Pennsylvania tax incentive plan played major role in luring Shell cracker plant
HARRISBURG — Almost four years after he signed a tax incentive bill meant to lure Royal Dutch Shell to Pennsylvania, former Gov. Tom Corbett awoke Tuesday to a phone call telling him the energy giant will build a petrochemical plant in Beaver County expected to create thousands of jobs.
“For Pennsylvania, it's going to be huge for generations,” Corbett said.
It came to fruition in part because of the incentive plan Corbett crafted while competing with Ohio and West Virginia for the multibillion-dollar plant. The heart of the deal was a package of tax credits that Shell can use to reduce its overall tax liability by up to 20 percent.
“It wasn't easy” to get through the Legislature and required bipartisan support, said Kevin Harley, Corbett's former press secretary. Democrats and Republicans were patting one another on the back Tuesday as word spread of Shell's announcement.
“All along, this has been a bipartisan effort and a good example of what we need more of in the General Assembly,” said Rep. Jim Christiana, R-Beaver County.
Drew Crompton, general counsel and chief of staff for Senate President Pro Tempore Joe Scarnati, R-Jefferson County, said the legislation that became the springboard to woo Shell was difficult to put together.
“We needed to see certain guarantees before the credits were a valid consideration and needed to find a way to ensure the credits could be applied to any company willing to invest billions in capital within the commonwealth,” he said.
After pushing through passage of a budget in 2011 that reduced the size and cost of state government for the first time in nearly 40 years, Corbett knew the Legislature would not be in the mood for a direct tax subsidy, Harley said.
The company and others that build such ethane crackers in Pennsylvania can apply for a new Resource Manufacturing Tax Credit. The deal Corbett structured provides a $2.10 tax credit per barrel of ethane for use in converting the substance to ethanol at Pennsylvania facilities.
The company must invest at least $1 billion in Pennsylvania and create at least 2,500 construction jobs, said Lyndsay Kensinger, spokeswoman for the state Department of Community and Economic Development.
When assessing its total tax liability to Pennsylvania, Shell can use the tax credits to reduce up to 20 percent of its tax bill.
While the bill was being debated, lawmakers estimated the tax credit would amount to $1.6 billion over 25 years. But that figure, built on an average of $66 million in tax credits per year, is not delineated in the law.
The plant site was approved for an expanded Keystone Opportunity Expansion Zone in 2013, Kensinger said. The zones were started under another Republican governor, Tom Ridge, to attract business to Pennsylvania by creating low- or no-tax areas approved by municipalities. Local taxing authorities have approved a plan for payments in lieu of taxes, Kensinger said.
Shell was able to claim a state sales tax exemption beginning Jan. 1, 2014, Kensinger said. “Shell will be eligible for additional KOZ benefits from the date of occupancy,” she said.
Shell also has been offered a grant for up to $10 million over two years from the Pennsylvania First Program for site development and infrastructure costs.
Rich Kirkpatrick, a PennDOT spokesman, said Shell paid for a $60 million project to alter Route 18 and make other road fixes at the site.
Brad Bumsted is the Tribune-Review's state Capitol reporter. Reach him at 717- 787-1405 or firstname.lastname@example.org.