Sunday, July 01, 2012

Sic Semper Saltines - part II, or how many crackers does it take to save Pittsburgh

A repeat for some, but as much as the current debate over the tax credits now going to Shell for a proposed 'cracker' is a big deal these days, it was a much bigger story in 1948.  So again, the headlines on the original Cracker that was going to save Pittsburgh are below. Just note the size of the font, I would need to check if Pearl Harbor had bigger billing. The stories inside were even more optimistic about how the one project would 'transform' Pittsburgh's economy, induce new industries to locate here, and protect it long into the future.  One thing is for sure is that Pennsylvania really does have a thing for big ticket economic development projects (cue up Ben Chinitz anyone?).  

Then of course there was the literal 'Cracker' plant which was the focus of so much public effort to keep open:

Maybe we should work on evicting Google Pittsburgh now located on that site and try to bring back Nabisco.. the ultimate cracker plant.  Actual crackers. In bulk. It was saved more than once by public pressure and $$. You know the Nabisco plant once was reported to have 850 employees on site, though it was nowhere near that much near the end.  The plant had this big positive eternality of making the entire East End smell fresh baked on a recurring basis

Special mention.  Not about a 'cracker' though it also comes down to that miraculous carbon atom in the end.  As I have decried in the past, the current paradigm of states throwing money toward competitive and very selective industry targeting is clearly a race to the bottom.  Where did it all begin, or put other way, where did this particular tax credit come from.   From us of course and the big tax incentives Pennsylvania gave to Volkswagen to build a new auto manufacturing plant in Westmoreland County. Pennsylvania's scale of incentive reset the standards for how big a role state governments play in economic development.  Then like now it was a big competition with Ohio and in the end Ohio was not willing to put $$ on the table like Pennsylvania was. Again, it sounds familiar.  Then like now the real payoff was supposed to come from all the ancillary employment that would spring up because of the plant.  Mega ditto.

What has been interesting this time around is that few have questioned the deal. Back in the day there were at least a few obscure folk not lining up behind the common wisdom.

Sunday morning proved George is still around and going strong.  The plant in question is a long forgotten memory. 

Imagine just for sake of argument that the governors of Ohio, West Virgnia and Pennsylvania had all agreed not to offer big incentives for the plant to be located in their respective states.  All this 'liquids-rich' natural gas is going to be produced no matter is it not?  By all accounts the proposed plant was going to be located in the greater-greater Pittsburgh (aka Power of 32?) region no matter.  What would have been the result?  Maybe the project would have been located where it made the most economic sense? We'll never quite know where that is I guess.  However, the three governors would have been written into a small bit of American history most likely? 


Anonymous The Wiz said...

If we had formed Westylvania when I suggested it, it would have been guaranteed the cracker plant.

Seriously, I read an article last week on PG Pipeline that said the tax credit was actually for any company that used ethane in its production cycle, not just Shell. The idea is to draw many other plants here.

Sunday, July 01, 2012 9:21:00 PM  
Anonymous DBR96A said...

What Pennsylvania just did for Shell is akin to what all the Southern states have done for foreign automakers in the last 20 years. Even the "pro-business" people these days don't know the difference between capitalism and corporate socialism.

Wouldn't it be a lot more simple just to cut state taxes for all businesses instead of giving perks to some industries and not others? Furthermore, what are energy companies going to do if Pennsylvania imposes an extraction tax, move to North Carolina and drill horizontally for 500 miles?

Tom Corbett is the embodiment of a corporate whore and a phony capitalist.

Monday, July 02, 2012 6:57:00 AM  
Blogger C. Briem said...

Wiz, you raise an important point I had not thought of. If the already reported impact of the proposed cracker plant includes all of the other manufacuturing it will spur.. then should all of those other plants need tax credits themselves in order to locate near it?

Monday, July 02, 2012 7:10:00 AM  
Anonymous BrianTH said...

My bet is that Shell picked the location that they would have picked anyway based on their normal criteria, and are collecting the tax credits as a free bonus. That conclusion is based on the assumption that various cost factors are likely more important than the tax credits to begin with, and that this is even more likely to be true when the competing offers from the three states are offset against each other.

Monday, July 02, 2012 8:04:00 AM  
Anonymous The Wiz said...

Chris; actually, that was the point. The tax is set up so that any company can get a five cent discount if they use Pa methane, not just Shell. They added a provision stating to qualify the company had to invest a minimum of one billion dollars.

Debra, we are already losing drilling rigs to Ohio and the Utica. There are over 25 shales plays across the US, including North Carolina. No need to drill horizontally 500 miles. Make the taxes too high and they can drill elsewhere.
I favor an extraction tax as long as the revenue is used to eliminates the rolling stock/capital tax and reduce the corporate to a competitive level with other states.

Monday, July 02, 2012 10:57:00 AM  
Anonymous Anonymous said...

Hey Wiz, can you provide a link or two to stories showing that rig operators are explicitly choosing other states over PA?

Monday, July 02, 2012 5:00:00 PM  
Anonymous The Wiz said...

About a 14% drop so far. The good news is that the Pocono region is so close to the East Coast markets that it is still cheaper to drill there since transportation costs are almost nothing.

Tuesday, July 03, 2012 9:32:00 AM  
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