‘Cracker’ incentives neither prudent nor necessary

‘Cracker’ incentives neither prudent nor necessary

The encouraging news is that a new study suggests that the embryonic plastic manufacturing industry in the Ohio River Valley is “positioned to capture a significant share of [the] $25 billion plastics import market.”

But that raises a significant question that goes back to the billions of dollars in public money that state leaders committed to Shell’s petro-chemical plant along the Ohio River in Beaver County.

And it’s not necessarily an affirmation of that taxpayer “investment.”

Shale Crescent, a self-described nonprofit focused on creating jobs in the region by promoting the abundant natural resources available in Ohio, Pennsylvania and West Virginia, says its study “dispels the long-held belief that plastic-based goods are cheaper to import than manufacture locally.”

“The study reveals that the low-cost gas and natural gas liquids flowing from the U.S. Shale Gas Revolution have the potential to turn the $53 billion U.S. plastics importing industry on its head,” the advocacy group says.

According to Nathan Lord, president of Shale Crescent USA:

“Ohio has surpassed China as the world’s low-cost center for plastics manufacturing, thanks to advantages in cost, economic climate and market access.”

Furthermore, the study says Ohio businesses and manufacturing facilities are located within a day’s drive of 50 percent of the U.S. population and over 70 percent of the plastics industry supply chain.

“That same radius also captures over one-third of U.S. natural gas production, creating substantial environmental advantages by eliminating the need for lengthy, fragile global supply chains and their associated greenhouse gas emissions.”

Ohio, West Virginia and Pennsylvania combined now produce more than one-third of U.S. natural gas supply and 1 1/2 times-plus more natural gas and natural gas liquids than China, the group notes.

“China is energy deficient and is reliant on global supply chains to either import plastic resin or produce resin from much costlier oil-based Naphtha,” Lord says.

The Shale Crescent USA study details how Shell has fired up its massive ethylene crack plant in Beaver County with an annual production capacity of 3.5 billion pounds of polyethylene resin (i.e. plastic pellets).

“Local plastics manufacturing operations will enjoy the benefit of regionally sourced resin eliminating long and costly logistics,” the study concludes. “The outcomes of this regional supply are shorter transit times, decreased working capital, greater feedstock flexibility and other cost-saving factors.”

That’s great. It sounds like a coming success story. And it was the likelihood of success that accompanied the announcement a decade ago of $1.6 billion in tax credits over 25 years.

Do recall that the incentives were tied to employment and production benchmarks. Not met, the incentives were to be pared accordingly.

But here are the still-nagging questions in this deal:

If it was projected to be the be-all and end-all for economic development, why were there public incentives at all? And the public benefits would have been $1.6 billion more without the giveaways, would they not have been?

Weren’t those glowing projections of grand economic benefits flowing to all just the confirmation Shell needed to risk only its capital, in toto, on the promise of great profits?

Government officials long have pointed to the so-called “clawback” provisions in the incentives as a safeguard against taxpayers being left holding the bag for a failed project.

But public coffers already have been tapped millions upon millions of public dollars even before the plant came online last year. That would include a sales tax exemption that turns 10 years old in 2024.

Don’t mistake our point of order; we wish Shell’s new “cracker” plant every success. And we hope initial projections of “downstream” industrial startups come to fruition — though, as of right now, there appears to be none, at least none publicly disclosed.

And if those ancillary manufacturing facilities do develop, will they, too, be publicly subsidized?

They should not be. Just as the cracker plant itself should not have been given any public “incentives.”

In reality, all the continuing rosy predictions for the cracker plant’s coming success should serve as proof positive that Shell should not have been allowed to offload the capital risk that it alone should bear on the taxpaying public.

And, as noted at the outset (and as counterintuitive it will be to the public-money almsgivers of “The State”), all this projected good news is not an affirmation that this latest spate of corporate wealthfare was needed – but that it was not.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).