



         House Bill 3732 also amended two provisions ofthe Tax Code that relate to tax exemptions
and tax rollback relief for property used for pollution control purposes. See id §§ 4-5, at 4264-65
(codified at TEX. TAX CODE ANN. §§ lUI, 26.045 (Vernon Supp. 2007)). Section 4 ofHouse Bill
3732 amended section lUI of the Tax Code. See TEX. TAX CODE ANN. § lUI (Vernon Supp.
2007). That section refers to exemptions from "taxation of all or part of real and personal property
that the person owns and that is used wholly or partly as a facility, device, or method for the control
of air, water, or land pollution." Id. § IUI(a); see also TEx. CONST. art. VIII, § I-l (permitting the
Legislature to authorize tax exemptions for governmentally mandated facilities, devices, or methods
for the control of air, water, or land pollution). The executive director of the TCEQ must issue a
letter to the property owner stating whether "the facility, device, or method is used wholly or partly
to control pollution." TEx. TAX CODE ANN. § 11.31(d) (Vernon Supp. 2007). The person seeking
the exemption must provide the chief appraiser a copy of the letter, and the chief appraiser is
required to "accept a final determination ... as conclusive evidence that the facility, device, or
method is used wholly or partly as pollution control property." Id. § 11.31 (i).

        House Bill 3732 added subsection (k) to section lUI to specify a list of facilities, devices,
or methods that may generate a tax exemption when a property owner follows the process described
in the remainder of section 11.31:

                (k) The Texas Commission on Environmental Quality shall adopt
                rules establishing a nonexclusive list offacilities, devices, or methods
                for the control of air, water, or land pollution, which must include:

                          (I) coal cleaning or refining facilities;

                         (2) atmospheric or pressurized and bubbling or circulating
                 fluidized bed combustion systems and gasification fluidized bed
                 combustion combined cycle systems;

                          (3) ultra-supercritical pulverized coal boilers;

                          (4) flue gas recirculation components;

                          (5) syngas purification systems and gas-cleanup units;

                          (6) enhanced heat recovery systems;

                          (7) exhaust heat recovery boilers;



        '(...continued)
                  (C) renders carbon dioxide capable of capture, sequestration, or abatement if any
                  carbon dioxide is produced by the project.

TEX. HEALTH & SAFETV CODE ANN. § 382.003(1-a) (Vernon Supp. 2007).
Mr. Buddy Garcia - Page 3                          (GA-0587)



                          (8) heat recovery steam generators;

                          (9) superheaters and evaporators;

                          (10) enhanced steam turbine engines;

                          (11) methanation;

                          (12) coal combustion or gasification byproduct and coproduct
                   handling, storage, or treatment facilities;

                          (13) biomass cofrring storage, distribution, and firing systems;

                          (14) coal cleaning or drying processes, such as coal
                   drying/moisture reduction, air jigging, precombustion
                   decarbonization, and coal flow balancing technology;

                           (15) oxy-fuel combustion technology, amine or chilled
                   ammonia scrubbing, fuel or emission conversion through the use of
                   catalysts, enhanced scrubbing technology, modified combustion
                   technology such as chemical looping, and cryogenic technology;

                           (16) if the United States Environmental Protection Agency
                   adopts a final rule or regulation regulating carbon dioxide as a
                   pollutant, property that is used, constructed, acquired, or installed
                   wholly or partly to capture carbon dioxide from an anthropogenic
                   source in this state that is geologically sequestered in this state;

                          (17) fuel cells generating electricity using hydrogen derived
                   from coal, biomass, petroleum coke, or solid waste; and

                           (18) any other equipment designed to prevent, capture, abate,
                   or monitor nitrogen oxides, volatile organic compounds, particulate
                   matter, mercury, carbon monoxide, or any criteria pollution.

Id. § 11.3 1(k).

       Likewise, section 5 of House Bill 3732 amended section 26.045 of the Tax Code. See id.
§ 26.045. Section 26.045 provides that the

                   rollback tax rate for a political subdivision of this state is increased
                   by the rate that, if applied to the total current value, would impose an
                   amount of taxes equal to the amount the political subdivision will
                   spend out of its maintenance and operation funds under Section
Mr. Buddy Garcia - Page 4                              (GA-0587)



                  26.012(16)3 to pay for a facility, device, or method for the control of
                  air, water, or land pollution that is necessary to meet the requirements
                  of a pennit issued by the [TCEQ].

ld. § 26.045(a). Section 26.045 describes the process whereby a political subdivision "receive[s] an
adjustment to the rollback tax rate." ld § 26.045(c)-(d). "A political subdivision of the state
seeking an adjustment in its rollback tax rate" is directed to "provide to its tax assessor a copy ofthe
letter issued by the executive director ofthe [TCEQ]," and the tax assessor is required to "accept the
copy of the letter from the executive director as conclusive evidence that the facility, device, or
method is used wholly or partly as pollution control property." ld § 26.045(i). House Bill 3732
added subsection (f) to section 26.045 of the Tax Code, and subsection (f) is identical to the
language adopted for subsection (k) of section 11.31. Compare id. § 11.31 (k), with id § 26.045(f).
In the interest of brevity, we therefore need not repeat it here.

        The language added to sections 11.31 and 26.045 of the Tax Code does not on its face
purport to limit TCEQ's rule-making authority to those facilities, devices, or methods that comport
with the definition of "advanced clean energy project."4 When a statutory text is unambiguous, a
court, and by extension this office, must adopt the construction that is supported by the statute's
plain language, unless that construction would lead to absurd results. See Tex. Dep't ofProtective
& Regulatory Servs. v. Mega Child Care, Inc., 145 S.W.3d 170, 177 (Tex. 2004). In the situation
you pose, the plain-language rule requires the conclusion that neither section 11.31 (k) nor section
26.045(f) ofthe Tax Code confines the TCEQ's rule-making authority to pollution control facilities,
devices, or methods that are associated with advanced clean energy projects. See also Act of May
28, 2007, 80th Leg., RS., ch. 1277, 2007 Tex. Gen. Laws 4261, 4261 (an act "relating to the
implementation ofadvanced clean energy projects and other environmentally protective projects in
this state") (emphasis added).




         'Section 26.012(16) defines "[m]aintenance and operations" as "any lawful purpose other than debt service for
which a taxing unit may spend property tax revenues." TEX. TAX CODE ANN. § 26.0 12(16)(Vemon Supp. 2007).

           'A brief submitted on behalf of the Sierra Club, Lone Star Chapter, acknowledges that "[w]hile many of the
legislators may have given the impression that the tax breaks would only apply to clean energy projects, as defined in
the bill, there is no specific statutory language in HE 3732 thatties the new list ofequipmentfor property iax exemptions
to the clean energy project definition." Brieffrom Ken Kramer, Director and Cyrus Reed, Policy Consultant, Lone Star
Chapter, Sierra Club, at 2 (Nov. 13,2007) (on file with the Opinion Committee) (emphasis added).
Mr. Buddy Garcia - Page 5                   (GA-058?)




                                     SUMMARY

                     Neither section 11.3I(k) nor section 26.045(f) of the Tax
              Code restricts the rule-making authority ofthe Texas Commission on
              Environmental Quality to only those pollution control facilities,
              devices, or methods associated with advanced clean energy projects.

                                            Very truly yours,




KENT C. SULLIVAN
First Assistant Attorney General

ANDREW WEBER
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Rick Gilpin
Assistant Attorney General, Opinion Committee
