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Oil/Gas Severance Tax Still Under Consideration in Ohio Senate

The Ohio Senate has opted to craft its own state budget rather than work from a version passed by the state House of Representatives last month or borrow from Gov. John Kasich's proposed budget, which called for a 6.5% severance tax on oil and natural gas production.

Senate Finance Committee Chairman Scott Oelslager has said the Senate would start with a "clean slate." But the Republican said he didn't believe a prolonged fight over the budget would shape up before a June 30 deadline to pass it. The House, Senate and governor all have different forecasts for state spending over the next two years.

Last month, Republican leaders cut nearly all of Kasich's tax reforms from the House budget, including his severance tax proposal (see Shale Daily,April 15). The House's version reduced Kasich's $72.3 billion budget by $777 million. At the time, House majority leaders said Kasich's proposals to increase the state sales, commercial activity, cigarette and severance tax -- floated to help fund a $5.7 billion, 23% income tax cut -- had been removed.

Although House Speaker Cliff Rosenberger didn't rule out an eventual severance tax increase, he said his chamber was instead interested in forming a tax commission to discuss, research and make recommendations concerning the tax and other reforms.

Senate committees are currently at work on the budget and it remains unclear if a severance tax could advance in that chamber. Before hearings on the measure in the Senate Ways and Means Committee, the Protect Ohio Jobs Coalition urged members to "reject the job-killing tax and instead focus on policies that encourage oil and natural gas industry growth and job creation."

"The Ohio Senate has a distinguished record of advancing pro-growth economic policies," said Skip Gardner, president of the Guernsey County Commissioners and a member of the coalition. "We urge senators to continue this prudent legislative tradition and reject imposing a stifling tax increase in Ohio energy production that could threaten investment in Ohio, drive good paying jobs out of the state and cause energy costs to rise."

Kasich has proposed several severance tax increases since taking office in 2011, but his latest proposal was the highest yet (see Shale Daily, Feb. 3). It met immediate industry opposition when it was announced in February.

The jobs coalition, which was formed to fight the proposal and other energy-related tax proposals, primarily consists of  mayors, trade unions, supply chain companies and county commissioners from the eastern part of the state near Utica Shale development (see Shale Daily, March 26). It was formed in March with about 40 members and has since grown to more than 75.

The state Senate is expected to vote on a budget bill sometime toward the end of the month in order to give a conference committee enough time to resolve differences in the House and Senate versions by the June 30 deadline, lawmaker representatives said.

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