Giant's Refinery May Face Tax Peril

RICHMOND, Va. -- A day after reporting significant improvement in earnings, Giant Industries Inc. told state legislators it may be forced to shut its Yorktown, Va., refinery if the House of Delegates' tax-reform plan ends sales-tax exemptions, reported the Hamptons Road, Va.-based Daily Press.

Giant Industries operates Virginia's only oil refinery. Officials from the Scottsdale, Ariz.-based petroleum-refining and -marketing company met legislators from the House and the Senate to tell them 200 jobs at the plant could hang in the balance of state-budget negotiations.

"It puts in jeopardy the continued operation of the refinery," said Leland Gould, Giant's executive vice president. "It, all of the sudden, taxes raw materials, and what that does is put us at a huge disadvantage."

The bill, proposed by Del. Phil Hamilton (R-Newport News), would raise $520 million by closing loopholes for several categories of industries, including shipbuilders, airlines and utilities. The measure remains alive in budget talks between the House and the Senate, but a specific design hasn't been determined, according to the Daily Press.

"There are billions of dollars of exemptions that ought to at least be reviewed before we talk about a huge tax increase," Hamilton explained. He said the specific industries affected by the plan might change during negotiations between the two chambers.

Ending Giant's exemption would cost the company between $30 million and $33 million a year, if the 60,000 barrels of crude oil it refines daily are taxed at 4.5 percent, industry analysts said.

"That would increase their operating expenses (in Yorktown) by 75 percent," said Sven Del Pozzo, an equity analyst who follows Giant for the research and consulting firm John S. Herold Inc. in Norwalk, Conn. The company made $11 million in 2003 and lost $9 million in 2002.

On the Senate floor, Sen. Marty Williams (R-Newport News) said the hit would wipe out the company's profits and force the company to close its doors in Virginia.

"It doesn't take any rocket scientists to find out where this is going. They're not going to sit here and struggle to lose $20 million," Williams said. "They're going to leave -- they're going to shut down the operation and leave."

The company operates two other refineries, in New Mexico, and 150 convenience stores. Gould said it has been considering expanding the Virginia refinery and adding jobs, according to the Press.