Bill proposes opportunity zones for natural gas

House Speaker Mike Turzai’s proposal to boost the use of Pennsylvania natural gas as a fuel and feedstock has attracted nearly a third of the state House of Representatives’ members as co-sponsors and earned a bitter critique from the governor’s office as it gets closer to being introduced in the chamber.

The proposal, known as the Keystone Energy Enhancement Act, would offer 10 years of tax breaks in special development zones to entice heavy natural gas users, like manufacturers and petrochemical makers, to Pennsylvania brownfield sites.

Mr. Turzai, a Republican from Marshall and the bill’s prime sponsor, described the broad outlines of the proposal during a shale gas industry conference in September, but his office has added more detail in recent weeks as it encourages other lawmakers to get behind the idea.

The bill would allow the creation of up to 20 Keystone Energy Enhancement Zones — five in Philadelphia County, three in Allegheny County, no more than two per county in all other counties and a total of four in the 41 counties with a population less than 145,000.

Natural gas-dependent businesses operating within the zones would be eligible for 10 years of exemptions, credits and other breaks from state and local taxes beginning in 2017, plus a tax credit of up to $1,250 for each full-time job they create within the zone.

“This could turn Pennsylvania into a great global energy hub,” Mr. Turzai’s spokesman Jay Ostrich said. “That just can’t be created if the supply is killed upstream by onerous taxes and regulations. We need to really find a way to make energy expansion a part of our public policy here in Pennsylvania.”

Mr. Turzai has positioned his proposal as an antidote to Democratic Gov. Tom Wolf’s calls for a severance tax on natural gas extracted from the Marcellus and Utica shales. Mr. Wolf reluctantly dropped the tax from negotiations for the long overdue state budget, but said last week that he will push again for the tax in his next budget.

In a statement, Mr. Wolf’s spokesman Jeffrey Sheridan again expressed frustration with the Republican-led legislature’s opposition to a severance tax.

“Rather than make oil and gas companies pay their fair share, Speaker Turzai, the industry’s closest friend, is working to give them even more handouts at the expense of our children and our schools,” Mr. Sheridan said. “The speaker is pushing for legislation that would probably drive to nearly zero state taxes paid by drillers.”

So far, 61 co-sponsors from all regions of the state have signed on to the bill, including nine Democrats, Mr. Ostrich said. The bill is expected to be introduced in mid-December.

The proposal is modeled on the state’s 16-year-old Keystone Opportunity Zones program, which promotes economic development in underused areas by offering state and local tax breaks to companies that locate businesses there.

Mr. Ostrich said the job creation tax credit would be capped at $10 million a year. The value of the other tax breaks will be calculated through the standard fiscal analysis that takes place after the bill is introduced, he said.

Potential zones would have to include a deteriorated property and have the space and infrastructure to support manufacturing, petrochemical or other downstream natural gas businesses. The zones would also be evaluated for other factors, like their potential to create jobs and assist an economically struggling area.

The bill would create a new seven-member board of industry experts who would administer the program and otherwise ease the expansion of pipelines and businesses that move or use the state’s natural gas and natural gas liquids, according to a co-sponsorship memo Mr. Turzai circulated for the bill.

While the bill’s title is expansive, the legislation is focused on enhancing only one form of Keystone energy. It would not, for example, entice large tech companies to locate data centers in Pennsylvania and power them with Pennsylvania renewable energy.

“Right now it is just targeted to natural gas, but we’re certainly open,” Mr. Ostrich said.

“If someone can show us a model where the government is not subsidizing alternative energy sources and it works, we would love to see that.”

Laura Legere:

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