Gov. Wolf signs petrochemical tax incentive bill

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A bill that will grease the skids for the fledgling petrochemical industry in northeast Pennsylvania was signed into law Thursday by Gov. Tom Wolf.

The Local Resource Manufacturing Tax Credit legislation, House Bill 732, establishes tax credits for new petrochemical plants envisioned for the Marcellus Shale formation, which will supply natural gas to be converted into feedstocks that will be used to produce fertilizers, plastics and other materials used in other new factories that the measure’s boosters anticipate will quickly sprout.

The ultimate goal is to both bring new manufacturing to Pennsylvania and to create a new market for the state’s ample natural gas reserves.

“The Local Resource Manufacturing Tax Credit helps make Pennsylvania more attractive and allows us to be competitive with other states in gaining long-term manufacturing industry investment,” House Majority Leader Kerry Benninghoff (R-Centre/Mifflin) said in a statement. “Enacting this bill will truly help all Pennsylvanians.”

Benninghoff cited estimates that the strategy would result in around 4,400 new jobs at four new plants and an economic shot in the arm of more than $1.6 billion. “Additional investment in the commonwealth because of our homegrown energy resources will be a critical factor in jump-starting our economy,” he said.

Under the terms of the bill, companies would be eligible for tax credits only if they agree to invest a minimum of $400 million in a project, hire at least 800 Pennsylvania workers, and pay prevailing wage and benefits to all construction trade workers. The new plants would also be required to use carbon capture and sequestration technologies to minimize their impact on the climate.

David Taylor, president & CEO of the Pennsylvania Manufacturers’ Association, said the petrochemical push had the potential to “establish an entirely new manufacturing sector in Pennsylvania” that will create high-value jobs and additional investments that will accelerate the state’s economic recovery.

“Attracting and retaining natural gas synthesis manufacturing should be a priority of policymakers at the state and federal level to ensure this prosperity occurs in our commonwealth as opposed to a competitor state or country,” Taylor said. “These types of investments drive long-term and sustained tax revenue with exponential growth, as additional downstream companies and associated industries cluster to create a manufacturing hub.”

Sen. John Yudichak (I-Luzerne) noted the legislation united Republicans, Democrats, and Independents around the concept of leveraging the state’s abundant natural resources to attract manufacturing industries that will create thousands of new jobs in northeastern Pennsylvania.

“In the last decade, the natural gas industry created over 300,000 new jobs while at the same time, it cut CO2 emissions by 30 percent and methane emissions by 40 percent. We can create good energy jobs and protect the environment,” said Yudichak, who offered the amendment to HB-732 that established the Local Resource Manufacturing Tax Credit.

The industry has already taken note of the allure of setting-up production in an area with plenty of nearby gas and proximity to river and rail transportation. The Pennsylvania Petrochemical Complex being built by Shell along the Ohio River in Beaver County will turn ethane from natural gas into approximately 1.6 million metric tons of polyethylene plastic annually. In eastern Ohio, PTTGC America this month finalized an agreement with a subsidiary of Mountaineer NGL Storage to develop underground storage for up to 3 million barrels of natural gas liquids in Monroe County for use by a PTTGC petrochemical complex proposed for a site eight miles north in Dilles Bottom.

The prospects for the global petrochemical industry have been bullish lately. The world’s global oil majors have reportedly been seeing petrochemicals as a viable business alternative as projected demand for refined oil fuels in the years to come looks sluggish. BP announced in late June it had agreed to sell its global petrochemical portfolio of 15 plants, including five in Texas and South Carolina, to Britain’s Ineos Ltd for $5 billion.