Governor Plans To Veto Natural Gas Manufacturing Tax Credit

Feb 5, 2020

Pennsylvania Gov. Tom Wolf will veto a bill that would provide millions in tax breaks for new construction of facilities that use natural gas extracted in the state to produce fertilizer and other chemicals, his spokesman said Wednesday.

The bill, which passed both legislative chambers this week by veto-proof majorities, authorizes the “energy and fertilizer manufacturing tax credit” for projects that require at least $450 million in construction and start-up costs and that create at least 800 jobs.

The Revenue Department estimates the tax credit would be worth about $22 million annually per plant. The tax break would expire at the end of 2050.

Wolf “believes such projects should be evaluated on a specific case-by-case basis,” said spokesman J.J. Abbott. “However, if there was a specific project, he would be open to a conversation.”

The bill's primary sponsor, Rep. Aaron Kaufer, R-Luzerne, said the fact that the bill is not specific to a single business makes for better policy.

“This is truly a once-in-a-lifetime opportunity, and if we don't take advantage of our natural resources in northeastern Pennsylvania, we're missing out on the opportunity,” Kaufer said Wednesday.

Eligibility will also require payment of prevailing wage rates and an effort to hire local workers during construction.

A 2012 state law provides a tax credit for turning ethane, found in “wet” natural gas from southwestern Pennsylvania, into ethylene. It was used to lure an enormous cracker plant, Shell's Pennsylvania Petrochemical Complex, now under construction in Monaca, in Beaver County.

The new legislation aims to develop manufacturing from “dry” natural gas, which in Pennsylvania is found mostly in the north-central and northeastern parts of the state.

Rob Altenburg, director of the energy center for the environmental group PennFuture, said the tax credit is going to a natural gas industry that has long fought the imposition of a severance tax in Pennsylvania. The industry does pay an impact fee.

“We're seeing a blanket subsidy being given to the industry, and there's not even any attempt to determine if that makes sense from an emissions perspective, or if that makes sense from a financial perspective,” Altenburg said.

It's unclear whether Democrats in the House and Senate will remain behind the legislation if it means voting against a veto from fellow Democrat Wolf.

A spokeswoman for Senate Democrats offered no immediate comment. Bill Patton, spokesman for the House Democrats, said his members would “take things as they come."

“We'll need to read the governor's veto message, to learn more about his reasoning,” Patton said.