PA Environment Digest Blog: Senate, House Pass Massive, 20-Year Taxpayer Subsidies For Natural Gas, Hydrogen And Petrochemical Industries In Hours With No Public Accountability Or Environmental Safeguards

On October 26, the Senate Appropriations Committee reported out House Bill 1059 (Hickernell-R-Lancaster) after amending it to provide $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.

The Committee adopted the amendment by a vote of 21 to 3 with Senators Haywood (D-Philadelphia), Kearney (D-Chester) and Saval (D-Philadelphia) opposing. The amended bill was reported out of Committee by the same vote.

House Bill 1059 was passed by the Senate 41 to 8 and the House concurred in Senate changes by a vote of 139 to 59.

The bill now goes to the Governor’s desk.

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.”

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.

Range Resources just announced Tuesday it will be cutting back to one drilling rig in 2023 to keep production flat or only slightly growing and limiting capital expenditures. Read more here.

Reaction

PennFuture President & CEO Patrick McDonnell issued this statement on the Senate action--

"Today, the Pennsylvania Senate voted on $2 billion in new tax breaks for the fossil fuel industry. State lawmakers clearly have not learned from example after example of broken promises.

“More subsidies for the fracking and petrochemical industries will continue to deliver disappointing economic results along with huge environmental risks. Let’s not repeat our mistakes.

"The so-called Economic Development for a Growing Economy (PA EDGE) tax credits would spend billions in tax cuts on projects offering a relatively small number of permanent job opportunities. Meanwhile, these giveaways are a polluter’s dream come true.

“The package does nothing to invest in proven and inexpensive clean energy technologies, nor is it a comprehensive economic strategy for the state. Rather, this is slapdash industrial policy at its worst that will perpetuate Pennsylvania’s addiction to fossil fuels.

"These subsidies will mean a further buildout of pipelines and other infrastructure at a time when the state legislature has failed to address the very real safety and siting concerns raised by affected residents around the state.

“While hydrogen technology may have a role in addressing climate pollution, its production need not come at the expense of Pennsylvania’s environment, climate, or the health of surrounding communities."

Natural Resources Defense Council senior attorney Mark Szybist issued this statement on the tax credit legislation--

“HB 1059 is a deeply flawed bill, chiefly because its new tax credits will provide massive financial support to petrochemical manufacturing and shale gas extraction unconditioned on either pollution limits or protections for communities where supported facilities will be located.

“The bill’s provision to establish a tax credit for clean hydrogen represents a huge missed opportunity for the state to leverage recently enacted federal clean hydrogen programs. Instead, it includes a massive loophole under which a steel or cement plant that might otherwise be subsidized for utilizing clean hydrogen that meets federal standards, could tap a subsidy for shale gas for decades, perversely driving more carbon pollution – not less.

“And adding insult to injury is the process by which HB 1059 was passed – the legislative language was released and voted on in less than twenty-four hours without a single hearing or opportunity for public input. This is a case study in how not to enact a law that’s in the interest of the people of Pennsylvania.”

Shale Gas + 20

The first commercial oil well was drilled in Pennsylvania in 1859. The first oil or gas well hydraulically fracked was in 1963. The first shale gas well was drilled in 2003 and that well was the first shale gas well fracked in 2004.

The vast network of industrial oil and gas facilities spread out on Pennsylvania’s landscape is so big it is difficult to comprehend because we only see one piece at a time.

Like the parable of the blind men and the elephant, we each only see our one part of the creature and cannot imagine, based on our limited experience, what it is that we are seeing and what the collective impact of those facilities are on our lives and the environment.

Serious and fundamental questions have been raised about all aspects of the operations of the oil and gas industry from the well pad to the stove top that have not been resolved based on the most recent 20 years of experience in Pennsylvania.

Serious and fundamental questions have been raised about the industry since the first comprehensive Oil and Gas Act was passed in 1984, but they haven’t been effectively dealt with and people and the environment have suffered.

This industry has been protected by politicians that continue to allow it to literally dump their waste and responsibilities on taxpayers to clean up.

This industry has paid record penalties for environmental violations, it creates brownfields and waste disposal sites everywhere it operates, abandons oil and gas wells as part of their ongoing business model, significant questions have been raised about the health impacts of each part of its operation from the uncontrolled spreading of drilling wastewater on roads to the operations of well pads, pipelines, gas processing facilities and compressor stations.

After the most recent 20 years of unparalleled growth and change in the industry and its massive development across Pennsylvania’s landscape, it is past time to take a hard look at the impact of this huge industry that affects nearly every corner of Pennsylvania and how we can do a much better job of protecting our health and the environment.

This latest attempt by the General Assembly and the Governor to prop up and protect the oil and gas industry with more taxpayer money after they rewarded us with record price spikes is a classic-- Ready - Fire - Aim -- scenario.

We’ve been through this before with the timber industry that denuded our hillsides, the first oil and gas boom where wells were drilled every 100 feet and oil was floated down streams to get to market, the coal industry that stripped our land bare and left our streams orange and mountains of unreclaimed moonscape.

And now an oil and gas industry-- the more sophisticated unconventional shale gas and the uncontrolled and protected conventional industry-- that 20 more years of development has left us with significant problems unaddressed.

Pennsylvania needs to do better…. Much better.

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

NewsClips:

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

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

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

-- 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]

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

-- DEP Issued NOVs To Conventional Oil & Gas Companies For Abandoning 55 Wells Without Plugging Them During September Alone, A Dramatic Increase In New Well Abandonments [PaEN]

-- Creating New Brownfields: Oil & Gas Well Drillers Notified DEP They Are Cleaning Up Soil & Water Contaminated With Chemicals Harmful To Human Health, Aquatic Life At 272 Locations In PA [PaEN]

-- Gov. Wolf, Senate, House Republicans Again Fail To Hold Conventional Oil & Gas Drillers Accountable For Protecting The Environment, Taxpayers On Hook For Billions [PaEN]