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Corbett Administration Sells Ethane Cracker Tax Break; Secretary Says Shell Asked For It

Scott Detrow / StateImpact Pennsylvania

DCED Secretary Alan Walker

The Corbett Administration has been criticized for not selling its proposed $1.65 billion ethane cracker tax break to the public. On Thursday, it began to make up for lost time.
13 different speakers took to the lectern at Beaver County Community College — three cabinet secretaries, five legislators, two county commissioners, and representatives from unions. Their message: if Shell builds an ethane cracker in Monaca, it could trigger a cluster of similar processing plants in the region. And if that happens, tens of thousands of people would gain employment.
“What these incentives do, is they don’t just bring a company to Pennsylvania. They bring an entire industry to Pennsylvania,” Labor and Industry Secretary Julia Hearthway said. “They bring an entire industry to northeastern United States. And with it comes jobs. Not a few hundred jobs. Not one company hiring 300 or 400 jobs. But thousands and thousands of jobs to Pennsylvania.”

In addition to boosterism, the event carried the warning that if legislators don’t pass this tax plan, Shell could build elsewhere. “There’s no signed deal at this point with Shell,” Department of Community and Economic Development Secretary Alan Walker said. “If the commonwealth passively stands by and does nothing, we will not only lose the Shell project, but we will lose our ability to grow this industry in Pennsylvania.”
For the first time, the Corbett Administration publically admitted the tax break was part of the initial agreement Shell made with Pennsylvania this spring. “This is actually what they asked for,” Walker said. “They were very concerned, because this plant won’t be finished in 2017, that all the gas would be contracted to go into the pipeline and to the Gulf or to the Midwest. They said ‘we need some incentive to make sure that gas is used here in Pennsylvania, so that it doesn’t all go into the pipeline.’”
The tax credit would give Shell – or any other company that builds a cracker in Pennsylvania – a $2.10 break on every barrel of ethane it purchases from energy companies located in the commonwealth.  (The discount is capped at 20 percent of the company’s annual Pennsylvania tax liability.) Revenue Secretary Dan Meuser pointed out the full $66 million annual cost wouldn’t be reached unless the cracker is purchasing 85,000 barrels of ethane a day.
Shell, which would already avoid state and local taxes for 15 years due to the Keystone Opportunity Zone act passed in February, would be able to sell the tax credits it generates to another company.
When Governor Corbett announced in March that Shell was targeting Beaver County, he never mentioned a $1.65 billion tax break.  On Thursday, Meuser said the tentative agreement with Shell didn’t include any other yet-unannounced pieces of legislation. But he left the door open for Pennsylvania to offer the company more incentives. “If things do get more competitive before a deal is signed, is it possible there could be something else that comes up in order to make this a reality? Sure. But there’s nothing that’s planned in that manner.”

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