A bipartisan tax credit for Pennsylvania’s energy and petrochemical sector was nearing final passage by the state House Tuesday after the Senate approved the measure the night before.
The Local Resource Manufacturing Tax Credit Program, known as House Bill 732, was cleared Monday on a 40-9 vote by the Senate and sent to the House for consideration. If approved, possibly Tuesday, the measure would go to Gov. Tom Wolf for his signature.
“This tax credit is a game-changer for Pennsylvania,” Senate Majority Leader Jake Corman (R-Centre) said after the vote, which took place Monday, reportedly after he and other Republican lawmakers had met to discuss the bill earlier in the day.
The bill targets tax breaks for manufacturers that invest in new facilities to make fertilizers and petrochemicals from dry natural gas produced in the region. Corman said that businesses would be eligible for the benefits if they invest more than $400 million in such plants and hire at least 800 Pennsylvania workers. The program is capped at $6.6 million per facility, and the number of facilities that can receive tax credits is limited to four projects for a maximum fiscal impact of $26.7 million per year.
“Once the employers have created the jobs and made the investments, then the employer gets a tax break,” Corman said. “If we don’t do this tax credit, these jobs aren’t created, and these additional community investments are not made.”
The tax breaks are part of a strategy to expand Pennsylvania’s manufacturing base around the Marcellus shale formation and to provide a new local market for its plentiful natural gas. So-called dry gas, primarily made up of methane, is used as a feedstock to produce ammonia and urea, which are major ingredients in fertilizer.
The Pennsylvania Manufacturers’ Association conducted a study on two typical plants that were already in operation within the state. It was estimated that building a plant with today’s dollars would cost around $500 million, but would create more than 1,000 jobs and generate an annual economic impact of approximately $524.5 million. In addition, the new plants would add to the petrochemical exports from the state.
The Pennsylvania Manufacturers’ Association and the Pennsylvania Chemical Industry Council released a letter of support on Monday in favor of an amendment by Sen. John Yudichak (I-Luzerne) that was inserted into HB 732 to enact a local resource manufacturing tax credit, adding that it would spur needed investment and industry growth in the commonwealth.
“The United States is a net exporter of chemicals and the global compound annual growth rate for ammonia is expected to increase 5 percent over the next four years. Attracting and retaining natural gas synthesis manufacturing ought to be a priority of policymakers at the state and federal level,” the letter said.
The organizations noted that in Beaver County, the largest construction site in North America to build a state-of-the-art petrochemical complex will utilize the natural gas liquid ethane from the Marcellus Shale to create ethylene. The construction project has bolstered the region’s economy and stimulated investments in education and businesses.
Pennsylvania’s building trades unions also supported the legislation, which would guarantee that construction workers on the projects receive prevailing wages and benefits.
“The Local Resource Manufacturing Tax Credit will attract new industries and put thousands of construction trade workers on the job building the future of the Pennsylvania economy on the backbone of our energy and manufacturing sectors,” Sen. Yudichak said in a floor speech on Monday.
House Bill 732 is similar to an energy and fertilizer manufacturing tax credit bill that was passed earlier this year in a bipartisan vote in the House and Senate but was vetoed by the governor in March.