Revised Petrochemical Tax Break Approved by PA Legislature

Months after Gov. Tom Wolf vetoed a bill incentivizing petrochemical companies to open up shop in the Commonwealth, a new bill with similar plans has passed in the state Senate and House of Representatives, this time with the governor’s support.

The new bill, HB 732, directly addresses the concerns raised by Wolf about the former bill he vetoed. It maintains the intent of the previous bill, HB 1100, and was drafted based on 2012 legislation, the "Resource Manufacturing Tax Credit," that was used to help attract Royal Dutch Shell to build its ethane cracker plant in Beaver County. However, there are marked changes between the two bills.

HB 1100 drew criticism from environmental groups for furthering the buildout of fossil fuel-intensive industries, such as petrochemicals, in the Commonwealth, and failing to extend those incentives to industries that promote renewable energy. However, the nature of the industry was not what led to its veto, as in his response, Wolf noted that “the petrochemical and natural gas industries play an important part in Pennsylvania’s energy-efficient and energy-sustainable future.”

Rather, the governor urged the legislature to cut the total value of tax credits available and to tighten mechanisms that would ensure that those employed by the company receiving the tax credit would be paid the prevailing wage.

With that information, both chambers of the Pennsylvania General Assembly passed HB 732. While largely the same as HB 1100, it differs in these ways:

· HB 1100 required a $450 million investment by the company seeking the tax credit, HB 732 requires a $400 million investment,

· HB 1100 provided a 47-cent tax credit per 1,000 cubic feet of natural gas purchased for use in the facility up to 20 percent of annual tax liability, HB 732 caps total credits to $26.7 million per year, and would allow for a maximum of four companies to take part in the program,

· Both HB 1100 and HB 732 mandate the creation of no less than 800 construction and permanent jobs, and,

· Both HB 1100 and HB 732 would restrict recipients to the fertilizer and petrochemical industries.

The bill may provide some hope for the future of petrochemicals in Pennsylvania, as the industry has remained largely stagnant since the beginning of the pandemic. In a statement published in the Pittsburgh Post-Gazette, Denise Brinley, head of the PA Office of Energy, noted that before the pandemic, the state was in the “opportunity phase where companies were scouting and looking for sites” in the region. Now, according to Brinley, “that has changed…we’re not expecting the same level of interest.”