Science & Technology
3:15 pm
Fri June 15, 2012

Corbett Administration Defends Tax Credit

When Governor Tom Corbett praised a deal with a major energy giant to set up shop in Beaver County, he didn't mention a $1.7 billion tax break was needed, too, but now the administration says that was part of the original deal.

Royal Dutch Shell made that request of the Corbett administration when it said it was considering building a natural gas processing plant in western Pennsylvania.

Expectations are high for the ethane cracker, which would convert a byproduct of natural gas into a chemical used to make plastics. Supporters believe landing the Shell plant would lead other energy companies to follow, creating an industrial hub and resulting in tens of thousands of jobs.

Critics say those job creation numbers are unrealistic, and that the tax break is going to a company that had $41 billion in revenues last year.

Something In Return

According to Department of Community and Economic Development Secretary Alan Walker, Shell wanted something in return.

"They were very concerned, because this plant won't be finished until 2017, that all the gas would be contracted to go into the pipeline and go to the Gulf or go to the Midwest," said Walker. "They said, 'We need some incentive to make sure that gas is used here in Pennsylvania, so that it doesn't go in the pipeline.' So this is what they asked for."

Corbett has reportedly told lawmakers he wants the tax break passed along with a budget in the next few weeks.

Two proposals, one in the House and the other in the Senate, aim to deliver a tax break.

Senator Elder Vogel (R-Beaver & Lawrence) said his measure doesn't use the Corbett administration's maximum tax break figures or create a time-frame for the deal.

"Those numbers are something somebody pulled out of the air somewhere, I think," Vogel said. "I don't think there's any hard, set, fast numbers. We have until 2017 to put numbers in place, because it'll be at least until 2017 before the plant is up and running."

Representative Jim Christiana (R-Beaver) authored the House version, which does include the specific tax break numbers for petrochemical businesses building on the Beaver County site, $1.7 billion over years.

Other Industries Get Tax Breaks
"I think what we're creating here is a cluster of industrial activity where this one type of plant provides jobs upstream in the development and it's providing jobs downstream in manufacturing," Christiana said.
Vogel said it's not a done deal that Shell will build in Beaver County.

"Shell has their next decision point somewhere in November, December — this is just another piece of the puzzle basically, to just ensure that they come here and bring all their money and the jobs here," Vogel said.

He added the $66 million annually in tax breaks for 25 years "scares everyone to death," but he points out tax credits for industry are nothing new.

"It's something we do to entice businesses, to give businesses a leg up, to get them started and going, and things like that," Vogel said. "Basically, right now, even if I would stick with the governor's numbers — $66 million? — right now the tax, the film tax credit is about $60 million a year right now."

The Corbett administration was criticized for originally keeping the tax credit secret, but Revenue Secretary Dan Meuser said the Corbett administration isn't keeping any other part of a deal with Shell under wraps right now.

"If things do get more competitive and before a deal is signed, is it possible there could be something else that comes up in order to make this a reality? Sure," Meuser said, "but there's nothing that's planned in that manner or that exists at the present time."

Ohio and West Virginia are also in the running for the ethane cracker plant.