A Marcellus shale gas-drilling site along PA Route 87, Lycoming County. Nicholas A. Tonelli | Flickr Commons
Moderate Republicans in the state House have put the brakes on a top priority for Speaker Mike Turzai — a plan encouraging natural gas development in Pennsylvania.
The proposal, “Energize PA,” would also streamline the regulatory process by imposing a 30-day timeline for all approvals and create a new state commission to handle permitting.
The sprawling, seven bill package also includes financial incentives, like an already passed multi-million dollar tax credit for industries that use methane.
Turzai and his allies say it would increase the use of natural gas for manufacturing in Pennsylvania, spurring jobs and prosperity.
But the plan has also raised concerns from Democrats and — critically — vulnerable southeastern Republicans, who have balked at what they term an environmentally unfriendly overhaul.
These lawmakers’ continued opposition has prevented the House GOP from passing the bills in the first weeks of work after summer recess.
What has the House passed?
House Republicans released the plan in April. During the introductory press conference, Turzai cited a McKinsey study, funded by state business interests, which claimed that a natural gas-fueled state economy could increase the state’s GDP by $60 billion, add 100,000 new jobs, and create billions in tax dollars for the state government.
The plan was further trumpeted at a Capitol press conference on Sept. 18 as the House reconvened.
“Pennsylvania is moving in the right direction. We’re growing and improving,” House Majority Leader Bryan Cutler, R-Lancaster, said at that recent press conference.
He said the plan would further encourage job growth at a time when the state’s unemployment rate is already below 4 percent.
“Energize PA is another step in that process,” Cutler added.
The proposal has the support of the natural gas industry and its principal trade group, the Pittsburgh-based Marcellus Shale Coalition, as well as other pro-business groups and some building trade unions.
Four of the plan’s proposals have advanced, including:
- A $26.5 million tax credit — based on Department of Revenue estimates — for any plant that processes methane gas into industrial products. The facility must cost $1 billion to build and create 1,000 jobs during construction. It passed the House last week.
- Creating a consolidated permit for companies that clean up brownfield sites. This bill passed the House in June and is now in the Senate.
- Expanding a grant program for pipelines to bring natural gas into businesses. This was enacted as part of the 2019-20 budget.
- Listing brownfield sites that could be reused for new industrial development on a government website. It passed the House with near-unanimous support.
The tax credit, now before the Senate, would provide a 5 cent-per-gallon subsidy on methane for the “production of ammonia, urea, and methanol, up to a total of 20 percent of the manufacturers’ tax liabilities.” The credit could also be transferred to another entity.
It is identical to a tax credit created to spur the construction of Shell’s Beaver County petrochemical plant, which will create plastic from ethane when it’s operational.
Rep. Aaron Kaufer, R-Luzerne, said the proposed credits are an opportunity for the northeastern part of the state to cash in on the shale boom. The region’s gas is different from western Pennsylvania gas, and lends itself less to plastic production and more to fertilizers and similar products.
“Right now, we aren’t attracting these businesses,” Kaufer said. “The money pays for itself. We’re not losing money on this.”
Kaufer added he’s already heard interest from multiple companies who, armed with the tax credit, would move into Pennsylvania.
According to Revenue department spokesperson Jeffrey Johnson, the lost tax revenue for each plant over a 40 year life would be more than a $1 billion.
But despite the price tag, the credit won the votes of fiscally conservative Republicans, such as Rep. Jason Ortitay, R-Washington.
“It’s not my preferred method of doing business. I’m a free market guy,” Ortitay told the Capital-Star.
But, much like the dozens of Democrats who also backed the bill — including northeastern Pennsylvania’s House delegation — Ortitay was won over by the potential to put a major investment into a struggling region and spark economic growth.
Speaking at that Sept. 18 press conference, Turzai said he expected some bipartisan support for the plan.
“I do think that there are many members on the other side of the aisle that think very similar to us on this issue,” he said. “We think that the use of natural gas is actually environmentally friendly and provides a really significant opportunity for the citizens of Pennsylvania on so many fronts.”
The bill passed 139-46 — but not without some sharp words.
“Here we are with another massive spending bill outside the budget to help big business pay less taxes,” Rep. Mary Jo Daley, D-Montgomery, said during floor debate.
The GOP plan has been assailed by environmentalists as an unnecessary reduction in industry oversight.
A letter signed by more than 50 environmental groups called the House GOP plan “an effort to double down on nearly a decade of preferential policy support for the natural gas industry” and an attempt to “lock-in gas and petrochemical infrastructure.”
The legislation, the letter adds, rolls back “critical protections,” subsidizes “polluting industries,” and weakens the permitting process.
Here’s what the three bills that have not passed the House would do:
- Create a new board tasked with furthering the use of natural gas. The board, made up of legislative appointees, would also have the authority to designate a 10-year local tax abatement in zones to construct natural gas infrastructure, if municipal governments agree to, among other things, ease the “local regulatory burden.” Rep. Joshua Kail, R-Beaver, is the sponsor.
- Institute a mandatory 30-day approval timeline for all permit applications to the state Department of Environmental Protection (DEP). Applications not reviewed within 30 days would be automatically approved. Rep. Mike Puskaric, R-Allegheny, is the sponsor.
- Create a new permitting commission. The bill would strip the DEP of its permitting duties, and give them to a five-member commission of gubernatorial appointees approved by the Senate. Current DEP permitting staff would not be transferred to the commission, but the department’s permitting funding would be. The commission has discretion to process and approve permits however it wishes. Rep. Tim O’Neal, R-Washington, is the sponsor.
The stern opposition from environmentalists has led to flagging support from moderate Republicans, especially from the Philadelphia suburbs.
“I think [environmental votes] have always been difficult for the southeast,” Rep. Gene DiGirolamo, R-Bucks, told the Capital-Star.
Legislative Republicans have consistently complained about the pace of DEP permitting, which can run over by weeks if not months.
Environmentally minded lawmakers have replied with calls for more funding to address the problem and say incomplete permits from applicants leads to delays.
In committee, House Republicans argued that a big shake-up is needed. They pointed to a recent study of two DEP permitting programs by the Legislative Budget and Finance Committee that found no relationship between increased funding and permit output.
But other environmental groups, such as the Sierra Club, said creating a permitting commission separate from the DEP could have unintended consequences.
Because the DEP meets federal permitting requirements, the department gets “millions of federal dollars coming to Pennsylvania for the administration of these programs,” a Sierra Club letter opposing the package reads.
If the new commission does not meet federal standards, the funding could be lost. O’Neal, the Washington County Republican, doesn’t believe the bill would cost Pennsylvania federal dollars.
David Hess, a former DEP secretary under GOP Gov. Tom Ridge, also pointed out in a blog post that without taking on trained DEP staff, setting up a new commission would stop all current permit processing in its tracks.
“These bills are a political statement and aren’t to be taken seriously,” Hess wrote.
While none of the regulatory bills passed this week, the House did revote and pass a bill that failed earlier this year to create an “Office of the Repealer,” which can suggest future regulation cuts. The bill also requires the state to eliminate two regulations for every one enacted.
The plan makes no mention of climate change or carbon emissions.
The House GOP has signaled they’ll continue trying to win over wavering Republicans to the package before the chamber reconvenes in October.
It’s not clear if extra time will actually help.
“Now you have a whole month to beat them up,” one GOP House lawmaker joked. He then added: “Or lose their votes.”
But even if all the proposals pass the House, the next steps are foggy.
Leadership in the GOP-controlled Senate has yet to say if they’ll take up the bills that eventually come over from the House.
Senate Environmental Resources and Energy Committee Chairman Gene Yaw, R-Lycoming, told the Capital-Star that the chamber was already “swamped with all kinds of things.” He had yet to discuss the House package.
And Gov. Tom Wolf has “serious concerns,” spokesperson J.J. Abbott said.
Abbott said the bills “dismantle DEP’s oversight authority and weaken environmental protection,” adding that Wolf “opposes creating a massive open-ended tax incentive program without being able to evaluate projects on a case-by-case basis.”
“Governor Wolf believes the legislature should first ensure the oil and gas industry is paying its fair share before providing more taxpayer-funded incentives to the industry,” Abbott said.
Capital-Star Editor John L. Micek contributed reporting.
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