PA to Grant $1.7B in Tax Credits for Shell Cracker Plant

The AP is at it again. This time they’ve taken aim at Pennsylvania Gov. Tom Corbett over the proposed new ethane cracker plant that Shell announced they would build in Beaver County, PA (see this MDN story for background).

The breathless headlines are that (gasp) Pennsylvania will have to grant Shell $66 million a year in tax breaks, for a total deal of some $1.7 billion in foregone taxes over 25 years (while at the same time that nasty Corbett keeps cutting previously scheduled obscene pay increases for teachers, never mind that the state is broke after years under Ed Rendell and Democrat control). That’s the sum total of the AP story running in hundreds of newspapers now.

Let’s provide some perspective, shall we?

First, the AP story:

Gov. Tom Corbett, who has been criticized for cutting state spending for schools and social services, is advocating future tax credits worth as much as $66 million a year for a petrochemical refinery planned by Shell Oil Co. in western Pennsylvania to capitalize on booming natural-gas drilling in the Marcellus Shale region.

The Corbett administration is seeking legislative approval now to demonstrate its willingness to share the costs of the project, even though the credits would not become available until 2017. The credit would be worth nearly $1.7 billion over the 25 years they would remain in place.

"It’s a competitive climate out there," said Steve Kratz, a spokesman for the Department of Community and Economic Development.

Corbett has not publicly discussed the proposed tax break. But Kratz on Monday confirmed information first reported by the online news service Capitolwire and provided new details.

A top aide to Senate President Pro Tempore Joe Scarnati said lawmakers will demand assurances that the plant be built in Pennsylvania and that promises of 10,000 to 20,000 related jobs will materialize. The bill is expected to be introduced in the Senate this week, the aide said.*

The AP story further says Corbett already signed legislation earlier this year granting tax credits—seeming to imply that this is double-dipping—granting even more on top of what was already agreed to. Oh, and did we (the mighty AP) say that Corbett is a heartless bastard Republication?

Here’s some perspective:

Three states were competing for the Shell cracker plant. West Virginia promised zero property taxes for 25 years, drastically reduced taxes on machinery and other equipment, building new short line railroads, and just about anything else Shell wanted. Ohio promised $1.4 billion in tax incentives. This is what Pennsylvania was, and frankly still is, up against. Still is?? Yeah, still is.

Shell has still not made a go/no go decision to build in Pennsylvania. The place where they propose to build is currently occupied by a zinc production operation that isn’t due to leave until 2014. At that point Shell will decide if they are going to move forward. And it will take upward of 10 years to build the ethane cracker plant once shovels hit the dirt. PA has to show they’re serious about working with Shell to get this thing done.

Is $1.7 billion a lot of money? Sure is. But think about this: When the cracker plant is built, it will provide between 10,000-20,000 jobs, half of them just to build the plant. And once the plant is built, it will keep many thousands continuously employed for the next generation or more. And it will attract untold numbers of smaller businesses to relocate near it, creating thousands of more jobs. It’s estimated that the economic impact of the cracker plant will ultimately bring in somewhere between $17-$20 billion. It’s a staggering, almost incomprehensible number.

Let’s see, if I could invest $1.7 billion over the course of the next 25 years and get back a return of $17-$20 billion, would that be a good deal? You do math.

* (Jun 5, 2012) – Proposed Shell tax break in Pa. worth $66M a year

P.S. Here’s a great example of the rank ignorance and utter stupidity you can expect to read about this issue: