PITTSBURGH (AP) —
Pennsylvania, Ohio and West Virginia are trying to top each other with
the sweetest package of tax breaks for Shell Oil Co., which plans to
build a huge new petrochemical refinery in the region.
But some
are questioning why there's been so little public discussion over
exactly what's being offered, and how the deals would impact communities
and the region.
"Who's going to be paying for the roads?" asked
Robert P. Strauss, a professor of economics and public policy at
Carnegie Mellon University. "You have to think through very carefully
what the additional costs will be."
The proposed plant, called a
cracker in the industry, would take ethane out of natural gas and
convert it into the basic materials for literally hundreds of consumer
and industrial materials, including plastics, fertilizers and
antifreeze.
Strauss, who worked on tax policy at the U.S. Treasury
and on Congressional committees before he began teaching in the 1970s,
said there's a history of politicians and the media exaggerating the
long-term benefits that may come from a large industrial plant.
He said there's no question a petrochemical plant would create jobs, but perhaps not as many as people hope.
The
American Chemistry Council, a Washington, D.C.-based industry lobbying
group, estimates that the plant would employ 2,484 people directly in
the chemical industry and 6,262 in related businesses.
Shell, part
of Royal Dutch Shell PLC, has previously said that the core plant could
employ 10,000 workers short-term, and several hundred long-term.
Shell
has said that the basic plant could cost $2 billion to $3 billion just
to build, and would attract a range of smaller plants nearby.
The
company hasn't commented on specific possible locations, but government
and industry officials agree on several: A former steel mill in
Aliquippa, Pa., about 35 miles north of Pittsburgh, and industrial parks
along the Ohio River in New Martinsville and Institute, W. Va. Ohio
also has industrial land on its side of the river in that region.
Dan
Carlson, Shell Chemical's general manager of new business development,
said in a statement that the three states "have shown great interest in
having us build our petrochemical plant in their states. We will make
an official announcement when the site selection is confirmed."
Some are disturbed that states haven't released a more detailed economic analysis of the proposed tax breaks.
"We
have no idea how much the state is losing in revenue each year. Nobody
knows," added Ted Boettner, director of the West Virginia Center on
Budget and Policy. "It's about transparency and accountability. Is it
clear to county officials, school boards, how much revenue is being
foregone?"
West Virginia has offered a 25-year property tax break,
Pennsylvania 15 years of tax breaks, and Ohio has reportedly offered
major incentives.
West Virginia officials estimate that without
incentives a $2 billion plant would pay about $29 million in property
taxes each year, compared to about $11 million in Ohio.
But new legislation passed by West Virginia lawmakers last week would cut the bill to just $1.6 million each year there.
Steven
Kratz, a spokesman for the Pennsylvania Department of Community and
Economic Development, said he couldn't speculate on a dollar estimate
for what a proposed 15-year tax break might be worth to Shell or any
other company. The proposal is in a bill moving through the state
Legislature.
Strauss doesn't question the basic concept behind
Shell's plan: to build an ethane refinery close to both the booming
supply of shale gas and to huge numbers of consumers in the Northeast.
But
Strauss noted that when German automaker Volkswagen AG opened a major
manufacturing plant south of Pittsburgh in the late 1970s, there were
huge tax incentives and projections for large numbers of long-term jobs.
Ten years later the plant closed, never coming close to the rosy job
estimates.
Others said that isn't likely to happen if Shell builds an ethane refinery.
"I
think that a petrochemical plant is likely to be far more stable," said
Ehud Ronn, a professor of energy studies at the University of Texas in
Austin.
Ronn noted that if Shell doesn't build a plant in the
Appalachians, it will have to transport raw gas down to Gulf Coast
refineries for processing, and then ship the ethane product back up to
the northeast.
"It makes certainly a lot of sense to build it near both the input and the output," Ronn said of Shell's plans.
Boettner
said his group isn't against a cracker plant coming to the region, but
it wants to make clear that someone has to pay for local infrastructure
costs.
"It's a classic race to the bottom, to pit states against
each other," he said. "We have leverage. We don't have to give away the
candy store," given the vast reserves of shale gas in the region.
In both Pennsylvania and West Virginia the tax breaks are targeted towards businesses that invest over $1 billion.
"Small businesses sort of get the shaft," Boettner said. "Somebody is going to have to make up the difference."
But Shell isn't the only company looking at building in the region.
Leonard
Dolhert, CEO of Aither Chemical in South Charlestown, W. Va., said the
demand for ethane is so great that more than one plant is needed.
"An
idea situation would be to build a plant in each state," he said,
adding that ultimately there could be billions of pounds of products
made from ethane in the region each year.
"In the long run, once the first plant is built, it should create economic development in all three states," he said.
Brian
Iams, spokesman for Bayer Corp., which owns the West Virginia
industrial parks along the Ohio river, said his company has had
discussions with more than one company that's interested in building a
plant.
Shell has only spoken generally about its criteria for a site, mentioning river and rail access.
But
Strauss said Shell and other major multi-national corporations take
great care to examine such huge investments, looking at other
intangibles such as the quality of education, infrastructure, and even government.
Strauss
said he suspects that the biggest question for Shell may be which site
has the best reputation for reasonable local and state government, given
their long-term investment.
___
Associated Press writer Kantele Franko in Columbus, Ohio, contributed to this report.
Copyright 2012 The Associated Press.