Michigan loses millions by paying companies to comply with enviro laws

General Motors is one of many companies in Michigan using state tax breaks to comply with environmental laws. (Creative Commons photo by Ahren D via Flickr)

Some of Michigan’s largest polluting corporations are receiving millions in tax breaks for installing environmental control equipment that is required under state and federal law. With the state facing an ongoing budget crisis, some say these tax breaks have become a costly and unnecessary entitlement program.

American Electric Power operates the DC Cook nuclear power plant south of Benton Harbor which provides power to a customer base that is mostly in Indiana. AEP claims $14.4 billion in revenues and $1.3 billion in earnings in 2008, it is one of the largest power companies in the U.S. Through tax breaks, Michigan has played a role in the success of this company, but by subsidizing more than $211 million in pollution control equipment at AEP’s nuclear plant, state and local governments have lost out on millions in revenue since 1999.

“As far as pollution prevention exemptions go, they really help the environment and customers,” said DC Cook spokesman Bill Schalk, “Because we are a regulated utility, reducing the cost of business through tax exemptions reduces costs to rate payers.”

Schalk described the use of pollution control technology at his plant as voluntary.

“We can get a tax exemption just as you as an individual can get one for buying Energy Star products.”

But while individuals can safely and legally run a household with appliances that don’t have an Energy Star rating, a nuclear plant cannot operate without a containment facility or emergency backup system.

According to the Michigan Department of Environmental Quality, “[e]xamples of equipment at nuclear power plants that qualify for partial exemption are the containment structures, the containment spray systems, the emergency core cooling systems, the gaseous waste disposal systems, the emergency power generating systems and the radiation monitoring equipment.”

Consumers Energy, Entergy, General Motors, Dow Chemical and Detroit Edison have also received millions in public support through the pollution control tax breaks. Some lesser known companies such as Otsego Paper, the cement companies Holcin and Lafarge Midwest Inc.,and Cadillac Asphalt LLC have also benefited.

Lafarge Midwest Inc., which operates a cement plant in Alpena, received more than $21 million in exemptions for air pollution control technology since 2001. Yet in 2007 the company released 360 lbs of mercury into the air, the most of any Great Lakes cement plant, and was ranked by EPA as the second-largest mercury polluter in the state, according to a report by Great Lakes Echo, a project of the Knight Center for Environmental Journalism at Michigan State University.

The Michigan Treasury Department website has published a list of the air pollution control technology tax expenditures through 2008.

According to the Treasury Department, air and water pollution control technology sale and use tax exemptions will cost the state $48 million in 2009 and state and local property tax exemptions for companies using these pollution control technologies will cost $160 million.

“More often than not the tax credits are for equipment they are required to install under the Clean Air Act or other regulations,” said Bob McCann, spokesman for the Michigan Department of Environmental Quality, only very rarely does a company go beyond what is required by law in installation of pollution control measures.

One common argument for tax breaks is that they can help persuade a job-providing industry not to relocate out of state.

But utility companies seem unlikely to move.

Atlas Gas and Oil, for example, a company that extracts natural gas from wells across Northern Michigan and appears to be the largest recipient of water pollution control tax exemptions. It has collected tens of millions in tax breaks over the last decade.

The Treasury Department website has published a list of water pollution related exemptions through 2008.

Dave Dempsey, environmental consultant and former environmental adviser to then-Gov. James Blanchard, said in an interview it’s time to end these tax breaks and use the revenue collected to fund state environmental programs.

“We’re essentially paying them for things they have been required to do for some time. It might still make sense if the breaks were limited to companies that go way beyond minimum compliance requirements, but instead, it’s become an entitlement program.”

Editor’s Note: This story has been updated to reflect clarified information about the state subsidizing more than $211 million in pollution control equipment at AEP’s nuclear plant near Benton Harbor.