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Government and Politics

Bill could increase severance tax on Ohio gas and oil
Republican State Rep. says bill would generate $1.7 billion over 10 years

Andy Chow
In The Region:
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.
Bill could increase severance tax on Ohio gas and oil

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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 Representative 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.”

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 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—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 I’ve got guys standing around doing nothing, that costs us money. So we want that money to happen.’”

Democratic Representative 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 additional communities so there’s more traffic congestion, there are public safety concerns, there are needs in the schools because of the influx of people coming into the areas—I would just like to see some portion of that money invested into those communities.”

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.”

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 then make a big push after the New Year.
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