By Rachel Martin | Watchdog.org
PITTSBURGH — A proposal to increase subsidies for alternative energy in Pennsylvania is drawing criticism from other parts of the energy sector.
But those critics, in some cases, are benefiting from state subsidies, too.
In his first budget proposal, Gov. Tom Wolf wants the state to increase energy-related subsidies by $225 million, as part of a $675-million economic development bond financed by the state’s natural gas production.
The new energy subsidies include money for wind and solar projects, along with energy-efficiency projects in the public and private sectors and further development of the state’s natural-gas infrastructure.
“The rich resources from Pennsylvania’s natural gas deposits have brought employment and new growth in Marcellus communities and can be harnessed to invest in our state’s overall economic future,” the 2015-2016 executive budget states.
The debt from the bond would be financed with $55 million annually from a new tax on natural gas production, which Wolf also has pitched in the budget plan.
That means natural gas producers essentially would be financing state subsidies to their competitors in other parts of the energy sector. As expected, that doesn’t sit well with some.
“It is ironic, that one industry is forced to subsidize its competition,” Kevin Sunday, manager of government affairs for the Pennsylvania Chamber of Business and Industry, told Watchdog.org.
Governments have spent “countless billions” on alternative energy, Sunday said.
“At what point will they be able to compete on their own?” he asked.
But Pennsylvania has spent lots of money on longstanding policies that predominantly favor traditional energy, to the tune of billions of dollars, said state Rep. Greg Vitali, D-Delaware, an advocate for more spending on alternative energy.
Vitali is the minority chairman of the House Environmental Resources and Energy Committee. He’s been a member of that committee for the 23 years he’s been in the House.
“I would support a bond issue for investment in renewable energy, and using a portion of the severance tax is a good idea,” he told Watchdog. “I think the interest rates are very low right now, and the beauty with regard to renewables, is that investing up front puts them into play sooner.”
Vitali is unimpressed with the competition argument Sunday raised. Vitali said fossil fuels and nuclear energy have been, and continue to be, heavily subsidized.
He pointed to an analysis by Christina Simeone while she was director of the PennFuture Energy Center for Enterprise and the Environment. She is now deputy director of the Kleinman Center for Energy Policy at the University of Pennsylvania.
In “Pennsylvania Fossil Fuel Subsidies: An Overview,” Simeone says Pennsylvania subsidizes fossil fuels at a cost of almost $2.9 billion a year — and that is likely an underestimate, given the data unavailability for many items.
Many of these subsidies are subtle, in the form of preferential tax treatments.
“With respect to energy, there is no free and competitive market, least of all in Pennsylvania,” Simeone said in the report.
Sunday said his organization is not implicitly about being pro-gas, but rather about supporting a level playing field and working for a better business climate for the state. His organization doesn’t have any members whose primary business is solar or wind energy, but some manufacture parts or have investments in those industries.
Sunday stressed that the Chamber does support smart tax policy, but he questions whether a severance tax, and this bond, fall within that category.
“If we get this right, Pennsylvania can be one of those states with a booming economy that other states are jealous of,” Sunday said. “If we don’t, we’ll be just another rust-belt state.”
Update: This story was updated to correct the amount of the bond issue.