Cracker Plant Battle Heats Up; Ohio, W.Va. Offer Up Tax Incentives

WHEELING – A multibillion-dollar ethane cracker would bring hundreds of direct chemical jobs to West Virginia or Ohio and up to seven times as many related jobs, which has both states offering large tax incentives for the plant.

Mountain State leaders have a fight on their hands to attract Royal Dutch Shell’s ethane cracker, as Ohio state Sen. Lou Gentile, D-Jefferson, recently joined fellow lawmakers in sending a letter to the global oil and gas titan, asking Shell to build its plant in the Buckeye State.

Shell officials have said they plan to build the plant in Ohio, West Virginia or Pennsylvania, with an announcement set for early 2012.

Sources with knowledge of the matter said the announcement could come as early as this month.

“This would be the largest single economic investment in West Virginia in over 50 years,” state Commerce Secretary Keith Burdette said, noting he believes the project could call for an investment of as much as $5 billion.

Previous estimates of project cost were capped at $2 billion.

Burdette also mentioned that, in addition to Shell, at least one other company is looking to locate a cracker in West Virginia. He said the interested companies are looking at sites of at least 250 contiguous acres “from Charleston all the way up to Hancock County.”

Dan Carlson, general manager of new business development for Shell, said his company has been meeting with representatives from all three states for “productive discussions.” Burdette said he and other state officials have designed a system of tax incentives to help attract the Shell investment to West Virginia.

According to Greenwire, a national environmental and energy news service, Ohio leaders are offering $1.4 billion in tax incentives to Shell to entice the company to locate the cracker there.

Connie Wehrkamp, deputy press secretary for Ohio Gov. John Kasich, said her office is very aware of the project, but could not discuss specifics.

“In order to maintain Ohio’s ability to compete for jobs, it is standing policy that we never discuss specifics regarding incentives that may or may not have been offered to companies,” she said.

Gentile, recently appointed to the position of senator while he was still serving as a member of the Ohio House, said he joined a group of Democrats and Republicans from both the Senate and House to let Shell know why it should develop in Ohio.

“We just wanted to let Shell know that we are supportive of the project, and are willing to do whatever is necessary to get the project,” Gentile said, noting this could include tax abatements among other incentives. “It is a competitive process, and we are putting our best foot forward.”

For his part, Burdette may ask West Virginia legislators if they would vote to allow for a reduction of personal property taxes for Shell – or any other cracker developer – to a 5 percent maximum charge for 25 years. Existing law allows the state to reduce the personal property tax rate to 5 percent for a maximum of 10 years.

Though declining to put a precise dollar amount on the tax incentives West Virginia is offering Shell, Burdette said, “We feel that it is a very competitive package.”

When asked if the state should give away so much potential tax revenue to gain the cracker, Burdette cited the hundreds of permanent jobs, paying an average of about $60,000 per year, the plant would create. He also said there will be as many as seven related jobs created for every cracker job – not to mention about 10,000 temporary construction jobs as the plant is being built.

“Companies give paychecks to employees. Those employees will be paying income taxes, sales taxes and other taxes,” Burdette said regarding how the state will gain from having the cracker.

Initially, many believed the plant would be a good fit for the Northern Panhandle because the area is situated right in the middle of the Marcellus and Utica Shale fields. Officials with Bayer Corp. said the company’s site north of New Martinsville would be a prime location because of the proximity to rail, road and water transportation. However, Bayer officials also are marketing a site in Institute, W.Va. near Charleston as a location for a cracker plant.

There has been talk that state officials would prefer to have the plant near Charleston, even though that would mean piping ethane out of this area for cracking.

Burdette said the state is not offering any extra incentive for Shell or another cracker developer to locate their plant in a particular area of West Virginia.

In terms of the potential related jobs that could come from the cracker, Burdette said these could include companies that manufacture “anything from pellets to plastic bags.”

“Although we obviously want it in West Virginia, wherever this cracker goes, it is going to create a lot of economic activity,” he added.