AUSTIN - Companies will be able to seek a special tax break for portions of existing plants that have not previously qualified for the pollution control equipment abatement under rules finalized Wednesday by state environmental regulators.

The Texas Commission on Environmental Quality, however, said applications for news property tax exemptions will be reviewed, and companies must prove that the equipment reduces pollution at the plant or business site.

That caveat relieved some county officials who were worried that large portions of existing refineries and power plants could come off the tax rolls.

But an engineer and appraiser with a major tax consulting firm disagreed that the effects of a law that went into effect last September will be minimal. Wayne Frazell said he still believes more than $1 billion will be exempted from taxation.

"This could cause a huge disruption of the property tax system and shift the tax burden to small business and residential property owners," said Frazell of Pritchard & Abbott, which advises appraisers in more than 100 counties.

He said he expects as much as half of some existing natural gas power plants that use combined cycle generators to be exempted.

Impact unknown

Jim Robinson, chief appraiser to Harris County, said he will need to review the language adopted by the environmental commission before projecting its impact. He previously said as much as $1 billion in taxable property could come off county appraisal tax rolls under the worst-case scenario.

The three-member commission has struggled to implement the new law that revised a 14-year-old pollution control tax exemption. The bill passed by the Legislature last year targeted new clean-coal power plants but was so broadly worded that the commission asked Attorney General Greg Abbott to interpret its scope.

Abbott ruled in December that the law is not limited to electric-generation projects. His ruling cleared the way for the commission to decide how broadly to apply the tax breaks.

The commission declined a request from the Texas Oil and Gas Association to add downstream hydrotreaters used to remove sulfur from motor fuels to the list of equipment that could qualify for the exemption.

The commission has previously denied that such equipment meets the test of reducing pollution at the refinery site. The association argued that while the equipment doesn't reduce pollution at the refinery site, it produces cleaner burning fuels that improve overall air quality.

Chris Ekoh, a staff attorney with the environmental agency, said pollution control equipment must yield an environmental benefit at the site to get an exemption.

Officials with the oil and gas trade group did not return calls seeking comment Wednesday.

New construction

Jeff Branick, first assistant to Jefferson County Judge Ronald Walker, said since the sulfur-reducing equipment was not included, the effect on existing industry should be minimal. He said that many refineries in his county are expanding.

"They're going to have significant tax exemptions resulting from new construction," he said.

Donald Lee, executive director of Texas Conference of Urban Counties, said county officials will see how applications for tax abatements are handled over the next year, and could ask the Legislature to clarify.

"We'll have to watch the process and see what exemptions get granted," said Lee.

The original pollution tax exemption was approved by Texas voters in 1993.

Since then, the exemptions have helped a variety of businesses from family-owned dry cleaners and gas stations to the largest refineries and power plants. The state comptroller projected the exemption cost school districts statewide $92 million in 2007.