A new proposal by Gov. Tom Corbett to give a long-term $1.7 billion state tax break for a planned Marcellus Shale gas petrochemical refinery in southwestern Pennsylvania is a late-emerging issue in the state budget debate.
The tax credit proposal for a $4 billion Shell Oil Co. plant came to light just as Mr. Corbett started negotiations last week with Republican legislative leaders over the final shape of the $27 billion state budget for fiscal 2012-13.
Lawmakers are pressing for more details about the proposal while at least two policy groups have criticized it as a corporate giveaway during a time when state aid to schools and human services is being cut.
Shell signed a land-option agreement in March to build a “cracker” plant in Beaver County to convert ethane, a byproduct of natural gas production, into chemicals to make a range of plastic products. This announcement came after Shell considered sites in Pennsylvania, Ohio and West Virginia that are in the Marcellus Shale formation.
Mr. Corbett said the Shell plant, if built, would be the largest industrial investment in the southwest region in a generation. A study by the American Chemistry Council, an industry trade group, estimates the plant would be the catalyst for thousands of new jobs in the chemical industry. The administration wants to offer a Pennsylvania Resource Manufacturing Tax Credit starting in 2017 to promote the use of ethane, said state Revenue Secretary Dan Meuser, who is involved in the Shell negotiations.
The tax credit would be capped at $66 million a year and go initially to the Shell cracker plant. The cracker plant won’t be eligible for the tax credit until it produces a threshold of 85,000 barrels of ethane daily, said Mr. Meuser.