Should Shell Oil Get a Tax Credit for Jobs Created by Other Companies?

Capitolwire.com has a story (subscription) this morning asking whether Shell Oil should get a tax credit worth $1.65 billion for jobs that other companies may bring to Pennsylvania.

As Mark Price blogged Tuesday, Governor Tom Corbett has proposed a 25-year tax credit for companies that build and operate ethylene cracker plants in Pennsylvania. The $66 million annual tax credit (beginning in 2017) is expected to largely benefit Shell, which is the only company exploring construction of a cracker plant in the gas-rich Marcellus Shale. 

The tax credit would come on top of legislation enacted in March designating Shell's Beaver County site a tax-free zone for 15 years. Without any tax liability, Shell would be able to sell the tax credits for cash. 

Why shower Shell with so much taxpayer dollars? Governor Tom Corbett's administration says it's all about the jobs. But, as Pennsylvania Budget and Policy Center Director Sharon Ward asks in the Capitolwire story, how many jobs will Shell actually create in exchange for all these tax breaks? 

Ward wrote in an e-mail: “The question is who is creating the jobs in exchange for the tax credit? The public statements made by [Department of Community and Economic Development] Secretary [Alan] Walker and others suggest that the 15,000-20,000 jobs are not direct jobs promised by Shell, but jobs that might be developed sometime in the future by companies that will purchase the ethylene generated by the plant.

“So the question is simply: Is Shell creating 15,000 jobs? Or is Shell extracting a bonus for jobs that might be created sometime in the future by others?” ...

Ward wrote that this deal: “…would seem to differ as well from prior economic development deals, which hold companies accountable for direct jobs. And finally, given the precedent, will new industrial plants come to the state hat in hand leading to an ever escalating bidding war among the states? Just askin’.”

Ward also questioned how many of those jobs would actually come to Pennsylvania.

“The [western Pennsylvania] region is integrated economically, so the jobs will likely go to people from all three states,” said Ward. “Jobs don’t recognize political boundaries.

“The spinoff industries that are supposed to be created using the ethylene could be existing plants or new plants in W VA or Ohio. So PA taxpayers are footing the bill for spinoff industries that might be created in Ohio, West Virginia or other states.”

[Senator Joe] Scarnati and his chief of staff Drew Crompton, have both said any enabling legislation to create the tax credit would include “clawbacks” if the promised levels of job creation did not occur. 

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