PA Environment Digest Blog: Gov. Wolf Signs Massive, 20-Year Taxpayer Subsidies Into Law For Natural Gas, Hydrogen And Petrochemical Industries With No Public Accountability Or Environmental Safeguards

On November 3, Gov. Wolf signed into law House Bill 1059 (Hickernell-R-Lancaster) that provides $106.6 million in annual taxpayer subsidies to manufacturing and other businesses that use natural gas and hydrogen in their operations for at least 20 years.

The bill also more than doubles the tax credit for using natural gas to make petrochemicals or fertilizer from natural gas.

Over the next 20 years, taxpayer subsidies for these industries will cost over $2.1 billion and that’s on top of the $1.5 billion taxpayer subsidies the General Assembly previously adopted for just one plant-- the Shell Ethane Refinery in Beaver County.

Called the Pennsylvania Economic Development For A Growing Economy (PA Edge) Tax Credits, the amendment would provide--

-- $50 million annually for using natural gas or “clean hydrogen” as defined by the U.S. Department of Energy in manufacturing for a 20 year period beginning January 1, 2024 to December 31, 2043;

-- Increase the current tax credit for using natural gas to make petrochemicals or fertilizer from $26,666,668 to $56,666,668 annually, with no end date;

-- $20 million in tax credits annually to support semiconductor & biomedical manufacturing, with no end date; and

-- $15 million in tax credits annually to support milk processing facilities, with no end date.

Click Here for the Senate Fiscal Note and Summary.

Governor Explains His Action

Gov. Wolf took the unusual step of explaining why he signed House Bill 1059 into law in a letter to the General Assembly.

Wolf said “In its most recent report, the Intergovernmental Panel on Climate Changes notes that ‘hydrogen is a promising energy carrier for a decarbonized world,’ and highlights hydrogen’s potential to ‘provide low-carbon heat for industrial process or be utilized for direct reduction of iron ore.’”

“That said, I recognize that in order for hydrogen to play a meaningful role in reducing emissions, we must ensure that the hydrogen used is truly ‘clean’ through stringent emissions standards. We must also commit to strong and equitable community protections to prevent impacts to already overburdened communities and to guide benefits to communities that need them. Each of these imperatives is addressed in HB 1059.”

“Relatedly, Subarticle D also authorizes a tax credit based on the use of natural gas. This provision was included as a short-term fail-safe in the event that a manufacturing facility is constructed and clean hydrogen is not initially available.

“While I do not believe that it would be possible for a project facility that has been funded as part of a DOE [U.S. Department of Energy] regional clean hydrogen hub to utilize natural gas instead of hydrogen for a significant duration of time, the bill requires a company applying for the credit to sign a commitment letter stating the date by which it will begin to purchase clean hydrogen.

“It is my expectation that this period of time would not exceed a year or two.”

Click Here for a copy of the letter.

Subsidies Without Accountability

As the Tribune Review, Republican Herald and the Citizens Voice newspapers recently editorialized after yet another major penalty was assessed for violations at a natural gas facility-- state lawmakers should adopt rules that preclude state taxpayers from subsidizing pollution from the oil and gas industry.

The Tribune Review said-- “The Shell refinery in Beaver County that is connected to gas-processing plants by the pipeline comes with $1.5 billion in state tax incentives.

“Shell isn’t alone. Pennsylvania loves to hand over tax breaks to encourage businesses to move in, build new or expand.

“But why not marry DEP’s diligence to something with a little more bite when it comes to a business functioning on the state’s dime?

“Why not treat corporate welfare recipients more like people who get public money?” Read more here.

The Republican Herald said--“Remarkably, while suing the pipeline for environmental violations, the state government also heavily subsidizes the Shell refinery with $1.7 billion in tax credits.

“Since first awarding the credits a decade ago, the Legislature has gone all in on such subsidies, awarding them for similar but smaller projects around the state, including for a pipeline in Schuylkill County.

“None of those subsidies are contingent upon environmental compliance. So, for example, the Shell petrochemical refinery’s subsidies aren’t affected by the related pipeline’s fine, which amounts to a miniscule fraction of the public subsidy.

“Lawmakers should adopt rules that preclude state taxpayers from having to subsidize pollution.”

The York Dispatch added their editorial voice this week saying energy companies are reporting record profits, they don’t need more tax breaks.

Propping Up Uncompetitive Natural Gas

It seems clear the tax credits are also an attempt to try to make natural gas competitive again through taxpayers subsidies after U.S. and Pennsylvania natural gas prices have increased dramatically as a result of their link to world energy markets.

As national business media have reported, natural gas drillers have been focused on keeping natural gas prices high to reward their investors with significant profits. Read more here.

Reaction

Joseph Otis Minott, Esq., Executive Director and Chief Counsel of Clean Air Council, issued the following statement: “We knew HB1059 would become law once it was presented to Gov. Wolf. His administration directly negotiated this package and aggressively pushed for it to be rushed through during the last week of legislative session in Harrisburg.

"Even so, Clean Air Council remains deeply disappointed and alarmed. The text of this bill was publicly available for less than 12 hours before passing through both chambers in the General Assembly. There’s a reason this was negotiated in the dark.

“Investing an additional $30 million on methane subsidies every single year through 2050 to support a petrochemical refinery boondoggle in Luzerne County is awful policy for state taxpayers and our climate.

“And the $1 billion investment in manufacturing facilities that burn methane inside a potential Hydrogen Hub has the potential to drive more methane and carbon pollution.

“The bill doesn’t even define “clean hydrogen” in a manner consistent with the U.S. Department of Energy’s proposed Clean Hydrogen Production Standard, but rather as any hydrogen that “demonstrably aids achievement” of that standard, a massive loophole.

“Pennsylvania must join the rest of the country in an all-out mobilization to confront the climate crisis, and billions in additional fossil fuel subsidies are simply unacceptable. The next administration needs to internalize this message and embrace a different path.”

(Photos: Be ready for the development of much more natural gas infrastructure across Pennsylvania, courtesy of Bob Donnan.)

NewsClips - Don’t Subsidize Natural Gas Pollution:

-- Republican Herald Editorial: State Lawmakers Should Adopt Rules That Preclude State Taxpayers From Subsidizing Pollution From Oil & Gas Industry [PaEN]

-- York Dispatch Editorial: Energy Companies Are Reporting Record Profits, PA Lawmakers Don’t Need To Give Them More Tax Breaks [PaEN]

-- Citizens Voice Editorial: Subsidizing Pollution - Taxpayers Pay $1.7 Billion To Subsidize Shell Ethane Plant In Beaver County

-- TribLive Editorial: State Fines Should Be Higher Than Tax Cuts To Penalize Environmental Leaks [PaEN]

-- Scranton Times/Republican Herald Editorial: Legislators Like Plastics, Expect More [PaEN]

-- Republican Herald Editorial: Dangerous Course For Oil & Gas Well Emissions, Obstructionists Should Get Out Of The Way [PaEN]

-- Citizens Voice Editorial: State Insists On Paying Polluters [PaEN]

-- PennLive Guest Essay: Tax Credit Bill Gifts Natural Gas, Dirty Hydrogen With $4 Billion In Taxpayer Subsidies - By Patrick McDonnell, PennFuture

Related Articles - Natural Gas Prices Spike:

-- TribLive: Homeowners Brace For Winter As Prices To Heat Homes Skyrocket, Biggest Spike Is For Natural Gas - More Than 34% Increase