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Ohio Utica Shale

Kasich proposal likely to surface in Ohio budget compromise talks

By Bob Downing Published: June 7, 2013

From the Associated Press:

By JULIE CARR SMYTH

AP Statehouse Correspondent

Ohio Gov. John Kasich is trying to line up support in Ohio’s drilling heartland for his proposed oil-and-gas tax increase by offering to send a quarter of the proceeds back to Appalachia.

The emerging proposal is likely to surface as part of compromise talks on the $61.7 billion, two-year state budget that cleared the Ohio Senate in a 23-10 party line vote Thursday. Both GOP-led legislative chambers have thus far rejected the drilling tax increase, but they supported significantly different tax packages that will need to be reconciled.

The Republican governor initially proposed raising severance taxes on Ohio’s burgeoning shale drilling industry to 4 percent and directing proceeds toward a statewide income-tax cut. Tax-averse lawmakers, energy companies and economically challenged eastern Ohio counties balked, forcing the administration to regroup.

State Rep. Ross McGregor, a Springfield Republican, said he supported the original proposal and wants to see whatever changes are necessary to move the drilling tax forward. He likened sending money to affected Appalachian areas to earmarking the bulk of Turnpike bond proceeds to northern Ohio, where the roadway is located.

"I’m sympathetic with colleagues whose districts are the most impacted (by drilling)," McGregor said. "Certainly, these areas of the state have had a real draught in economic development, not just over the past couple of years but for decades. I also see taxes from this resource as a benefit to the whole state."

The new plan would raise the severance tax rate to 4.5 percent and send 25 percent of the revenues to 33 Appalachian counties, through their development agencies. The remaining 75 percent would still go to statewide income-tax reductions. That could mean more than $370 million for the region and $1.1 billion in tax cuts over five years.

Kasich spokesman Rob Nichols said that through discussions on the tax, the administration has determined that offering a portion of proceeds to the region where drilling is booming is "the right thing to do."

"All of Ohio stands to benefit enormously from the shale boom, especially eastern Ohio," he said. "As the boom continues to grow it’s only right that eastern Ohio communities have the resources they need to both address new demands and also make sure these new opportunities produce significant, sustainable benefits for local families."

The industry remains strenuously opposed to Kasich’s tax swap plan, Tom Stewart of the Ohio Oil and Gas Association said.

"It’s like taking a 100-dollar bill from eastern Ohio landowners, then ripping off a quarter of that bill and giving it back to them," he said. "What do you do with that?"

Stewart said the industry has supported a doubling of the severance tax in 2010 and is not averse to taxation "for good public policy reasons."

"It’s not an issue of whether we like supporting it or not," he said. "In this case, we see the severance tax being used to support a political purpose to achieve a political goal that does not support public safety and trust in the gas regulatory program."

That political purpose is lowering Ohio’s state income tax, a campaign promise of Kasich’s in 2010.

Columbus Chamber of Commerce lobbyist Michael Hartley said reducing the income tax would help the entire state’s economy.

"Our No. 1 priority for state stuff is lowering the state income tax. That helps our members," he said.

But having more of that money returned to eastern Ohio communities is essential, said Tracy Drake, chief executive officer of the Columbiana County Port Authority.

"The area has seen monies for other initiatives, like casinos and Turnpikes, go to local areas," he said. "So if there is to be a tax on this industry here, obviously we would think it would be appropriate for some of that tax to stay local, because it’s impacting the area and, historically, eastern Ohio has been under-recognized for economic development by the rest of the state."

Stewart said Kasich’s plan still unfairly taxes a single industry for the benefit of other areas of the state.

"That’s a question that needs to be asked of Ohio landowners in eastern Ohio, who have been waiting decades for this," he said. "What’s that person in Cincinnati getting out of this? They’re getting $4 natural gas (per 1,000 cubic feet) when it should be priced at $16, they’re getting 38,000 jobs so far."

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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.

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.