Pa. Lawmakers send natural gas tax credit for Wolf, who’s promised veto

By: and - February 4, 2020 6:03 pm

Rep. Aaron Kaufer, R-Luzerne, and sponsor of the methane tax credit (Capital-Star photo).

*This story was updated on Tuesday night to correct an erroneous estimate for the cost of the tax credit and include a new cost estimate from the Department of Revenue. It was also updated with more information about Energize PA legislation

Setting the stage for a gubernatorial veto and potential override showdown, state lawmakers have approved a multi-million dollar tax credit designed to bring methane processing plants to northeastern Pennsylvania. 

The majority-Republican Senate split 39-11 Tuesday on the measure sponsored by Rep. Aaron Kaufer, R-Luzerne, that offers millions of dollars in tax credit to businesses that use Pennsylvania natural gas to produce fertilizer and petrochemicals.

The Republican-controlled House passed it hours later on a final vote of 157-35, before sending it to Wolf’s desk. The measure received broad bipartisan support in both chambers.

A spokesman for Gov. Tom Wolf told the Capital-Star that the York County Democrat would veto the bill, which faces fierce opposition from environmental advocates. 

But the General Assembly can override gubernatorial vetoes with two-thirds majority votes in the House and Senate.

Both chambers passed that threshold with their votes Tuesday.

The bill initially called for businesses to spend $1 billion and create 1,000 jobs to qualify for the tax credits. But an amendment the Senate approved Monday lowered the required capital investment to $450 million and the job creation requirement to 800 positions.

The change also requires tax credit recipients to pay workers the prevailing wage and to make “a good faith effort” to hire local firms for construction. 

According to the Department of Revenue, the amended tax credit program will cost approximately $22 million per plant per year. Its estimated cost for the original bill was $1 billion over the lifespan of each plant receiving the tax credit.

Sen. John Yudichak, I-Luzerne, said the amended requirements better reflects the size and scale of methane plant projects, and will allow more businesses to apply for the tax credits.

At least one company, Connecticut-based Elis Energy, has said it’s interested in using the tax credit to set up a methanol plant in northeastern Pennsylvania, according to a letter shown to the Capital-Star Tuesday.

The company could not be reached for comment on Tuesday.

As the Capital-Star reported in September, the incentive mirrors a tax credit that spurred the construction of a petrochemical plant in Beaver County, which will create plastic pellets from ethane.

“Just like what’s happening out west, it’s only an incentive if those individuals locate here and provide a certain number of jobs,” House Majority Leader Bryan Cutler, R-Lancaster, said. “It’s structured the same way and we expect the same success.”

One key difference is that the Beaver County project has enjoyed vocal support from Wolf, who touted it as an economic boon to southwest Pennsylvania.

Yudichak hopes the governor will see the same potential for the petrochemical industry in the northeast. The region is expected to lose millions of dollars in economic activity this year due to Wolf’s decision to shutter a state prison and a state center for intellectually disabled adults.  

“I hope the governor steps back from the rhetoric and recognizes the impact of the Shell plant that he touts as an economic win,” Yudichak told the Capital-Star, adding, “This project would be a big economic win for northeastern Pennsylvania.”

“A bad day for the environment”

Kaufer’s bill is the second component of the Republican-sponsored Energize PA package to reach the Governor’s desk. A grant program for pipelines into businesses was included in last year’s budget. 

Designed to stimulate the state’s natural gas industry, the package backed by House Speaker Mike Turzai, R-Allegheny, drew quick criticisms from environmentalists, conservationists and other groups that want Pennsylvania to wean itself from the fossil fuel economy as the planet inches closer to unsustainable warming levels caused by carbon emissions.

The House GOP wants to ‘Energize PA.’ Environmentalists say ‘no thanks’

Those groups amplified their criticisms of Kaufer’s bill last week, when it cleared a key committee hurdle in the Senate and was scheduled for a floor vote in the upper chamber. 

Matthew Stepp, chief of staff and vice president of the conservation non-profit PennFuture, called the bill “a head-shaking handout to the fossil fuel industry using hard-earned taxpayer dollars.”

“If enacted, this dangerous legislation will offer subsidies to the same companies behind exploding pipelines, toxic methane leaks, and polluted water,” said Stepp, who called on Wolf to veto it. “The subsidies would do nothing more than enrich stockholders and well-heeled executives at the expense of environmental degradation and boom-and-bust economic development.”

Katie Blume, political director for Conservation Voters PA, added that the credit’s passage was “a bad day for the environment” and referenced health problems in Louisiana from the state’s petrochemical industry.

“I hope that one day, the environmental community and trade unions can come together on things that benefit both of us,” Blume added.

But Kaufer waved away the concerns, saying that Louisiana’s pollution “was an anomaly.”

“When you have the support of local labor, people here, those are local people working in the community, these are people who live in the community,” Kaufer said.

“We can do this safely and make sure we do this without any of those concerns,” he added.

Tax credits like the one created in Kaufer’s bill don’t carry a direct cost to the commonwealth —  but Pennsylvania does sacrifice tax revenue with each credit it grants. 

The incentives are popular among Democratic and Republican lawmakers alike, who say they encourage businesses to plant roots and create jobs in Pennsylvania. 

“Right now, we aren’t attracting these businesses,” Kaufer told the Capital-Star last year. “The money pays for itself. We’re not losing money on this.”

Critics, on the other hand, say the benefits of the tax credits are hard to quantify, or don’t deliver sufficient financial returns to the state.

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Elizabeth Hardison
Elizabeth Hardison

Elizabeth Hardison covered education policy, election administration, criminal justice and legislative news for the Capital-Star from Jan. 2019-April 2021. You can find her on Twitter @ElizHardison.

Stephen Caruso
Stephen Caruso

Stephen Caruso is a former senior reporter with Pennsylvania Capital-Star. Before working with the Capital-Star he covered Pennsylvania state government for The PLS Reporter.