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Severance Tax Proposal for Oil and Gas Industry in Ohio Is Back—Now With Industry Support

Thursday, December 5, 2013 at 6:00 PM

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A drilling site in Mahoning County. (Michelle Kanu / ideastream)

State leaders are once again considering an increased tax on the oil and gas industry as shale gas development continues to grow. Only this time -- as Statehouse correspondent Andy Chow reports -- the industry supports the effort.

There’s a renewed attempt to capitalize on the shale gas boom in Ohio with a bill that would increase the severance tax on the oil and gas industry.

Republican Rep. Matt Huffman says his bill would generate about $1.7 billion in net new revenue over the course of ten years.

That money would do three things. First, it would help the state fund its regulatory framework, including well inspectors. It would also be used to close up old, abandoned wells, while the rest of the money would go towards the Income Tax Reduction Fund.

“And that way taxpayers all over the state—not just in the oil producing counties or shale counties, but all of the taxpayers in the state of Ohio—will be able to benefit from this new tax that the oil industry is paying,” Huffman said.

The bill would also create exemptions and tax credits for certain drilling operations and landowners.

Gov. John Kasich proposed an increased severance tax in his budget earlier this year, which was pulled by Republican lawmakers. Huffman says his legislation trims the governor’s proposal.

“This is about 65 percent of what the governor’s proposal is,” Huffman said. “So it’s more than half. If we’re looking for a compromise, it’s closer to the governor’s proposal than zero.”

A big reason Kasich’s effort failed earlier this year was the staunch opposition from the oil and gas industry. However, the Ohio Oil and Gas Association has announced its support for the latest attempt to raise the severance tax, calling it a “sensible modification.”

Huffman says his plan to increase the state’s regulatory staff helped convince the industry.

“Of course that’s one of the reasons the oil and gas (industry)—they like that part of it because it’s like, ‘Hey...if we stand here and wait for 100 days waiting for the inspector to show up, you know while I’ve got guys standing around doing nothing, it costs us money. So we want that money to happen,’” he said.

Democratic Rep. Debbie Phillips represents the Athens area which is not at the heart of the shale gas boom but is seeing its impact through things like injection wells.

Phillips is glad the severance tax bill has been introduced but hopes it spurs a deeper discussion into what that money could be used for.

“There are other impacts in a lot of communities so there’s additional traffic congestion, there are public safety concerns, there are needs in the schools because of the influx of people coming into the area. I would just like to see some portion of that money invested into those communities,” Phillips said.

Phillips says shale gas could become the next so-called “boom and bust” cycle where an industry comes in, takes out the natural resources, and leaves. And Phillips says there have been other regions that have managed to implement measures so communities could benefit long after the industries leave.

“They have more jobs now than they did at the height of the resource boom because they were very forward-looking in investing the money coming into the region during the boom,” she said.

House Speaker Bill Batchelder is one of 18 co-sponsors of the bill so far. Huffman hopes to have a hearing before the holiday break and make a big push after the start of the new year.

Tags

Economy, Energy, Shale, Government/Politics

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