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Commonwealth Forum: Should State Government 

Subsidize the Economic Development of Natural Gas 

Facilities?

YES

The Pennsylvania Department of Community and Economic Development’s 
website has an “Investment Tracker” that allows visitors to view economic 
development activities by the Commonwealth since 2000. The drop-down 
menu lists 322 programs that have been administered during this period. 
Like it or not, state government is in the business of economic development. 
The first component of competing nationally and internationally for jobs is 
by providing a favorable tax and regulatory environment. The second com-
ponent is attracting individual firms through targeted tax breaks, infra-
structure development, relocation assistance, and job training programs.

Pennsylvania has been hit hard by deindustrialization. However, the 
continued technological development of hydraulic fracturing practices has 
presented the state with a way to create more jobs by accessing oil and natu-
ral gas in the Marcellus Shale. The Commonwealth has decided to invest 
heavily in encouraging the growth of this industry. Pennsylvania is now the 
second-largest natural gas producer in the United States. At the end of 2016, 
20,524 workers were directly employed in oil and natural gas production, 
and 54,547 were employed providing supplies to the industry. Pennsylvania 
Marcellus Shale development has resulted in $10 billion of investment to 
build or retrofit natural gas power plants. It has also attracted jobs through 
corollary businesses such as petrochemical plants and natural gas exporting 
facilities. Further, the impact fee levied on producers by the state raised $1.2 
billion through the end of 2017. This money is disbursed to state agencies and 
local governments for infrastructure development, conservation programs, 
and, for some localities, tax cuts. Beyond economic development and tax 
revenues, cheap natural gas has lowered utility prices for residents of Penn-
sylvania. Given these results, how is it possible to argue against the Com-
monwealth’s investment in this industry?

NO

Why should state government subsidize an already heavily subsidized indus-
try? Estimates vary, but fossil fuels already receive a subsidy of around 



Energy Policy 69

$20 billion per year. The costs in terms of environmental degradation, poor 
health outcomes, and contribution to climate change are not included in the 
price of natural gas or any other fossil fuel. While natural gas burns cleaner 
than coal or oil, companies that produce it should not receive public dollars 
to pollute the air and water.

The Shell ethane cracker plant planned in Beaver County will receive the 
largest tax subsidy in state history, valued at $1.65 billion. Meanwhile, the 
plant will create only six hundred permanent jobs ($2.75 million per job!). Is 
such a massive tax expenditure really worth it? No wonder state government 
is experiencing such tough budget decisions and a $2 billion structural bud-
get deficit. They’re giving away the store. Such subsidies result in a raw deal 
for Pennsylvanians. Tax cuts for large, wealthy, multinational corporations 
mean state revenue must come from somewhere else, namely, average citi-
zens.

To add insult to injury, parts of the plant are being built in Mexico and 
shipped to the construction site. Not only that, but of the estimated $100 mil-
lion in steel needed to build the plant, manufacturers in Pennsylvania would 
be lucky to get a few crumbs. Most likely, the steel will come from China. So, 
Pennsylvania citizens are paying to advance the development of not only 
large profitable corporations, but other nations, too. One can only wish for 
such dedication from state government to the advancement of its own people 
as they have for the polluting fossil fuel industry.

For More Information

The Pennsylvania Public Utility Commission (http:// www .puc .state .pa .us/ 
filing _resources/ issues _laws _regulations/ act _13 _impact _fee _ .aspx) has 
an Act 13 (Impact Fee) website dedicated to providing information and 
resources related to the law and its collected revenues.

PowerSource (http:// powersource .post -gazette .com/) of the Pittsburgh Post-
Gazette is a special supplement on energy policy. It covers the Pittsburgh 
region’s natural gas, coal, nuclear, and alternative energy sectors in con-
text.

State Impact Pennsylvania (https:// stateimpact .npr .org/ pennsylvania/) is a 
product of member National Public Radio stations WITF and WHYY 
covering the topics of energy, the environment, and the economy. It was 
developed in response to the last decade‘s growing energy economy in 
the state.

The Marcellus Shale Coalition (http:// marcelluscoalition .org/) provides in-
formation on natural gas from the perspective of the industries that are 
extracting it from the Marcellus Shale.

From Pennsylvania Politics and Policy: A Commonwealth Reader, Volume 1. Edited by
Michelle J. Atherton and J. Wesley Leckrone (Philadelphia, Temple University Press,
2018).




