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Economic Development, Energy Bond Programs Proposed

The budget’s $675 million in economic development-related borrowing is contingent on the Governor getting passage of his severance tax proposal.  Some $55 million of that tax revenue would be used annually to pay the borrowing costs. 

Wolf wants to use some extraction tax monies to pay debt service on a $675 million bond that would fund an economic development package. A third of the bond, $225 million, would be used to fund solar, wind, biomass and other renewable energy grant programs.

Specifically, the energy fund would earmark:

(Energy Fund, Continued)

  • $30 million in competitive grants to businesses employing combined heat and power (CHP) cogeneration technologies.
  • $20 million to facilitate construction of new wind farms and support interconnection with the grid.
  • $20 million for “Green Agriculture,” competitive rants for projects for farms ranging from energy efficiency, biodigesters, biomass and distributed wind generation.
  • $30 million to the Pennsylvania Energy Development Authority for expanding clean advanced energy technologies, services and fuels.
  • $25 million in matching funds for the “Last Mile” Natural Gas Distribution Line Fund for business parks and manufacturers to construct natural gas lines.
  • $50 million for relaunching the PA Sunshine program for rebates on qualifying solar projects with an aim of installing 100 MW of new solar generation the first year.
  • $50 million in grants to fund energy efficiency improvements.

Some House Republicans on Wednesday characterized the proposal as picking winners and losers.

Dennis Davin, acting secretary of the Department of Community and Economic Development, told the House Appropriations Committee the proposal is part of a larger investment in job creation, including supporting business development loan programs and business expansion programs. “We think when you look at those opportunities as a whole…Pennsylvania will do much better,” Davin said.

Rep. Seth Grove (R, York) said during the DEP Appropriations hearing, “Now the governor says he’s not going to pick winners and losers – it’s a pretty big shift of taxing an entity and giving that money to another industry.”

Acting DEP Secretary John Quigley responded,  “It’s part of a much bigger economic stimulus, economic development proposal that is completely appropriate.”

Quigley argued that modernizing the state’s energy infrastructure would employ Pennsylvanians in good-paying jobs like laying distribution pipeline, installing solar panels or retrofitting buildings to save energy costs.

In response to questions from Rep. Jeff Pyle (R, Armstrong) over the solar initiatives and industry declining, Quigley said, “The cost of solar power has gone down precipitously, so we expect more bang for our buck.” The PA Sunshine solar program, created 2,700 jobs in Pennsylvania between 2009 and 2013 when the funds were exhausted.

“The solar industry has fallen on hard times in Pennsylvania, while it is growing in other states around the nation, most of which provide some level of additional public support for solar, those jobs are growing in other states,” Quigley said. “In Pennsylvania, the solar industry has contracted…with the decline of federal and state support.”

Pyle said that he didn’t think alternative energy was a wise investment while coal-fired plants are closing.

“The governor is very clear he wants to protect – and that is the word he has used, protect – Pennsylvania’s coal industry and protect Pennsylvania’s position as a net energy exporter and take advantage of all of Pennsylvania’s natural resources,” Quigley said.

Quigley said “the Governor’s proposal is not designed to replace coal fired plants.  It IS designed to protect Pennsylvania’s position as a net exporter of energy, to incentivize energy, create jobs that can’t be outsourced, and to complement our coal and gas industries.”

Acting DCED Secretary Dennis Davin outlined the $675 million investment program, (See link here) and said the funds will support programs including the Pennsylvania Industrial Development Authority (PIDA), which deals with business development loans, Business In Our Sites, which focuses on competing for business expansions and relocations, energy investment initiatives and technology and manufacturing innovation.

During Questions, Davin said the proposed Royal Dutch Shell ethane cracker plant would continue to move forward.  He said the Wolf administration supports the plant, and said the state was working on key permits with state and federal agencies.

Rep. Wheatley also asked about the $675 million bond issuance and questioned whether the administration anticipates coming before the legislature with a proposal that requires their input.

The governor’s bond proposal includes money saving investments such Green Agriculture. This initiative will allow more farmers to take advantage of clean and renewable energy technologies and help achieve the state’s energy goals. Acting Agriculture Secretary Russell Redding said that $20 million would be available through competitive grants for projects designed to help Pennsylvania farms implement energy efficiency and technology upgrades, bio-digesters and distributed wind generation on farms – all of which can help farmers reduce energy costs by becoming more self-reliant. 

Rep. Pyle suggested more funding to wind and solar “may not be the wisest investment” given the recent track record of the industries in the state. He cited legislation authored by Rep. Kathy Rapp (R, Warren) last year to conduct an efficiency study comparing wind and solar power investment to what the state is getting back, and suggested the department wait for its results “before we dive in head-first.”

Rep. Mary Jo Daley (D, Montgomery) asked about the jobs that would be created by the program.  Quigley said there is an opportunity to create thousands of long lasting, well paying, family sustaining jobs.”

Rep. Christiana questioned why the state does not wait for the severance tax to be fully implemented before going to bond market and acquiring new debt for alternative energy projects. Sec. Quigley said the Office of the Budget could better answer that question but noted that the low rates provide the opportunity to have a comprehensive economic develop plan that would benefit the entire state.