Pa. Legislature adopts $670 million tax credit for petrochemical plants
A bill aiming to lure petrochemical and fertilizer plants to Pennsylvania with more than $650 million in new tax credits is on the way to Gov. Tom Wolf after the House and Senate passed it by large margins this week.
The Democratic governor vetoed a similar bill earlier this year, but his administration was involved in negotiating this one and he said he plans to sign it.
Neither bill was the subject of public hearings.
House Bill 732 creates a new “local resource manufacturing tax credit” for companies that invest at least $400 million and create at least 800 construction and permanent jobs to build petrochemical or fertilizer plants that use dry natural gas produced in Pennsylvania.
A maximum of four companies can qualify for the credits each year and each company’s annual tax credit is capped at $6.7 million. The credit would amount to $667 million in foregone taxes over the 25 years that the credit program would run from 2025 to 2050.
The credit is modeled after one used to entice Shell to build its petrochemical plant in Beaver County, but this one is exclusive to petrochemical and fertilizer manufacturers that use dry natural gas rather than ethane.
Dry gas is produced abundantly from the Marcellus Shale in northeastern and north-central Pennsylvania and, to a lesser extent, from Pennsylvania’s Utica Shale.
The dry gas requirement disqualifies most Marcellus Shale gas produced in southwestern Pennsylvania, which is considered “wet” because it contains natural gas liquids.
The bill Mr. Wolf vetoed earlier this year would have incentivized the use of natural gas more broadly, but it contained no limits on how many plants could qualify for the credits and lacked enforcement provisions to ensure companies pay construction workers prevailing wage rates.
Pennsylvania’s Department of Revenue estimated the vetoed proposal would have cost $22 million per year per plant in foregone taxes until the end of 2050.
The new proposal requires project developers to capture and sequester the carbon dioxide emissions from their facilities — a tool for combatting climate change that about a dozen industrial projects in the U.S. have successfully implemented. But the requirement is toothless because it is only mandated “to the extent it is cost effective and feasible” at the discretion of the plant’s owner.
One prospective manufacturer that could be eligible for the credits, KeyState Natural Gas Synthesis, has said most of the carbon dioxide generated by its proposed plant in Clinton County will be captured onsite and used in other products.
The bill’s backers include chemical, manufacturing and natural gas trade groups as well as building trade unions. The Senate approved the bill on Monday with a vote of 40-9.
Rep. Aaron Kaufer, RLuzerne, who sponsored the earlier version of the tax credit bill, called it a “transformative opportunity of a generation.”
Environmental groups, renewable energy companies and some Democrats assailed the bill, calling it reckless in the face of expanding threats from climate change and in the midst of a pandemic creating so much economic hardship for Pennsylvanians.
On Tuesday, the House passed the bill with a vote of 163-38.
Rep. Sara Innamorato, D-Lawrenceville, called the bill — which was initially written as a tax relief measure for volunteer fire departments — “the definition of a backroom deal.”
“We need to see the full ledger on bills like this,” she said.
“We need to see the benefits weighed against the long-term burden that increased pollution would have on our infrastructure, our health care system and our families’ budgets.”