Despite record refining margins and extraordinary profits in recent years, Motiva Enterprises LLC is pressing local officials in two states for tax incentives to increase refining capacity.
Officials with Jefferson County, Texas agreed to a 20-year tax abatement plan if Motiva expands its Port Arthur refinery.
That move came after Motiva told a public meeting that it already held incentives from Louisiana for a proposed expansion at its Convent, Louisiana, refinery.
Motiva, a joint venture between Saudi Aramco and Royal/Dutch Shell has said for months it plans a major expansion at a US plant to help alleviate tight capacity.
Motiva wants "the optimal way to expand along the network," said Motiva spokesman Stan Mays.
"I couldn't say that it's going to be one facility, or a combination of expansion."
The tax incentives will be a "big part" of the decision, Mays said.
With new grassroots refineries a hard sell in the US, Shell and other oil companies have been expanding plants to keep up with demand.
Trading tax incentives for economic development is sometimes called corporate welfare. But officials in Louisiana and Texas said the policy is a no-brainer.
Carl Griffith, the head of the board that offered Motiva the abatement, said South Texas saw its economy slump when such policies were abandoned. He has reintroduced the abatements since assuming his post in 1996.
"We don't just compete against Louisiana, we compete against the entire world," Griffith said. The incentives enable Motiva to keep the plant in Beaumont, rather than France.
"Communities that fail to do that are going to loose work," he argued. With the loss of jobs and construction, such areas will "kill themselves."
If Motiva decides to go forward with expansion plans in both states, Griffith would not feel that the tax incentive had been offered for naught. Rather, he said, the price of gasoline would likely be driven down, which would be helpful to all.
Glenn Waugespack, tax assessor for St James Parish, Louisiana, said the episode showed how local communities are captive to big companies and their promises of economic development.
"I believe that they're using it to get what they can out of Texas. They know that they've got it here, they don't have to fight for it," Waugespack said.
The current capacity at Convent is 235,000 barrels per day (bpd), while Port Arthur can process 275,000 barrels into gasoline.
Projects under consideration range from a 100,000 bpd expansion, to a 325,000 barrel expansion, according to Motiva.
The company has previously spoken of possibly expanding its 226,000 barrel per day Norco, Louisiana, refinery, but didn't discuss such a plan at the public meeting.
Both states are eager for the jobs that an expansion could bring. The mammoth Port Arthur plan being discussed would generate over 3,000 jobs during construction and result in about 300 permanent jobs, according to Griffith.
Under the Texas plan, Motiva would be spared taxes on the $3.5 billion project for three years and pay a significantly reduced rate each subsequent year until 2026.
Motiva Port Arthur plant manager Tom Purves told the commissioners court that the tax incentives were essential.
"It is the cornerstone of making sure our company understands that Texas is behind this project, more specifically Jefferson County," Purves said, according to a report in the Beaumont Enterprise.
In St James, Motiva already has incentives in place to expand incrementally, Waugespack said. Taxes on $5 to $10 million upgrades are regularly abated, he said.
A major expansion would guarantee 10 years without taxation on the new development, he said.
The programme is not administered at the parish level, but by the state's economic development commission, he said.
"The exemption is going to be automatic. There'll be no ifs, ands, or buts about it," Waugespack said.
