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Corbett begins PR effort for refinery tax credit

The Associated Press June 14, 2012, 6:14PM ET

By Marc Levy


Gov. Tom Corbett’s administration began its public relations effort Thursday to build support for a 25-year tax credit worth up to $1.7 billion that it wants to foster a petrochemical industry in Pennsylvania around the state’s supply of natural gas from the vast Marcellus Shale formation.

Three of Corbett’s cabinet secretaries held a forum at the Beaver County community college, near the Pittsburgh-area site of a multibillion-dollar petrochemical refinery planned by a subsidiary of Netherlands-based oil and gas giant Royal Dutch Shell PLC.

The Republican governor’s administration has just begun sharing with the public the details of what lawmakers say would be the biggest package of taxpayer-paid incentives in Pennsylvania’s history for a project Corbett bills as the reindustrialization of the state.

Secretary of Revenue Dan Meuser said the “Pennsylvania Resource Manufacturing Tax Credit” would more than pay for itself through the creation of thousands of new jobs, the Beaver County Times reported.

The goal of the incentive is to lure an entire industry, not just the Shell plant, Secretary of Labor and Industry Julia Hearthway said, the newspaper reported.

The recently revealed plan of Corbett’s would not affect the state’s finances right away — the $66 million-a-year tax credit would first take effect in 2017. But Corbett wants the state Legislature to approve the tax credit before the end of June when lawmakers leave Harrisburg for the summer to show Shell that the state is serious about its offer of financial incentives for the refinery and a surrounding chemical manufacturing industry.

Shell’s so-called ethane cracker would be the first built in the northeastern United States, spurred by the rapid growth of drilling in the Marcellus Shale formation, which is thought of as the nation’s largest-known natural gas reservoir.

However, many rank-and-file lawmakers have not been briefed on the matter and legislation is just being introduced.

“Without knowing the details, I really can’t speak to it, whether it makes economic sense,” Rep. Glen Grell, R-Cumberland, said Thursday. “I would need to know what is the amount of state tax credits that is going to be applied per job created. Then we have to evaluate that versus what it could cost to incentivize or create jobs elsewhere.”

Senate President Pro Tempore Joe Scarnati, R-Jefferson, said Thursday that he would ask Shell officials to come in and talk to legislative leaders.

“I believe for something of this size and of this magnitude those of us in charge of appropriations should be able to hear from Shell what their plans could be with a tax credit such as this,” Scarnati said.

The Corbett administration’s financial incentive plans for Shell appear to revolve around the tax credit and a newly created tax-free zone for the site that the Legislature approved in February. Lawmakers briefed last week by administration officials said they were told that taxpayer-paid financial aid would be considered to help clean up the site where the plant would be built, but administration spokesman Steve Kratz said Thursday that no such financial aid is available for private entities.

Administration officials have declined to estimate the value of the tax-free site to Shell.

Under the legislation, the tax credit would apply to any ethane cracker in Pennsylvania that converts natural gas liquids to ethylene, which is then used to produce chemicals that go into everything from plastics to tires to antifreeze.

The credit would be equal to a nickel per gallon of ethane purchased and used in manufacturing ethylene in Pennsylvania.

Shell’s industrial complex would likely attract many smaller, specialized chemical plants, according to the Washington, D.C.-based American Chemistry Council, and the Corbett administration wants to encourage that by allowing Shell to sell or transfer the tax credit to companies that supply the ethane or use a derivative.

Shell has estimated that the core plant could employ several hundred people and create up to 10,000 construction jobs. The American Chemistry Council estimated last year that a manufacturing industry around the plant could employ another 2,400 people, plus another 8,200 people indirectly through the ongoing purchase of supplies and raw materials.

On Tuesday, Corbett warned that he has heard that Ohio and West Virginia are still trying to lure away the Shell cracker with their competing offers of financial incentives.

In the meantime, some of the natural gas liquids produced from the Marcellus Shale region are already under contract to be piped down to the Gulf Coast, where 26 of the nation’s 29 crackers are located.

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