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Ohio Lawmakers Unlikely to Reach Oil/Gas Tax Compromise by October ‘Deadline’

A legislative task force established to a reach a compromise on increasing Ohio's unconventional oil and natural gas severance tax has said it would need more time to reach a solution, indicating that an Oct. 1 deadline announced by Republican leaders in June won't be met. 

The general assembly has been debating an increase in the severance tax for years without resolve, as production from the Utica Shale has continued to increase. Negotiations over the summer failed to include an increased severance tax in the state's biennial budget (see Shale DailyJune 8). As a result, Republican leaders from the state House of Representatives and the state Senate said a task force would be assigned to nail down a compromise and get the rate increased (see Shale DailyJune 16).

In June, when the announcement was made during an impromptu press conference, Senate President Keith Faber told reporters that Oct. 1 would serve as a "hard deadline" for recommending a fair severance tax to the legislature for a vote. But Faber and others have told local news media organizations in recent days that slumping oil and gas prices and the complexity of reaching a compromise would likely require more time.

The task force consists of three members from each chamber -- two Republicans and one Democrat -- as well as Director of the Ohio Office of Budget and Management Timothy Keen. A task force co-chairman said the group would likely outline some of its recommendations in early October, but added that an exact rate and other key provisions could take longer.

While the state House passed a bill last year to tax unconventional production at 2.75%, Republican lawmakers said in June that a likely starting point for renewed negotiations would be based on West Virginia's severance tax rate of 5% (see Shale DailyMay 15, 2014). Currently, Ohio has one of the lowest oil and gas severance tax rates in the country. Producers pay 20 cents/bbl for oil and 3 cents/Mcf for natural gas, according to the Ohio Department of Taxation.

Ohio's Republican Gov. John Kasich, who has proposed several severance tax increases ranging from 1.5% to 6.5% since he took office in 2011, has said through a spokesman that he supports legislative efforts to increase the severance tax (see Shale DailyFeb. 3). It remains unclear if the group can reach a compromise, however, with the co-chairman saying an actual rate could be difficult to get to anytime soon.

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