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Ohio Budget Bill Passes House Without New Oil, Gas Taxes

Legislators in the Ohio House of Representatives have passed a mid-biennium budget review bill but stripped out Gov. John Kasich's proposals to restructure taxes and regulations on the oil and natural gas industry.

HB 487 passed the House on Wednesday by a 61-33 vote and now moves to the Senate.

"Because there are some many policy changes in that bill, the House took the step of actually separating it into 10 different bills," Mike Dittoe, spokesman for House Speaker William Batchelder (R-Medina), told NGI's Shale Daily on Friday. "The main portions of it remained intact in [HB] 487, but there has been no separate bill introduced as of yet, and I don't know that there will be, regarding the severance tax that the governor proposed."

Kasich had proposed new taxes on hydraulic fracturing (fracking) and natural gas liquids (NGL), passing the revenue along to Ohioans in the form of a personal income tax cut (see Shale Daily, March 6). But the governor's Republican colleagues in the House, unenthusiastic about raising taxes, tabled the proposals shortly afterward (see Shale Daily, March 20).

"We're still operating under that mantra of not having raised taxes, not having money to work with previously, and still closing the deficit," Dittoe said of the House Republicans. "I know the speaker feels pretty strongly about that.

"We are still in conversations with the governor on his severance tax issue, but certainly since it was pulled out of the bill immediately it doesn't look like there will be any immediate action on it, at least at this time."

Asked if there was a possibility that Kasich would veto the budget bill because his oil and gas tax proposals weren't included, Dittoe said, "we maintained about 90% of what the governor wants. So I would be absolutely beyond shocked if there was any change to his signing that bill. He does have line-item veto power, but I would be shocked if he got rid of the entire bill."

Rob Nichols, spokesman for the governor, told NGI's Shale Daily negotiations were continuing. "It's something that we continue to talk about, something that we believe is absolutely, fundamentally important to job creation in this state," Nichols said Friday. "We're a state that's starving for capital in our economy.

"Reducing the state income tax would be a shot of adrenaline into Ohio's small businesses. We've said that we're going to give the legislature time to understand why it's important. It's something that we're going to keep talking about everywhere we go. It's something we're going to keep pressing on. We think that over time people will see it our way."

Kasich's plan would have taxed unconventional wells producing oil and NGLs at a rate of 1.5% of gross receipts for the first year. Producers that didn't recoup their investment in the first year could apply to extend the 1.5% rate for a second year, but otherwise they would have paid a standard rate of 4% of gross receipts annually for the remainder of the life of the well (see Shale Daily, March 15).

The governor's plan also called for taxing unconventional gas wells at 1% of gross receipts; eliminating the severance tax on conventional gas wells that produce less than 10 Mcf/d; taxing conventional wells that produce more than 10 Mcf/d by 1% on gross receipts up to a cap of 3 cents/Mcf; and implementing a $25,000/well fee to benefit local governments. Taxes for conventional wells producing oil and NGLs would have remained unchanged.

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