A group of more than 40 local elected, business, labor and community leaders in Ohio has formed a coalition to challenge Republican Gov. John Kasich's 6.5% severance tax proposal on unconventional oil and natural gas production.
The Protect Ohio Jobs Coalition said this week it was "dedicated to ensuring tax policies do not stop the growth of Ohio's oil and natural gas industry, the Ohio businesses that support it and the Ohio jobs it creates in related industries." Specifically, the group plans to advise lawmakers against a proposal included in HB 64 -- Kasich's $72.3 billion two-year state budget -- currently making its way through the legislative process.
Kasich's proposal would tax oil and gas volumes at 6.5%, but it would provide a lower rate of 4.5% for natural gas liquids to reflect their additional processing costs. Kasich has proposed several severance tax rates since he took office in 2011, but the latest is the largest (seeShale Daily, Feb. 3). The severance tax proposal is part of a broader plan to reduce the state's income taxes by 23% by 2017.
All oil and gas producers in the state now pay 2.5 cents/Mcf of gas and 10 cents/bbl of oil.
The coalition, which primarily includes mayors, trade unions, supply chain companies and county commissioners in the eastern part of the state near Utica Shale development, claims that it's the wrong time for a tax increase on the industry.
"This industry is facing low commodity prices and must make tough choices about where and how to invest," said Cambridge Area Chamber of Commerce President Joanne Sexton. "We need to encourage the industry to stay in Ohio, not create tax policies that make it more attractive to drill elsewhere."
But Ohio Department of Taxation spokesman Gary Gudmundson said the state essentially sheltered the industry during the Utica's early years. He said after four years of paying a "negligible tax," producers are generating significant wealth from Ohio's natural resources.
"The proposed higher severance rate is fair and would put Ohio near the competitive middle of the severance tax rates in other natural gas- and oil-producing states," he said. "It is time the industry began to reimburse taxpayers for the services they're providing through their taxes and pay a reasonable return to the residents of Ohio where the resources are being harvested."