How Gov. Corbett's tax credits for Shell, ethane would work

After I posted referencing Peter DeCoursey's Capitolwire story about Gov. Corbett's "secret" tax break proposal for Shell's planned Pittsburgh-area ethane plant, I heard back from Corbett's office through Steve Kratz, spokesman for the Department of Community and Economic Development.

Yes, Gov. Corbett is recommending a proposed tax credit for ethane, the natural gas by-product used for plastics manufacturing, which Shell plans to collect and process in the new plant, says Kratz. And not just for Shell, but for a whole new ethane-based plastics industry:

"The commonwealth has a tremendous opportunity to produce and use ethane to build a brand new industry," Kratz told me. As Corbett administration officials have previously suggested, it "could create up to 20,000 jobs." Not just at Shell's planned Monaca works, but at other plants using ethane-based products in plastics-making, "including spin-offs."

So what's the governor's sweetener to get those jobs to PA? "The tax credit would be 5 cents a gallon, limited to 20 percent of the taxpayers’ qualified Pennsylvania tax liabilities." Not immediately clear whether those tax liabilities are calculated before or after Shell's Keystone Opportunity Zone tax breaks, which typically enable fortunately-located employers to avoid paying sales and property and other business taxes.

Can Shell or another ethane tax credit beneficiary sell the tax credits to other taxpayers? "Within one year a business could apply to DCED for the approval to assign eligible credits to another taxpayer. The rights can only be assigned once (and) can only be assigned for up to 50 pct of the purchaser's Pennsylvania tax liability."

So who gets these credits? "Anyone who buys ethane (in PA) including upstream suppliers selling to a manufacturer and downstream manufacturers purchasing ethane derivatives." 

When would this kick in? "Starting in 2017," the year Shell's plant is supposed to open. "An applicant would have to apply on an annual basis, based on tax liability, and whether they qualify."

How much ethane per year would qualify for this tax incentive? "It's hard to speculate." The state doesn't have estimates? "I'll get back [to] you."

Bottom line, for Gov. Corbett, says Kratz: "The main purpose for this tax credit is to make sure the ethane that is produced in Pennsylvania is staying in Pennsylvania and would be used in Pennsylvania. Otherwise it could be pipelined to the Gulf Coast and other areas where there is a robust petrochemical industry set up." The incentive should help keep the gas home, and produce more permanent industrial jobs, the governor says.