Pa. lawmakers offer Shell tax credit plans
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HARRISBURG -- Two Beaver County lawmakers have released similar versions of a proposed ethane tax credit for Shell Oil Co., which the governor has urged for inclusion in the pending state budget package.
One from Republican state Rep. Jim Christiana would offer $1.65 billion over the next 25 years, as the Corbett administration proposed, to Shell and other companies that locate ethane-processing facilities in Pennsylvania and buy ethane from local natural gas wells.
The other from Republican Sen. Elder Vogel enacts a nearly identical tax credit based on the amount of ethane purchased by Pennsylvania-based processing facilities, but would require the incentive to be reauthorized annually as with other state tax credits.
"We didn't put numbers in on the amount and the number of years, because I think that's still up in the air," Mr. Vogel said in an interview. "We want to make sure we do the best we can to protect the taxpayers."
Mr. Vogel said he would prefer to review the numbers further, while continuing to enact the tax credit so that the incentive is in place before Shell's next decision point this fall.
"There's no rush," he said. "Put the bill in, get the vehicle in place. We can put numbers in three years from now, but we need the bill in place."
Both tax-credit plans, each described as a "resource manufacturing tax credit" in the legislation, would begin in 2017. The Shell plant proposed for Potter, Beaver County, is expected to begin operating that year.
That petrochemical facility will process natural gas liquids, commonly found in the shale gas extracted in southwestern Pennsylvania, and transform the liquids into plastics and other materials. Construction of the plant is projected to employ up to 10,000 people, and several hundred full-time employees are expected to operate it.
The administration's push for the $1.65 billion ethane tax credit over the next 25 years was first reported last week, and has been described by the governor and others since as part of an effort to "reindustrialize" Pennsylvania.
Both of the new tax-credit plans would offer a credit of 5 cents per gallon, or $2.10 per barrel, on ethane purchased here, up to 20 percent of the company's qualified tax liabilities. That formula also was proposed by the Corbett administration.
Kelli Roberts, a spokeswoman for Gov. Tom Corbett, said the administration is reviewing both proposals and is not yet favoring one or the other.
Proponents say the tax credit would incentivize companies to locate in Pennsylvania, as well as encourage further development by indicating to businesses that they will have a reliable supply of ethylene here for making plastic-based products. But some Democrats say they have questions about the necessity of such a sizable incentive.
"This would be a major change in the state's tax law with a staggering price tag," said House Democratic spokesman Bill Patton. "Perhaps a case can be made, but we owe it to taxpayers to understand the full ramifications."
Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, said the proposals should be evaluated based on the number of permanent jobs that will be created. Currently, "there is no clear information" on those potential job figures and "no accountability if those jobs do not materialize."
Mr. Vogel said he would support including a provision to revoke tax credits if the company's job projections are not met.
Other questions also linger, however, regarding Shell's level of commitment to the Beaver County site. While the company announced in March that it had reached a deal regarding a zinc smelter site, Mr. Corbett has emphasized in recent days that the process is far from final. He told reporters this week that Ohio and West Virginia are said to be continuing efforts to woo the company away from Pennsylvania.
Mr. Vogel said he doesn't know if Shell would reverse course on locating in Pennsylvania if the tax credit proposal is not approved, but he did say he believes it will be an important factor at the company's next decision point in November or December.
"If they build the cracker plant in our area, it would be the only one north of Louisiana," Mr. Vogel said. "It's a big investment, a big move for them. ... We haven't had an opportunity like this since the steel mills went away, and we might never get another one again if this doesn't happen."
Top Republican lawmakers have said the tax credit has been a part of budget discussions. Either of the proposals could be amended into one of the budget-related measures that will be approved later this month.
First Published June 14, 2012 12:00 am