COLUMBUS: Two key Ohio Republicans have come out against Gov. John Kasich’s proposed higher severance tax on gas-oil drilling.
Both Ohio Treasurer Josh Mandel and Ohio House Speaker William G. Batchelder of Medina spoke out Thursday against Kasich’s tax plan at the three-day winter meeting of the powerful Ohio Oil and Gas Association.
Three other other Republican legislatiors also pledged their support to the association.
The association’s three-day annual winter meeting was a celebration of growing success of the liquid-rich Utica shale and the unveiling of a political campaign against Kasich’s tax plan.
The industry is also opposed to giving local communities any control over drilling, against a new state sales tax on drilling royalties paid to landowners and worried about "reactionary" regulatory policies on drilling coming from Columbus and Washington, D.C.
The 3,200-member association is also troubled by drilling opponents termed "well haters," many of whom have out-of-state ties and are "outside agitators," said Thomas Stewart, the association’s executive vice president.
"This is going to be a fight, a passionate fight," Mandel said of the severance tax.
"Now is not the time for government to kill the golden goose and scare away the capital that could lead to a long-term recovery in our state," he said.
He labled Kasich’s tax proposal as little more than a plan to redistribute wealth.
Ohio should lease as much state property as possible, not tax the industry, he said.
Batchelder said the governor’s tax proposal, now part of the state budget bill, to be "nonsense."
He said he had no intention of supporting the tax proposal and suggested that the severance tax will fail.
Increasing the severance tax "is absolutely the wrong direction to go," said state Rep. Andy Thompson, R-Marietta.
Kasich wants drillers to pay a severance tax as high as 4 percent to fund income-tax cuts for Ohioans.
That plan calls for taxing oil extracted by horizontal drilling at 1.5 percent of market value for the first year, a rate that may be extended another year if initial drilling costs aren’t recovered. After that, the rate would be 4 percent annually.
The same rate structure would be applied to natural-gas liquids. The levy on gas would be held at 1 percent.
The changes would generate $920 million through fiscal year 2017.
The state’s current severance tax is 20 cents per barrel of oil and 3 cents per 1,000 cubic feet of natural gas with no tax on natural-gas liquids. The state collected $10.6 million in severance tax in fiscal 2010.
Stewart came out swinging against Kasich’s tax plan.
It is unfair to target only the drilling industry to fund the imcome tax refund and imposing the tax now would hurt the drilling industry that is poised to boost Ohio’s economy. Stewart said.
It is, he said, "a policy based on envy."
Errors were made by the state and the tax will not produce the income that Kasich has stated, Stewart said. He called the4 state’s data "very flimsy" and "garbage."
The tax would be paid by individual landowners, not drilling companies, he said.
Kasich, he said, has "an obsession" with taxing the gas-oil industry.
It is likely that Ohio, with neighboring Pennsylvania and West Virginia, will soon be producing nearly 15 percent of the natural gas consumed in the United States, a panel of industry experts said.
The whole country consumes 70.3 billion cubic feet per day, and the three-state region will soon be producing 10 billion cubic feet per day or 14.3 percent of the national total from the Utica and Marcellus shales, said Kenneth Mariani, president and CEO of EnerVest Operating LLC. one of the big players in Ohio’s still-developing Utica shale.
That is going to happen in the next few years, he said. That kind of impact is staggering and difficult to grasp, but the impacts will be sweeping, he said.
Oklahoma-based Gulfport Energy Corp. is pleased with the results from its 14 initial Ohio wells drilled in 2012 and intends to drill 50 new wells this year, said CEO James Palm.
Most of those wells are in Belmont, Harrison and Guerney counties. "We like what we’ve found there," he said during a panel discussion.
Cheaspeake Energy Corp. with 200 wells in Carroll, Columbiana, Harrison and Jefferson counties is "optimistic" about the Utica shale, said Scott Rotruck, vice president of coprorate development.
The Utica boom has contributed to the association membership climbing from 1,400 to 3,300 in the last two years, said president Joel Rudicil.
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.