Shell oil stands to gain two billion in tax incentives to build a 400-job plant near Pittsburgh

Shell Oil Co., a child of Royal Dutch Shell – the latter reportedly the largest oil company in Europe and second largest company in the world – is thinking about building an ethane cracker plant in Monaca Borough, Beaver County, 30-some miles northwest of Pittsburgh, Pa.

The proposed plant would be used to “crack” ethane from natural gas derived from wells drilled into the Marcellus Shale in the southwestern region of the state. The cracking process results in ethylene, used mostly in making plastics.

The plant will benefit from Act 16 of 2012,  a bill the Pa. General Assembly adopted to exempt the giant firm from paying state income and property taxes for 15 years.

To sweeten the deal, Gov. Tom Corbett has proposed a $1.65 billion Resource Manufacturing Tax Credit for the company, to be spread over 25 years.

The Pennsylvania Budget and Policy Center, a nonpartisan, statewide policy research project, has estimated the plant will create about 400 permanent jobs. In a report published June 8, the PBPC reckoned the combination of Act 16 and the additional $1.65 million – in the proposed 2013 state budget not yet approved – will cost Keystone State taxpayers about $165,000 per year per job.

Shell has claimed as many as 10,000 jobs will be created by the plant, but that number includes ancillary businesses, such as restaurants and retail shops – neither of which is known for high paying positions.

The company also claims the “new” jobs will include businesses that supply and service the plant, a point Gov. Corbett has made in promoting the nearly $2 billion total taxpayer funded contribution.

But many of those jobs – as well as some of the estimated 400 in-plant jobs – could go to companies in neighboring West Virginia and Ohio, and other states and countries. The tax deal contains no requirement that they be created in Pennsylvania.

There also is a possibility the state will be stuck with cleanup from a zinc producing operation currently on the site of the proposed Shell plant. (State leaders have denied promising to clean up the hazardous materials site, but as I write this, none have promised the state will not perform the task.)

The site owner, Horsehead Holding Corp., is building itself a new plant in North Carolina, and plans to be operational there in Fall 2013. If Shell decides to exercise its option to buy the site, Horsehead would have to vacate the Monaca property by April 30, 2014.

“We believe (selling the Beaver County property to Shell) provides the best value proposition for Horsehead among the several alternatives we are considering for this site,” Horsehead President & CEO Jim Hensler said in March in a prepared statement.

Undoubtedly, Shell already is working on obtaining federal, state and local permits for construction of the plant, near a curve in the Ohio River. Even so, a decade or more could pass before the plant is operational – if Shell decides to build it.

We live in a financial culture in which growth is measured by increasing profit, rather than widgets made and sold, and in which counties and states hold “reverse auctions” to see which can offer the least costly deal to a new or expanding businesses.

Corporations always claim they will bring wealth with their arrival – more workers paying more income taxes, as well as taxes associated with the stuff they buy.

Everybody wins, business says.

Unfortunately, the results usually are difficult, if not impossible, to prove. Tax collection agencies, including the state Department of Revenue, rarely have such information categorized by industry or specific business; they do not know how long, if ever, it will take individual personal income, property and sales taxes to make up the corporate tax breaks.

At $165,000 per year per job, the new workers will be, in the state’s 2013 budget and for the next quarter century, public employees.

With business promoters calling for government to get out of the way and let the marketplace create jobs and profits, why is it they so often make taxpayer contributions, available only from government, a condition of their existence?