Petrochemical tax credit bill awaits Gov. Wolf’s signature

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A bipartisan tax credit for Pennsylvania’s energy and petrochemical sector was awaiting Gov. Tom Wolf’s signature Wednesday after being approved by the state House of Representatives.

The Local Resource Manufacturing Tax Credit Program, which provides tax breaks for the development of new fertilizer and petrochemical plants fueled by natural gas, passed by the House Tuesday on a 163-38 vote Tuesday. The measure, House Bill 732, was cleared 40-9 by the Senate the previous day.

The bill is expected to be signed promptly by the governor, likely before the end of the week.

“This tax credit further opens the door for manufacturers to not only establish roots here in Pennsylvania, but to generate large revenues, boost our region’s economy and provide vast opportunities for job growth,” said Rep. Aaron Kaufer (R-Luzerne). “This is a once-in-a-lifetime chance for Pennsylvania, especially the northeast region, as it will also allow us to use cost-effective, accessible natural gas to compete with overseas manufacturers.”

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. Lawmakers 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.

“The Local Resource Manufacturing Tax Credit in House Bill 732 will bring a new manufacturing industry to Pennsylvania at a time when economic vitality is needed most,” said David N. Taylor, president and CEO of the Pennsylvania Manufacturers’ Association (PMA). “While making new products like fertilizers and fuel, these manufacturing facilities will create high-value jobs, expand the use of Pennsylvania energy, and attract related industries and additional investments, all of which will accelerate our economic recovery. This remarkable effort has brought together Pennsylvania industry – both labor and management – in our shared commitment to a pro-production, pro-jobs, pro-growth agenda for our commonwealth.”

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 PMA 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 PMA and the Pennsylvania Chemical Industry Council released a letter of support this week in favor of the amendment by state Sen. John Yudichak (I-Luzerne/Carbon) that was inserted into HB 732 to enact the local resource manufacturing tax credit.

“To localize and realize the full benefit of our natural gas resources for Pennsylvania, we must be strategic in attracting investments that also utilize natural gas as a feedstock,” 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.

“Our struggling economy needs new industries to invest in Pennsylvania and working families in northeastern Pennsylvania deserve a fair shot at securing good-paying jobs,” said Sen. Yudichak, adding that the tax credit that resulted from a bipartisan compromise between the governor and legislature will spur economic growth across the construction trades, manufacturing, and energy industries.

Pennsylvania’s building trades unions also supported the legislation, which would guarantee that construction workers on the projects receive prevailing wages and benefits.

Anthony Seiwell, business manager of the Eastern Pennsylvania Laborers’ District Council. “The Governor’s administration along with labor, industry, and bipartisan legislators compromised under our shared commitment to promote local construction and manufacturing as well as create thousands of family-supporting jobs.”

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.