Create a free account to continue

Pa. Gov Boasts Broad Support For Refinery Tax Credit

Gov. Tom Corbett is claiming deep support from labor unions and business advocacy groups for his plan to lure in an integrated petrochemical industry.

HARRISBURG, Pa. (AP) — Gov. Tom Corbett on Wednesday demonstrated that he has deep support from labor unions and business advocacy groups behind him as he presses state lawmakers to approve Pennsylvania's largest-ever taxpayer-paid package of financial incentives for what he portrays as the biggest industrial investment in the state in a generation.

He appeared at a Capitol news conference with several dozen union and business group representatives, as well as lawmakers from both parties, in a show of support for his proposal for a $1.7 billion tax break designed to lure an integrated petrochemical industry to a state wracked by the flight of manufacturing jobs in recent decades.

Corbett faces lawmakers uneasy over the appearance of an industry giveaway and possibly a suspicious public at a time that his administration is pressing for a second straight year of tax cuts for businesses and cuts in aid for education and services for the poor.

"For the general public, that might be hard to understand because ... they think we're giving money to them," Corbett told a news conference. "No, we're not. What we're saying is, 'You build it. You provide all these jobs for all these people and we'll take a little bit less money from you so that we have more money for us.'"

Conservatives have expressed discomfort with the kind of tax break they have opposed in the past, and liberals are angry over this latest idea for a taxpayer subsidy after accusing Republicans of giving the booming natural gas industry a pass on paying their fair share of taxes.

Asked whether he believes enough votes will emerge in the Legislature, Corbett, a pro-business Republican who is viewed as an ally of the natural gas industry, singled out a handful of Democratic lawmakers who stood on stage with him.

"With some friends from the other side of the aisle here, I think the support will be there," he replied.

Still, Corbett suggested that lawmakers will want to change the amount he has proposed — a maximum of $66 million a year for 25 years beginning in 2017. Later Wednesday, Corbett said he had reached an agreement with top Republican lawmakers on a tax credit plan, but would not give details until rank-and-file lawmakers are briefed in the coming days.

The plan is in response to the tentative commitment by a subsidiary of Netherlands-based oil and gas giant Royal Dutch Shell PLC to build a multibillion-dollar petrochemical refinery in the southwestern Pennsylvania town of Monaca, about 30 miles northwest of Pittsburgh.

The site of the Shell plant also would be located in a tax-free zone the Legislature created for it, although Corbett administration officials won't say what they believe the value of that would be to Shell.

Such a refinery would be the first on the East Coast, and would be fed by the "wet gas" drilled out of Appalachia's bountiful Marcellus Shale formation, which is thought of as the nation's largest-known natural gas reservoir. While Shell has said little about the tax credit publicly, an executive, Daniel Carlson, was in the Capitol on Wednesday for meetings.

Details of the tax credit started to become public in recent days as Corbett began to press the Republican-controlled Legislature to approve it before the end of June. With less than two weeks until they leave Harrisburg for the summer, lawmakers are still trying to get a better grasp on the details of the proposal.

Corbett called the opportunity to secure such a project a once-in-a-lifetime chance to usher in "a new industrial revolution in Pennsylvania" that could employ thousands of people. The tax credit is designed to try to get a chemical manufacturing industry to come with Shell, as well as possibly other companies willing to spend billions of dollars to build other refineries.

"When I was a young man, 25,000 souls worked in the mills (in Johnstown), high-paying jobs," said Sen. John Wozniak, D-Cambria. "The city was filled with stores, department stores, restaurants. I can tell you right now, if you never experienced the loss of manufacturing jobs, you have no idea of its impact. This is an opportunity to bring manufacturing back to Pennsylvania. For those that lived in Beaver County, Pittsburgh, Johnstown, Bethlehem, they know the importance of these manufacturing jobs."

Shell's so-called ethane cracker would convert natural gas liquids to ethylene, which chemical manufacturers can then use to produce chemicals that go into everything from plastics to tires to antifreeze.

Shell views the tax credit as a way to help ensure that ethane is abundant and affordable for the life of the refinery, which it says could extend for three or more decades. The worry is that natural gas producers would be more inclined to pipe the ethane from the Marcellus Shale field to Gulf Coast refineries, Shell said in a June 12 letter to lawmakers.

The proposed tax credit is calibrated at that level to be offset by new tax collections the industry would generate from the economic activity and jobs it adds to the state, administration officials say.

At a nickel per gallon of ethane purchased and used in manufacturing ethylene in Pennsylvania, the tax credit would be proportional to the industry's activity and the resulting collections of new taxes on things like sales and income, Revenue Secretary Daniel Meuser has said.

More in Supply Chain