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Ohio Utica Shale

Hagan proposes raising Ohio's severance tax on drilling

By Bob Downing Published: February 20, 2013

A press release from State Rep. Robert Hagan, D-Youngstown:

State Representative Robert F. Hagan (D-Youngstown) announced today that he will be introducing legislation to raise the severance tax on oil and natural gas production to 7.5%. Such a tax would raise hundreds of millions of dollars over several years and help restore cuts that were made to schools and local governments in Governor Kasich’s first budget. The tax would also provide for the hiring of additional inspectors to monitor drilling activity in the state.

 

“The Ohio Department of Natural Resources has only a few dozen inspectors for thousands of active and inactive wells,” Rep. Hagan said. “That’s a terrifying ratio. We need to equip the state and our local communities with the necessary resources to ensure that drilling operations are being conducted in a responsible manner in accordance with the law.”

 

Ohio’s severance taxes are currently among the lowest of all energy states, and are set at fixed amounts rather than as a percentage of market value. Regardless of the price for a barrel of oil, a driller in Ohio currently pays just a dime per barrel for the severance tax and another dime for a conservation fee. Whether oil is selling for $35 or $150 per barrel, Ohio is collecting only 20 cents. The severance tax on natural gas drilling is similar in both design and low revenue yield.

 

“Ohio’s severance tax is behind the times and needs to be modernized to reflect the state’s newly accessible wealth of natural resources,” Rep. Hagan said. “An updated severance tax will provide funds to restore jobs and services, and will help impacted communities with up-front costs of drilling.”

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