From the Columbus Dispatch:
By Joe Vardon
The “fracking” tax boost/income-tax-cut package that Gov. John Kasich couldn’t push through the legislature in 2012 appears primed for passage next year.
Kasich held his annual year-end review yesterday at the Statehouse, an event where the Republican governor and GOP legislative leaders tied a bow around 2012’s accomplishments and looked ahead to what’s in store for 2013. The two Republicans whose chambers refused to take up Kasich’s proposal to raise severance taxes on shale drillers and cut the state’s income tax, Ohio House Speaker William G. Batchelder of Medina and outgoing Senate President Tom Niehaus of New Richmond, both predicted that Kasich would win approval for the plan in 2013.
“I don’t think there’s any question we ultimately will support it,” Batchelder said, with Kasich seated to his left.
It was the Republican Batchelder’s House that stripped Kasich’s fracking tax increase from the roughly 3,000 pages of legislation the governor proposed as part of a mid-budget-cycle review. Kasich proposed taxing crude oil and natural-gas liquids drawn from horizontally drilled wells at 1.5 percent of gross receipts, eventually increasing to 4 percent, and dry gas at 1 percent.
The state currently charges a 20-cents-per-barrel tax on crude oil, a 3-cent tax per 10,000 cubic feet of dry gas and no tax for gas liquids, regardless of how the wells was drilled. Kasich’s plan would exempt roughly 90 percent of the state’s conventional wells — about 44,000 wells producing small amounts of oil — from any severance tax.
Niehaus, who will be succeeded next year as Senate president by Keith Faber of Celina, didn’t take up the fracking tax proposal either. He predicted that the GOP-controlled Senate ultimately will approve the plan, but he also said, “Whatever that tax is, we want to make sure we’re not penalizing businesses from doing business in Ohio.”
That comment was representative of the concerns the oil-and-gas industry raised as it sparred publicly with Kasich over his plan this year.
Kasich, who was seated to Niehaus’ right yesterday, scoffed at the notion that an increased severance tax would drive drillers away.
“Are you kidding me?” he said. “Every single time I meet with the industry privately, you know what they say? They say we should take this (tax plan) and run. But then they get their lobbyists and all these other people and they obscure the issue.”
Kasich’s original proposal was estimated to generate an income-tax cut worth $500 million annually by 2017, based on energy prices in March. He said yesterday the severance-tax plan will be rolled into a broader tax-reform proposal that will be part of his proposed 2013-14 budget in early February and designed to significantly lower the state’s income tax, especially for small businesses.
“This income tax is too darn high,” Kasich said. “And people say we’ve already lowered it and did it do any good? Yeah, it’s done good. We’ve got 127,000 jobs, including a more-friendly business climate. But this tax, at 5.9 percent, is too high.”
Kasich also said another key initiative in 2013 will be a new school-funding formula, which he suggested would be proposed separate from the budget and would be explained in an “education night”event with stakeholders. He didn’t offer specifics of his proposal yesterday but said, “I want a child, no matter where they live, no matter what the wealth is in their district, to be able to compete effectively with a child in every other district.
“There are going to be some programs in there that I think should be viewed very positively about opportunity for schools to change, to innovate,” Kasich said. “We don’t look at this as an effort to try and address some court case, but rather this is a program to make sure that children have the capability to succeed.” He was referring to the Ohio Supreme Court’s 1997 ruling in the DeRolph case that the state’s school-funding system was unconstitutional.
A significant portion of Kasich’s 2012 review yesterday spanned beyond the last 12 months and incorporated his entire two years as governor. For instance, information Kasich’s press office distributed touted the nearly $500 million socked away in the state’s rainy-day fund, the addition of 127,300 jobs statewide, a drop of 2.1 percentage points in the state’s unemployment rate and a 7.6 percent reduction in the state government’s workforce since January 2011 — the month Kasich took office.
Kasich’s legislative achievements specific to this year include a new state energy policy that contains regulations for shale drilling, and education-policy changes that include a third-grade reading requirement and a new grading system to judge schools’ performances.
“This year, as I traveled through Ohio, I heard voters consistently say that they are fed up with the hyper-partisanship and extremism of the last two years,” said House Minority Leader Armond Budish, D-Beachwood. “I look forward to working cooperatively with the governor and Republican legislative leaders on a job-focused agenda. Yet I fear that they are deaf to the message.”
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.
The Ohio Environmental Council, a statewide eco-group based in Columbus.
Earthjustice, a national eco-group.
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.
Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.
Allegheny Front, environmental public radio for Western Pennsylvania.