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Ohio Utica Shale

Groups call for Ohio, Pa., West Va. regional severance tax

By Bob Downing Published: March 11, 2014

From Policy Matters Ohio on Monday:

Calling for a regional frack tax: An open letter to three governors



March 10th, 2014

We write today to urge that our states — Pennsylvania, Ohio and West Virginia — take a common, regional approach to taxation of gas and oil at the state level, by adopting a severance tax rate on fracking no lower than that of West Virginia, without holidays, exclusions and credits, and with a similar tax base across all products yielded from a well.

Download letter (2 pp)
Press release
March 10, 2014
Hon. Tom Corbett, Governor
Commonwealth of Pennsylvania
225 Main Capitol
Harrisburg PA 17120
Hon. John Kasich, Governor
State of Ohio
Riffe Center, 30th Floor
77 South High St.
Columbus, Ohio 43215-6117
Hon. Earl Ray Tomblin
Office of the Governor
State Capitol
1716 Kanawha Ave. E.
Charleston, WV 25305

Governors Corbett, Kasich, and Tomblin:

We write today to urge that our states take a common, regional approach to taxation of gas and oil at the state level, by adopting a severance tax rate no lower than that of West Virginia, without holidays, exclusions and credits, and with a similar tax base across all products yielded from a well.

During the past five years, our states have experienced rapid development of oil and gas extraction (from hydrofracturing or fracking) in the Marcellus Shale and Utica Shale. The growth of these industries has brought not only new jobs and tax revenue, but growing costs to state and local governments to manage and regulate the industry, and to address its local impacts. As we are sure you are aware, new environmental pressures, increased road maintenance needs, new demands on emergency responders, and rapid escalation of housing costs are common to the areas in our states that have seen rapid gas and oil development.

Pennsylvania, Ohio, and West Virginia led the nation in the commercial development of fossil fuels, yet the states have taken radically different approaches to sharing the benefits of mineral wealth with their residents. The structure of West Virginia’s mineral extraction tax puts it in the middle of producing states. Ohio’s very low tax rate and the lack of a state-level tax in Pennsylvania until 2012 put both states at the back of the pack.

Given our states’ shared experience with natural gas and oil extraction, a common rate and structure of taxation would be a smart approach. Working together, we can make sure our region benefits from new development even as we protect our communities from new costs and the environmental risks of fracking. Having a single tax rate across the three states would provide important long-term predictability for the industry and help provide a more promising future for Ohio, Pennsylvania, and West Virginia. Setting a common tax no lower than the West Virginia rate, as we recommend, would bring the entire region more in line with gas-producing states in the West and in the South.

This reasonable rate and structure would take taxes out of the competitive equation, eliminate any distortion widely varying tax rates might cause, and help provide sustained funding for state priorities, all with little overall impact on the industry.

Substantial investments have been made by all three states and many local governments to ensure compliance with regulations, expand infrastructure, and manage the demands and impacts of this growing industry. An adequate severance tax would ensure that industry contributes to these costs.

Interstate competition can only lead to a race to the bottom, in employment, infrastructure, and environmental protection. Interstate cooperation can ensure that industry growth is managed in a way that maximizes benefits and minimizes costs to residents.

Although our state capitals are separated by hundreds of miles, our states’ oil and gas fields are separated by only a few miles. From that vantage point, a common tax rate and structure across the states seems not only simple but logical.

We look forward to discussing this topic with you in more detail in person. Thank you for your attention to this matter.

Sharon Ward, Director
Pennsylvania Budget and Policy Center
Amy Hanauer, Executive Director
Policy Matters Ohio
Ted Boettner, Executive Director
West Virginia Policy Center on Budget and Policy




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Utica and Marcellus shale web sites

Ohio Department of Natural Resources' Division of Oil and Gas Resources Management State agency Web site.

ODNR Division of Oil and Gas Resources Management. State drilling permits. List is updated weekly.

ODNR Division of Geological Survey.

Ohio Environmental Protection Agency.

Ohio State University Extension.

Ohio Farm Bureau.

Ohio Oil and Gas Association, a Granville-based group that represents 1,500 Ohio energy-related companies.

Ohio Oil & Gas Energy Education Program.

Energy In Depth, a trade group.

Marcellus and Utica Shale Resource Center by Ohio law firm Bricker & Eckler.

Utica Shale, a compilation of Utica shale activities.

Landman Report Card, a site that looks at companies involved in gas and oil leases.FracFocus, a compilation of chemicals used in fracking individual wells as reported voluntarily by some drillers.

Chesapeake Energy Corp,the Oklahoma-based firm is the No. 1 driller in Ohio.

Rig Count Interactive Map by Baker Hughes, an energy services company.

Shale Sheet Fracking, a Youngstown Vindicator blog.

National Geographic's The Great Shale Rush.

The Ohio Environmental Council, a statewide eco-group based in Columbus.

Buckeye Forest Council.

Earthjustice, a national eco-group.

Stop Fracking Ohio.

People's Oil and Gas Collaborative-Ohio, a grass-roots group in Northeast Ohio.

Concerned Citizens of Medina County, a grass-roots group.

No Frack Ohio, a Columbus-based grass-roots group.

Fracking: Gas Drilling's Environmental Threat by ProPublica, an online journalism site.

Penn State Marcellus Center.

Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.

Allegheny Front, environmental public radio for Western Pennsylvania.