Ohio Gov. John Kasich is proposing changes to how the state taxes and regulates oil and natural-gas drilling with what he calls a goal of “leading the nation with a comprehensive energy strategy.”
The plans, many of which require legislative approval, include a higher tax on drillers to pay for an income-tax cut, updating standards for well construction, disclosing chemicals used in hydraulic fracturing and new regulations for natural-gas gathering lines, according to information released by Kasich’s office.
Kasich, a 59-year-old Republican, is releasing his proposals today as part of a “Mid-Biennium Review” halfway through Ohio’s two-year budget. On energy, the governor has said he wants a balance between regulations that protect the environment while allowing for new jobs and investment.
“We can do it where it’s environmentally sound and we get the jobs,” Kasich told reporters yesterday in Dayton, where he attended a National Collegiate Athletic Association men’s basketball tournament game with President Barack Obama and British Prime Minister David Cameron.
States including Ohio, Pennsylvania and North Dakota are confronting the costs and benefits of hydraulic fracturing, or fracking, which involves injecting water, sand and chemicals underground at high pressure. While the industry says fracking is safe and has allowed increased production, environmental groups say it can lead to contamination.
The governor’s plans also include $1.74 billion for capital improvements, the first such budget in Ohio since fiscal 2009-2010. There would be $1.36 million in bonds backed by the state’s General Revenue Fund, according to the administration.
Drillers would pay a severance tax as high as 4 percent that would generate as much as $1 billion by 2016 to reduce income taxes paid by individuals and small businesses, according to Kasich’s office.
At least one environmental group is unhappy with the Kasich plan.
“Gov. Kasich’s new energy plan is a profound disappointment,” said Alex Beauchamp, Midwest region director at Food & Water Watch, a national eco-group.
“The governor has chosen to completely ignore the significant risks fracking poses to Ohio. Ignoring those risks, particularly after the ODNR just found that fracking waste fluid was likely responsible for a dozen earthquakes near Youngstown, is recklessly irresponsible. Beyond earthquakes, we know that fracking poses dangerous risks to our drinking water, our air and even Ohio’s property values.”
He added, “Taxing fracking doesn’t make it safe. . . . Ohio should ban fracking now.”
The Ohio Oil and Gas Association has “serious concerns and questions” about the Kasich tax plan, said Tom Stewart, its executive vice president.
Gas and oil drilling is just getting under way in eastern Ohio and raising the severance tax like Kasich wants “will negatively impact the economic future of Ohio and its residents,” Stewart said. “For this reason, we oppose a tax increase of any kind, particularly one targeting an emerging industry.”
Stewart said it is unfair to ask one industry to fund an income-tax decrease and said the drilling could yield major economic impacts for Ohio.
Kasich also wants an annual tax on banks and other financial institutions of 0.8 percent on the first $500 million of net worth and 0.25 percent on larger amounts.
Currently, banks pay a corporate-franchise tax of 1.3 percent of net worth. Mortgage brokers, payday lenders and other institutions pay a separate levy that Kasich wants to eliminate so all institutions pay the new Financial Institutions Tax, according to the Ohio Taxation Department.
It’s a wash
A few large banks would see taxes increase by about a combined $30 million a year under Kasich’s plan, while others would see their bills cut about the same amount, the administration said. The state collects about $225 million a year from financial institutions, according to the department.
Kasich, elected with a pledge not to raise taxes, has vowed that all changes would be “revenue neutral.”
The governor’s plans have drawn opposition, including from the Ohio Oil and Gas Association, which has said asking one industry to fund tax cuts for others is unfair. Groups including the Fraternal Order of Police of Ohio and Ohio Association of Professional Fire Fighters also have said revenue from drilling should offset cuts to schools and local governments.