PA Environment Digest Blog: PA Taxpayers To Give $130.9 Million In Tax Credits To Subsidize Shell Petrochemical Plant In Beaver County; Total Expected To Be $1.17 Billion Thru 2042; No Regard For Environmental Compliance Record

So far, the Shell Petrochemical Plant in Beaver County is scheduled to receive a total of $130.9 million in tax subsidies from the PA Resource Manufacturing Tax Credit, according to the Governor’s FY 2024-25 Budget proposal. [page D-6]

The Big Budget Book says in FY 2022-23 Shell received $5 million in tax subsidies; in FY 2023-24 Shell will get $60.9 million; and in FY 2024-25 Shell will get another $65 million-- the maximum amount available by law.

The Budget Book also anticipates Shell will receive the maximum $65 million annually for the foreseeable future.

State law authorizes the tax credit for the next 16 years through December 31, 2042 when the tax credit expires. If Shell continues to qualify, it will receive a total of $1.17 billion in taxpayer subsidies.

The Shell Petrochemical Plant is the only facility that has qualified for this tax credit.

Summary Of Tax Credit

The PA Resource Manufacturing Tax Credit was originally established by Act 85 of 2012 and is available to business entities purchasing ethane for use in manufacturing ethylene at a facility in the Commonwealth that has made a capital investment of at least $1 billion and created at least 2,500 full-time equivalent jobs during the construction phase.

[Note: A PA Senate Republican fact sheet on the Shell Petrochemical Plant estimated construction costs at $4 billion. Recently, the CEO of Shell said the plant cost $14 billion to build and would not be fully operational until 2025 or 2026. Read more here.]

The PRM tax credit is equal to $0.05 per gallon of ethane purchased ($2.10/barrel) for the period from January 1, 2017 to December 31, 2042.

The credit may be used to offset a taxpayer’s liabilities for Personal Income tax, Corporate Net Income Tax, Capital Stock and Foreign Franchise Tax, Bank Shares Tax, Title insurance Company Shares Tax, Insurance Premiums Tax, and Mutual Thrift Institutions Tax.

A taxpayer may use this credit to reduce their tax liability by a maximum of 20 percent for any tax year in which it is awarded.

Within one year after the PRM credit is approved, a taxpayer can apply to DCED for approval to assign or sell eligible credits to another taxpayer.

The eligible buyer of the credit may use the purchased credits to offset up to 50 percent of its Pennsylvania tax liabilities. The credit can be assigned to related entities.

Click Here for a Department of Revenue fact sheet.

No Environmental Compliance Requirement

The PA Resource Manufacturing Tax Credit is awarded without regard to whether a facility receiving the tax credit is complying with the state’s environmental laws and regulations.

So far, the Department of Environmental Protection has imposed penalties totalling over $10.6 million on the Shell Petrochemical Plant and associated pipeline for repeated air pollution and construction violations.

On May 24, 2023, DEP entered into a consent order and agreement with Shell Chemicals Appalachia, LLC, in which Shell formally acknowledged that the company exceeded total emission limitations for air contaminants, agreed to make repairs to reduce future exceedances, and agreed to pay nearly $10 million to DEP and the local community. Read more here.

Under the COA, Shell will pay a civil penalty of $4,935,023 – and as required by Act 57 of 2011, 25 percent of this penalty will be directed to local communities.

Additionally, Shell will spend another $5 million for environmental projects to benefit the local communities.

In total, communities in Western Pennsylvania will directly receive $6.2 million for projects to benefit the environment, heath, and quality of life of the community near the facility because of the COA.

Shell will also pay additional monthly civil penalties for the rest of 2023 for any further exceedances. DEP has not released any information on these follow-up penalties, even though violations have continued. Read more here.

Visit DEP’s Shell Petrochemical Complex webpage for more information on reports and actions taken related to the plant.

On October 13, 2022, DEP announced it executed a $670,000 consent assessment of civil penalty with Shell Pipeline Company LP and its contractor, Minnesota Limited LLC, for violations of its permit and Pennsylvania laws and regulations that occurred in 2019 and 2020 during construction of the company’s Falcon pipeline project. Read more here.

Visit DEP’s Shell Falcon Ethane Pipeline webpage for more information.

Reaction

Matt Walker, Advocacy Director for the Clean Air Council, said, "Pennsylvania taxpayers should not continue to subsidize Shell’s petrochemical plant to make plastics from fossil gas byproducts, and repeatedly violate air quality rules. Elected officials must put an end to subsidizing this environmental rulebreaker.”

Tax Credits Gone Wrong

This isn’t the first time a Pennsylvania tax credit has gone wrong. Take for example when a $5.7 million in taxpayer Film Development Tax Credits were awarded to make the movie Zack and Miri Make A Porno. Read more here.

NewsClips:

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

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

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

-- Citizens Voice Editorial: State Insists On Paying Polluters

-- Post-Gazette - Anya Litvak: Shell’s Rocky First Year Of Commercial Operations In Beaver County

-- Marcellus Drilling News: Shell CEO Says PA Cracker Plant Not Fully Online Until 2025/26, Cost $14 Billion

-- Pittsburgh Business Times: Shell Plant’s Costs Much Higher Than Previously Disclosed

-- Beaver County Times: Shell CEO Puts Beaver County Petrochemical Plant Price Tag At $14 Billion

-- Institute for Energy Economics And Financial Analysis: Shell Acknowledges $14 Billion Price Tag For Petrochemical Plant, More Than Double Street Estimates

-- Ohio River Valley Institute: Pennsylvania’s Bad Bet On Shell Petrochemical Plant