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Shale subsidies' tab to flirt with $1B

| Monday, Nov. 4, 2013, 12:01 a.m.

HARRISBURG — The discovery five years ago that the Marcellus shale and its natural gas could spew big profits and cheap, homegrown energy has spurred gas-friendly state officials to run up a growing taxpayer-funded tab to encourage the use of the hydrocarbons.

Bills pending in the Republican-controlled Legislature could deliver hundreds of millions of dollars in subsidies over a decade — possibly approaching $1 billion — in addition to the expanding number of checks being written by Gov. Tom Corbett.

With the assent of lawmakers, Corbett, a Republican who says the industry has the potential to reindustrialize Pennsylvania, tapped four pots of money for more than $30 million for natural gas projects.

That includes money for a processing project by plastics maker Braskem S.A. of Brazil, pipeline construction to link facilities of French drug maker Sanofi SA, scores of compressed natural gas vehicles and about a dozen fueling stations. About one-fifth of that money is drawn from a $200 million-a-year drilling fee on the industry.

On top of that, lawmakers last year approved what could become the state's biggest taxpayer-paid economic development incentive ever — possibly in excess of $1 billion over 25 years — to entice the construction of a multibillion-dollar petrochemical refinery in Beaver County to convert natural gas liquids into ethylene for the plastics and chemicals industries. Netherlands-based oil and gas giant Royal Dutch Shell PLC is considering it.

Patrick Henderson, a deputy chief of staff for Corbett who spearheads the administration's energy policy, couldn't say how much money the administration ultimately would be willing to spend to encourage natural gas use.

Some of the subsidies were drawn from economic development incentive money that is designed to spur hiring, and it was coincidental that natural gas was a key aspect of the project, Henderson said.

Otherwise, Henderson said, the state so far has made a “relatively modest investment of dollars” for compressed natural gas vehicles and fueling stations, primarily to convert diesel-powered bus and truck fleets.

The argument for Pennsylvania's rising natural gas vehicle subsidies is that the money boosts the local economy by favoring a domestic industry and diversifies the nation's fuel sources by displacing oil that is more expensive and often from abroad. Supporters tout natural gas as a cleaner energy source, but researchers at the Engine Research Center at the University of Wisconsin-Madison and the Center for Alternative Fuels, Engines and Emissions at West Virginia University say there is very little difference in pollution from a new diesel engine and a natural gas engine.

The Corbett administration wants to strategically plant vehicles and fueling stations to encourage public and private sector fleet managers to invest their own money in the enterprise, Henderson said.

“If we can get one or two into your fleet and show you it works, you're more inclined to buy going forward,” Henderson said. “That's really the goal, to have mini-demonstration success stories in a host of fleets. Our goal is not to buy 20 vehicles for the guy who has 20 in his fleet.”

Recipients of the money include Seal Beach, Calif.-based Clean Energy Inc., Houston-based Waste Management Inc. and Philadelphia-based Sunoco Inc.

Other states offer an array of subsidies that encourage natural gas use, but a comprehensive tally does not seem to exist.

Of the bills pending in the Legislature, as much as $60 million a year in a wide-ranging transportation funding bill passed overwhelmingly by the Senate in June would be available to help the state's mass transit agencies convert their fleets to “an alternative energy source, including compressed natural gas.”

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