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Subsidies may grow for Shell Oil

| Friday, June 8, 2012, 9:20 p.m.

Taxpayers could be on the hook for cleaning up pollution at a zinc smelter site in Beaver County, increasing the public price tag if Shell Oil Co. buys the property for a new petrochemical plant.

Shell, which would not have to pay property taxes for 15 years at the Horsehead Corp. site and could qualify for $1.7 billion in state credits, might have its environmental cleanup bills covered by federal tax incentives, state officials said on Friday.

Shell spokeswoman Kelly op de Weegh could not be reached for comment.

The news of additional subsidies for Shell, the world's second-largest company with more than $20 billion in profits last year, left state Sen. Daylin Leach, D-Montgomery, "very troubled."

"Wouldn't it make more sense for the company that caused the pollution to pay for the costs of cleaning it up, rather than the taxpayers?" asked Leach, who yesterday sent a letter to Gov. Tom Corbett questioning the various credits the state is offering Shell and called for public hearings on the matter.

Leach was reacting to a report from Harrisburg news service Capitolwire that said Corbett had offered for the state to pay for the cleanup, whose "cost could run into the seven figures." The report said Horsehead required the state to pay for the environmental work as a condition of offering Shell the land purchase option.

Corbett spokesman Steven Kratz said the Capitolwire report was incorrect. "The Act 2 Land Recycling Program would be available for any company purchasing a potential brownfield site," Kratz said in an email. He declined to comment further, referring questions about cleanup incentives and the Land Recycling Program to the state Department of Environmental Protection.

Crafton-based Horsehead has a land purchase option agreement with Shell, giving the oil giant first right to buy the land for an undisclosed price. Horsehead, which reported $21.5 million in profit last year, is building a metals plant in North Carolina and plans to close its zinc smelter near Monaca.

"The terms of our agreement with Shell are confidential," Horsehead spokesman Ali Alavi said in an emailed statement. "We have not entered into an agreement with the commonwealth in connection with the Shell option."

DEP spokesman Kevin Sunday said the 17-year-old Land Recycling Program sets cleanup standards for landowners looking to redevelop polluted property. Property that qualifies for the program can be eligible for federal tax credits to cover environmental work, Sunday said.

But "the state isn't paying for cleanups," he said, and "there's no automatic money" for property in the program.

It is up to the private parties involved in the property transaction to determine who will be responsible for environmental cleanup, Sunday said. The DEP has not had contact with Shell regarding the program or incentives, he said.

The federal brownfield tax credit program appears to have expired at the end of 2011, according to the Environmental Protection Agency's website. EPA officials could not be reached for clarification.

Horsehead in 2009 settled a lawsuit by an environmental group over alleged violations of federal pollution laws. The lawsuit claimed Horsehead violated the Clean Water Act at least 135 times between 2004 and 2008 by discharging higher amounts of zinc, selenium, chlorine and lead than allowed into the Ohio River and Raccoon Creek.

In 2006, the state fined Horsehead $110,000 for violating air-pollution regulations, news reports show.

Shell announced in March that it had optioned the 300-acre Horsehead property in Potter and Center townships and would continue investigating the site for a potential $4 billion plant that would turn components in natural gas from the Marcellus shale formation into the building blocks for plastics. The project, if it comes to fruition, could create hundreds of jobs at the plant, 10,000 temporary construction jobs and thousands of jobs at spinoff businesses throughout Western Pennsylvania.

Under a bill Corbett signed this year, the Horsehead site was designated as an expanded Keystone Opportunity Zone, which provides the owner with 15 years of property tax breaks. Corbett is advocating tax credits worth as much as $66 million a year for 25 years starting in 2017, a total of $1.7 billion.

"This is not a tax break just for Shell," said Elizabeth Brassell, spokeswoman for the Department of Revenue, referring to the tax credits. "It's for any natural gas-processing facility that would establish in Pennsylvania."

"Perhaps more importantly," Brassell said, "the credit can be assigned or sold to upstream natural gas suppliers and downstream manufacturing companies that use the ethane derivatives, thereby revitalizing Pennsylvania's manufacturing industry and securing long-term economic benefits for Pennsylvania residents and communities."

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