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Ohio Utica Shale

Hagan votes against Ohio severance tax proposal

By Bob Downing Published: May 15, 2014

From Ohio state Rep. Robert Hagan, D-Youngstown, on Wednesday:

COLUMBUS –State Rep. Robert F. Hagan (D-Youngstown) today voted against House Bill 375, legislation that the tax rate on oil and gas drilling to largely pay for an income tax cut in Ohio.

 

“Instead of investing in infrastructure, public safety and education in the communities adversely affected by the oil and gas industry, the Republican legislature has decided to gift the wealthiest Ohioans with an income tax cut,” said Rep. Hagan. “The severance tax rate in HB 375 is puny compared to other major shale states and wildly misguided in how it allocates the revenue raised from fracking.”

 

House Republicans’ plan to alter Ohio’s severance tax to 2.5 percent would establish Ohio as the only state in the country to require oil and gas revenue—which is predominantly generated in rural and Appalachian working-class communities—to pay for an income tax cut that disproportionately favors Ohio’s wealthiest citizens.

 

A review of oil and gas taxation policies across thirty-five states that levy a tax or fee on drilling production shows that no state uses any amount of oil or gas revenue to pay for any level of income tax reduction.

 

Under the GOP plan, the first $21 million of revenue raised by the tax on oil and gas drilling will go to the Ohio Department of Natural Resources for drilling regulations, like capping orphan wells. Of the remaining funds, 85 percent will go toward income tax cuts targeting the wealthiest Ohioans, while some 17.5 percent will go to local governments. The plan also includes a tax break for big oil companies by authorizing a driller to deduct the first $10 million in receipts from oil and gas severed at a horizontal well.

 

Democrats tried to change the focus of the bill several times on the House floor, offering amendments to use the revenue to return the majority of the money to affected communities, reduce the recent sales tax hike and to raise the severance tax rate by one to five percent. GOP lawmakers blocked the proposals from formal consideration by the House.

 

“Tax breaks for oil companies and the richest top percent are a reflection of how disconnected Republicans are from the struggles of hardworking Ohio families,” said Rep. Hagan. “The opportunity to utilize our natural resources to benefit some of the most impoverished counties in our state is being squandered.”

 

The bill passed by a vote of 55 to 35. It now goes to the Ohio Senate for further consideration.

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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.

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