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Governor Backs Petrochemical Tax Break Bill In Pennsylvania

Joe Ulrich

Gov. Tom Wolf said Tuesday that he supports legislation that extends millions of dollars in tax breaks to turn natural gas into fertilizer and industrial chemicals as it sped through the Legislature after emerging from closed-door negotiations with top Republican lawmakers.

Wolf, a Democrat, vetoed a similar bill in March, but said he negotiated changes to limit the scale of the subsidies available and to ensure construction workers building a qualifying petrochemical plant are paid union-scale wages.

"This is a better bill," Wolf said at an unrelated news conference Tuesday.

The tax credit legislation has high-profile support from traditional Republican allies, including the Pennsylvania Manufacturers Association and the state’s huge natural gas industry, and traditional Democratic allies in the building trades unions.

Starting in 2024, the new legislation authorizes 25 years of tax credits up to $26.7 million a year, to be divvied up among no more than four facilities that each can draw a maximum credit of just under $6.7 million. That totals almost $670 million.

The bill easily passed the Senate on Monday, hours after the new wording became public. On Tuesday, the House of Representatives approved it, 163-38.

Opponents, primarily southeastern Pennsylvania Democrats, called it an unnecessary giveaway to a fossil fuel industry and petrochemical plants that will wreak havoc on public health and the environment and funnel profits to wealthy, out-of-state corporations.

Its backers hailed it as a once-in-a-lifetime opportunity to bring new prosperity to northeastern Pennsylvania, where once-powerful steel and coal industries have withered and median income and rates of college-degree attainment are lower than the rest of Pennsylvania.

Thanks to a decade of exploration in the prolific Marcellus Shale reservoir, the region now boasts a plentiful supply of dry natural gas that can be turned into fertilizer, ammonia, diesel exhaust fluid and other chemical products that are in demand across the northeastern United States, backers say.

The sponsor, Rep. Aaron Kaufer, R-Luzerne, called it the “the transformative opportunity of a generation.”

Wolf, meanwhile, has pursued policies to fight climate change, often opposed by the same business and labor interests propelling the tax credit bill, but he also has pledged to help the natural gas industry succeed in its efforts to get its products to market.

Rep. Greg Vitali, D-Delaware, singled out efforts to combat climate change in Pennsylvania, one of the nation's biggest greenhouse gas polluters, and said that encouraging the petrochemical industry makes that effort harder.

“It’s like trying to drive a car with one foot on the gas and one foot on the brake, you just can’t do it,” Vitali told colleagues during floor debate.

The bill is a particular achievement for unions, guaranteeing the facilities that get the tax credit pay union-scale wages for construction.

It also could lure new natural gas customers in the nation’s No. 2 natural gas state behind Texas, as the industry weathers stubbornly low prices and court and regulatory battles that have stalled major interstate pipeline projects.

Two projects on the drawing board, targeting sites in Clinton County and Luzerne County, could be candidates for the tax credit.

The facilities must meet a capital investment requirement of $400 million and 800 jobs, including construction.

The bill is modeled on a 2012 state law that was designed to lure a multibillion-dollar Shell ethane refinery now under construction in western Pennsylvania’s Beaver County.

“This bill is a winner, this bill will lead our state into that industrial renaissance that we should have,” said Rep. Joshua Kail, R-Beaver.