Ohio Offers Shell Cracker Plant $1.4B in Tax Incentives

moving mountainsCompetition to attract an ethane cracker plant is heating up. West Virginia has made no bones that they intend to be the winners of the investment that will be made to build an ethane cracker plant to be built by Shell. The plant will cost upward of $2 billion and will create thousands of jobs to build the plant, operate the plant, and just as importantly, in the industries that will locate near the plant once it’s operational. It’s an economic jackpot worth $5 billion or more, and those who are in the game to attract it are in it to win.

Regular MDN readers know what an ethane cracker plant is. For those who are new, a very brief background. In some areas of shale gas drilling, not only methane (natural gas) comes out of the ground, but other chemicals as well. It’s often called “wet gas”. Processing wet gas to extract ethane is profitable because ethane can be “cracked” into ethylene, a primary raw material used for manufacturing plastics. With an abundant source of cheap ethane, petrochemical companies like Shell are looking to locate a huge processing plant in the Marcellus/Utica Shale region. Shell previously said they would announce their site selection in early 2012, perhaps in January.

West Virginia has repeatedly said they want that plant and they’re willing to move metaphorical mountains to get it. But you can now add Ohio to the mix of those states (WV, PA and OH) who are seriously courting Shell with big incentives to locate the plant in their state.

…Ohio state Sen. Lou Gentile, D-Jefferson, recently joined fellow lawmakers in sending a letter to the global oil and gas titan, asking Shell to build its plant in the Buckeye State.

According to Greenwire, a national environmental and energy news service, Ohio leaders are offering $1.4 billion in tax incentives to Shell to entice the company to locate the cracker there.

Connie Wehrkamp, deputy press secretary for Ohio Gov. John Kasich, said her office is very aware of the project, but could not discuss specifics.

"In order to maintain Ohio’s ability to compete for jobs, it is standing policy that we never discuss specifics regarding incentives that may or may not have been offered to companies," she said.

Gentile, recently appointed to the position of senator while he was still serving as a member of the Ohio House, said he joined a group of Democrats and Republicans from both the Senate and House to let Shell know why it should develop in Ohio.

"We just wanted to let Shell know that we are supportive of the project, and are willing to do whatever is necessary to get the project," Gentile said, noting this could include tax abatements among other incentives. "It is a competitive process, and we are putting our best foot forward."*

Not to be outdone, WV Commerce Secretary Keith Burdette is looking to cap property taxes for Shell at five percent for 25 years:

Burdette may ask West Virginia legislators if they would vote to allow for a reduction of personal property taxes for Shell – or any other cracker developer – to a 5 percent maximum charge for 25 years. Existing law allows the state to reduce the personal property tax rate to 5 percent for a maximum of 10 years.

Though declining to put a precise dollar amount on the tax incentives West Virginia is offering Shell, Burdette said, "We feel that it is a very competitive package."*

*The Intelligencer/Wheeling News-Register (Jan 1, 2012) – Cracker Plant Battle Heats Up; Ohio, W.Va. Offer Up Tax Incentives