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Proposed Tax On Drillers Faces Uphill Battle With Legislature

Friday, March 8, 2013 at 4:27 PM

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Governor John Kasich

One of the key provisions of Gov. John Kasich’s budget is the plan to hike the tax on big companies creating a boom in oil and natural gas drilling and exploration in Ohio. But Statehouse correspondent Karen Kasler reports that though Republicans control the governor’s office and both chambers of the legislature, the proposal could be facing an uphill battle.

Gov. Kasich has been pushing a tax on oil and natural gas drillers for a year, saying that what he has called a reform in the severance tax could be used to offset the income tax cut that he’s talked about since he launched his campaign for governor.

It was stripped out of his budget update last year, and he said at the end of last year that after looking at the impact of severance taxes in other states, he would make it a cornerstone of this budget.

Kasich:  “There is no danger that people are running away, and since we’ve been talking about this, they’ve continued to invest billions – I mean, we’ve got two, three billion dollars invested in this state.”

Seated next to Gov. Kasich at that event in December was House Speaker Bill Batchelder, who was also asked about the severance tax.

Batchelder:  “Will our caucus vote for it? I think that they will. I don’t think that there’s any question about it.”

But now the 4% severance tax on big oil and gas drillers is in the 63 billion dollar two year budget, to help fund a 20 cut in the income tax for all Ohioans and a 50 percent cut for small businesses. And Speaker Batchelder is sounding a lot less welcoming toward the severance tax increase.

Batchelder:  “We certainly don’t want to discourage people from coming here. Let’s do everything we can to encourage people to come create jobs. And if we do that, then I think we’re going to have a source of taxation at some point down the road that would be very helpful. But not now, I don’t think.”

Batchelder says he thinks the governor’s claims of billions of dollars in investment in Ohio by drillers is – using the Speaker’s word – “optimistic”. And he says the income tax cut could still happen through cuts in other spending. Batchelder says the Republican caucus he leads, which includes 60 of the 99 House members, is leaning toward opposing the severance tax. 

But Majority Whip Cheryl Grossman of Grove City near Columbus may have already made up her mind.

Grossman:  “I am opposed to the severance tax as it’s been presented. I think we need to be extremely cautious that we don’t do anything to discourage the potential that can come here to the state.”

But not all Republicans are leaning against the severance tax. Sen. Bill Seitz is a longtime conservative lawmaker from Cincinnati.

Seitz:  “I think in the main it is a reasonable proposal. The fact of the matter is, these folks have spent billions of dollars to buy the rights to explore for oil and gas in Ohio. They are not going to walk away from that investment.”

Kasich’s position has been boosted by polls showing a growing majority of Ohioans support a tax on oil and gas drillers. And when he unveiled his budget with the severance tax in it, he warned those who oppose it that this may be the last chance to have some control over it.

kasich:  “At some point it’s going to happen. It’s either going to happen through this, or it’s going to happen on the ballot. One way or the other, it’s going to happen.”

Republican opposition to the severance tax – as well as the Medicaid expansion – could put Democratic lawmakers, who are in the minority in both the House and Senate, in a surprisingly important position – the governor would need their votes to get the budget as it is passed. Most Democrats support a severance tax increase, but want the revenue to go back to local governments and schools to offset cuts in last year’s budget. 

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Energy, Shale, Government/Politics

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