Operators of a planned offshore ammonia processing plant won’t pay property taxes to the county until 2032 but will pay about $2 million a year in lieu of taxes under an abatement agreement county commissioners approved Monday.
The county will earn about $20 million from the proposed $800 million plant over the abatement agreement’s 10-year term, officials said.
That’s at least twice the amount the company negotiated with the city of Texas City in a similar agreement struck two years ago, officials said.
The abatement will go into effect Jan. 1, 2022, according to the agreement. County commissioners unanimously approved the tax break.
County officials celebrated the abatement as a last step before the construction begins on the ammonia plant, which was first proposed in 2015. Officials expect ground-breaking next year, they said.
Before approving the abatement, commissioners voted to change their own rules to allow the county to grant the abatement and receive a payment in lieu of taxes during the abatement period.
“Conceptually, during a tax abatement, we’re not allowed to get anything up front,” Galveston County Judge Mark Henry said. “We know our payday comes 10 years from now. While we agreed to that, we also agreed for them to pay $2 million a year, every year, up front.”
Gulf Coast Ammonia in 2017 signed an agreement with Eastman Chemical Co. to lease space at Eastman’s Texas City facility, 201 Bay St. S, to build an anhydrous ammonia shipping and processing plant.
The facility will produce liquid ammonia, not ammonium nitrate, from hydrogen and nitrogen gases, and will supply domestic and international markets, according to the company
The city of Texas City approved a 10-year tax abatement for the plant in December 2017, and updated the abatement earlier this year because construction of the plant didn’t begin as soon as originally planned.
The county abatement is similar to the one Texas City approved two years ago, although there are some differences.
Both agreements require the company to make payments instead of taxes while the abatement is in place.
The county’s agreement requires the company to make a $2 million annual payment in lieu of taxes every year during the length of the abatement. Texas City’s agreement requires the company pay between $750,000 and $1 million each year.
The company originally had sought a 100 percent tax abatement, without any kind of supplemental payment, said Dane Carlson, Galveston County’s Director of Economic Development.
How much the company will save by paying a fixed amount for 10 years, rather than taxes, depends on how much the land value goes up during the 10 years of abatement, Carlson said.
The abatement will run during construction and the first years of production, he said.
The land value has increased sixfold since 2017, when it was valued at $425,000. In 2019, it was valued at $2.6 million.
The abatement was important because it guaranteed the project would come to the county, Carlson said.
“The company was looking at several different sites across the Gulf Coast,” he said. “Without an abatement, the project would have gone somewhere else.”
Texas City Mayor Matt Doyle was pleased to hear the county had passed the abatement, he said Tuesday afternoon. The county and the city did not work together on their abatement proposals, officials said.
The abatement is the first the county has granted in nine years, Carlson said.