Legislators in the Pennsylvania General Assembly are scrambling to put the finishing touches on a tax code bill that could potentially offer billions in a tax break to companies in exchange for investing billions in an ethane cracker and associated manufacturing facilities.
Owen Thomas, chief of staff for state Sen. Elder Vogel Jr. (R-Rochester), told NGI’s Shale Daily the Appropriations Committee would meet Friday afternoon with hopes of completing a bill for Gov. Tom Corbett to sign by Saturday evening, before the current fiscal year ends and the legislature adjourns for a two-month summer recess.
“That’s our hope,” Thomas said Friday. “We’re trying to move this along.”
The proposal calls for offering what essentially amounts to an unlimited tax break for qualifying industry, for the next 25 years, starting in 2017. Companies that purchase ethane in Pennsylvania would be eligible for a 5 cent/gallon tax credit that could then be applied toward up to 20% of their eligible state tax liability.
Corbett had originally proposed an incentive package of up to $1.67 billion, but with an annual cap of $66 million (see Shale Daily, June 6).
“We wanted to make sure that this [ethane cracker] project happens, so we removed the $66 million cap,” Thomas said. “It basically works out to roughly the same amount in incentives.”
Thomas said the newer proposal also has several benchmarks included in it. Companies would need to make a capital investment of at least $1 billion in new facilities and create at least 2,500 full-time construction jobs to qualify for the tax break. He said legislators would also receive an annual report from the state Department of Revenue to see what companies were taking advantage of the tax break, and how much they were getting.
“We believe that by putting an annual review in place, we will make sure that we bring a little bit of accountability to the process,” Thomas said. “We want the jobs and we want Shell to come. But we also want to make sure that we’re doing right by the taxpayers.”
Last March, Shell Chemical LP — a subsidiary of Royal Dutch Shell plc — said it had signed an option to purchase land in Beaver County for a petrochemical complex that presumably would include a “world-scale” ethane cracker that would serve the Marcellus Shale region (see Shale Daily, March 16). Shell has said such a facility would be capable of processing 60,000-80,000 b/d of ethane.
The 300-acre site Shell selected is near Monaca, straddles Center and Potter townships and is currently owned by Horsehead Holding Corp., a zinc producer. The site lies within a Keystone Opportunity Zone, which offers another series of economic incentives, including a tax break (see Shale Daily, Feb. 6).
Thomas said companies that qualify for the tax break could sell it to operators or manufacturers, especially those that need a steady supply of ethane. Qualified companies would be allowed to sell the tax break as a way to lure more supportive industries to the region, an idea Thomas said has enjoyed bipartisan support.
“Jobs are jobs, and we need the jobs,” Thomas said. “There’s been a broad spectrum of support from both Republicans and Democrats, unions and businesses. They find themselves in the same boat here and want to get this across the finish line.”
The American Chemistry Council has said a $4 billion state-of-the-art facility to process wet gas from the Marcellus could lead to as many as 10,000 temporary construction jobs, 400 direct plant jobs and approximately 17,000 jobs in associated industries that would emerge to support and take advantage of the plant’s operations.
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