The Pennsylvania General Assembly has passed a bill designed to lure manufacturers with a tax credit for using state-produced natural gas to make petrochemicals or fertilizer, but Gov. Tom Wolf has indicated he may veto it.
State House Bill (HB) 1100 passed 157-35 in the Pennsylvania House and 39-11 in the state Senate. Any manufacturer investing at least $450 million to build a facility that creates at least 800 construction and permanent jobs would be eligible. The manufacturer could then receive 47 cents/Mcf for any natural gas consumed to make petrochemicals or fertilizer.
The legislation passed along bipartisan lines in both chambers of the Republican-controlled general assembly, suggesting lawmakers could override a veto. It was sponsored by state Rep. Aaron Kaufer, who represents Luzerne County in Northeast Pennsylvania, where unconventional gas production is prolific. Kaufer said he advanced the bill with the specific aim of drawing manufacturers to the region he represents.
“This is our opportunity to use our abundant, affordable and accessible natural gas to offset the cost of cheap labor overseas,” Kaufer said. “This type of investment will provide a once in a lifetime opportunity to compete with manufacturers overseas.”
Wolf said he intends to veto HB 1100. “Gov. Wolf does not support this bill as he believes such projects should be evaluated on a specific case-by-case basis,” said spokesperson J.J. Abbott.
The Wolf administration commissioned a study three years ago showing that the state has enough ethane available to support up to four more ethane crackers in addition to Royal Dutch Shell plc’s facility. Abbott said Friday if a particular project was advanced for the state that could take advantage of a natural gas tax credit to make byproducts, the governor “would be open to a conversation.”
HB 1100 is modeled after the Pennsylvania Resource Manufacturing tax credit enacted in 2012 to help lure additional investment from Shell. The company is building a multi-billion dollar ethane cracker in western Pennsylvania. That tax credit incentivizes the use of ethane and not natural gas, but it was estimated to be worth more than $1 billion to Shell at the time it was passed.
Shell’s facility is designed to use up to 100,000 b/d of ethane to create ethylene and polyethylene. A similarly sized ethane cracker being developed by Thailand’s PTT Global Chemical pcl in nearby Southeast Ohio is also thought to be close to a final investment decision as it has all major regulatory approvals and has made progress on site preparation.
Other petrochemical facilities have been floated for the region over the years, but none have materialized. Last year, Braskem SA canceled plans for an ethane cracker in West Virginia.
However, both the public and private sectors have for years been pushing the idea of a Northeast petrochemical hub, trying to build support and awareness for Appalachia’s storied manufacturing base, abundant resources and underground storage possibilities.