The multi-state scrum for a cracker plant

The American Chemical Council (ACC), an industry trade organization made up of chemical manufacturers, has put out a report that projects manufacturing output, industry revenues, job creation and tax revenues resulting from construction and ongoing operation of ethane cracker plants in 9 states. The report, done in-house by ACC’s statistics and economics shop, uses a standard economic model to arrive at the numbers. Accompanying the report are fact sheets for the 9 states studied.

Comparing the fact sheets, the jobs and revenue numbers for the states are similar with the exception of Texas which does far better than any of the other states. Pennsylvania’s numbers are similar to our neighbors New York, New Jersey, and Ohio and also Michigan. Arkansas and West Virginia, while still doing well, would not benefit as much as the rest of the states. 

ACC is sharing its report in the various state houses to fuel the desire of lawmakers to attract one of the ethane crackers to locate within their borders. The report has been well received in the Pennsylvania General Assembly and the governor’s office. It shows that an ethane cracker would create 17,000 permanent jobs and generate $1.2 billion in wages and $140 million annually in state tax revenues.  

Whether or not it was meant to, the report has intensified the scrum among the states to get a cracker plant. The most intense competition has been among Pennsylvania, Ohio and West Virginia for a plant that Royal Dutch Shell wants to build. Each state has tried to outdo the other by offering the giant oil company taxpayer-funded incentives in the form of tax credits, tax-free properties and income tax exemptions. For now, it looks like Pennsylvania has won if Governor Corbett can persuade the members of the General Assembly to give Shell the biggest tax subsidy ever offered to one company in state history - $66 million a year over 25 years. If the legislature balks, Shell might take its plant and the money and jobs across the border to Ohio. 

The Shell tax credit is not, however, based on the number of jobs that the plant would create. Permanent employment at the plant itself would only be about 400 jobs. The tax credit would be based on the amount of ethylene produced at the plant and would go only to Shell, not to other companies involved in the supply chain. The credit would eat up almost half of the total state revenues projected by the ACC report. 

Pennsylvania has not done its own economic impact analysis of a cracker plant. An analysis by the Pennsylvania Budget and Policy Center raises significant questions about the size and scope of the incentive package the governor has offered and pointed out the spotty track record of previous grandiose incentives based on grandiose jobs and revenue projections. 

The competitive fever that has set in at the governor’s office to win the Shell plant at all costs may cost Pennsylvania taxpayers more than they will get out of the deal. And Governor Corbett’s request for the members of the General Assembly to commit $66 million a year to one company and his request for them to further slash state funding for education and human services puts the legislators who have to face the voters this November into the middle of the multi-state scrum for the cracker plant.