Shell Tax Breaks Would Pay Off For Pennsylvania

Julia Hearthway
Philadelphia Inquirer

Shell Oil Co. is considering a Western Pennsylvania site for a $4 billion ethane cracking plant that could spin off thousands of jobs. Similar plants have gone up along the Gulf Coast, where the petrochemical infrastructure already existed. Here, we would be largely starting from scratch.

Pennsylvania’s sole advantage is its vast reservoir of natural gas. The gas contains ethane, which can be processed into ethylene, a building block of a wide range of products, from running shoes to pharmaceuticals.

Because of competition from other states, the Corbett administration has proposed a series of tax credits to entice Shell to build the plant in Beaver County. It is not unusual for the state to offer such incentives.

Unfortunately, though, several myths about the Shell credits could imperil the biggest economic development project in the Pittsburgh area since the days of steel. These myths include:

The state is giving Shell $1.65 billion to locate here. The state is not handing any money to Shell. It’s letting Shell keep more of its money with a tax credit on ethane processed and resold here. This is to encourage Shell to invest in the region and to guarantee that the gas processed here is used here, which could attract still more industry.

The state already has little money for schools, welfare, etc. The tax credit wouldn’t go into effect for five years, so denying it wouldn’t add a cent to the state budget this year or next. What it would do is send the plant to another state. Furthermore, the sales and income taxes the plant would generate would more than offset the credits.

Ordinary working people won’t support such a tax credit. Last week, the Governor’s Office received a copy of a letter sent to Philadelphia newspapers from United Steelworkers officials, saying, “The tax credits paid to Shell will come back in the form of good-paying jobs. … We need to look past the election-year rhetoric and realize that the issue here is not tax credits. The issue is jobs.”

The plant won’t employ more than a few hundred people. When up and running, the Shell cracker will employ around 400 people. In addition, up to 20,000 indirect and induced jobs are projected in engineering, research, restaurants, retail, and more.

There’s nothing in this deal for the rest of Pennsylvania. More money for workers means more business across the state, and more revenue in the treasury means more services for everyone. As the union leaders said, “overseas shipments will certainly need to go through the Port of Philadelphia, creating even more good-paying union jobs.”

Pennsylvanians should support this opportunity to reestablish a sector of the economy many feared was lost forever. Manufacturing can return if we open the door to it.

Julia Hearthway is Pennsylvania’s secretary of labor and industry.

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