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Report Shines Light On Fossil Fuel Subsidies in Pennsylvania

A new report from the nonprofit group PennFuture finds that Pennsylvania elected officials “continue to coddle the fossil fuel industry with massive subsidies” that totaled $3.8 billion in fiscal 2019.

The report, titled “Buried Out of Sight: Uncovering Pennsylvania’s Hidden Fossil Fuel Subsidies,” claims that preferential treatment is received by the fossil fuel industry in the Keystone State. The analysis from PennFuture shows $3.8 billion in fossil fuel subsidies for fiscal year 2019, which amounts to $296 per state resident and represents a 14 percent increase from the group’s last study in 2015. Of the $3.8 billion total, the shale gas industry captured 52.1 percent, or $2.0 billion.

PennFuture describes itself as a nonprofit focusing on a clean energy economy and protecting air, water, land and sustainable communities in Pennsylvania.

The report contends state subsidies included $322.9 million in exemptions from the corporate sales tax, $305.1 million in exemptions of taxes on natural gas and utility sales, as well as $4.3 million in tax credits for the Keystone Opportunity Zone that relates to projects like Shell Chemicals’ ethane cracker construction in Beaver County.

It also cites the loss of nearly $530 million in potential revenue from the lack of a severance tax on the oil and natural gas extraction industry. The Shell Cracker plant received $1.6 billion in state subsidies as part of a package of tax credits that Shell can use to reduce its overall tax liability by up to 20 percent. The Beaver County plant, which is expected to go into operation in 2022, will refine ethane from natural gas fracked from Southwestern Pennsylvania into pellets to create plastic products. The plant, estimated to cost between $6 billion and $10 billion, has created about 8,000 temporary construction jobs and will employ about 600 permanently when it is finished.

PennFuture is calling on Pennsylvania elected officials to approve a severance tax and eliminate tax breaks for fossil fuel companies that amount to an estimated $2 billion per year. The report also calls for tracking of subsidies for fossil fuel companies and more focus on health-related impacts of shale gas development on those who own property near wells.

Industry groups are strongly opposed to the imposition of a severance tax on natural gas production. Gov. Tom Wolf has proposed the tax in every year of his administration but it has not gained traction in the legislature.

In a letter published in the Pittsburgh Business Times, Dan Weaver, president of the Pennsylvania Independent Oil and Gas Association, fired back at the study, saying it included “absurd logic” about economic incentives, and noted that the tax credits to Shell attracted “the largest private investment in the commonwealth since World War 11 and one of the largest construction projects currently under way in the U.S.”

In July 2020, the legislature approved a bill providing more than $650 million in new tax credits for companies that plan to invest at least $400 million and create at least 800 construction and permanent jobs to build petrochemical or fertilizer plants that use dry natural gas produced in Pennsylvania. It goes into effect in 2024 and continues until 2050. HB 732 was signed by the governor, signaling that incentives to attract fossil fuel-related industries are likely to continue for years to come.

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