Ohio Gov. John Kasich said he is prepared to fight his fellow Republicans in the General Assembly who are unenthusiastic about his plans to restructure taxes and regulations on the oil and natural gas industry.
On Friday Rep. Ron Amstutz (R-Wooster), chairman of the House Finance and Appropriations Committee, announced that he was tabling Kasich's plans from consideration as part of HB 487, the state's mid-biennium budget review bill.
"This aspect of the [budget] proposal touches on a high priority for our caucus -- making Ohio's tax burden as equitable and competitive as possible," Amstutz said. "However, the more the members of our caucus have learned about this particular proposal, the more concerned I've become that there are key questions that cannot be sufficiently answered and resolved within the available legislative time frame, especially in light of all the other legislative work on our plate.
"It may be possible in the future to develop a tax reform package that makes bigger improvements in Ohio's tax equity and competitiveness."
Earlier this month a spokesman for the Ohio House of Representatives Republican Caucus hinted that Kasich might have trouble getting his proposal passed if were to call for higher taxes (see Shale Daily, March 6).
Kasich's plan would tax unconventional wells producing oil and natural gas liquids (NGL) at a rate of 1.5% of gross receipts for the first year. Producers that don't recoup their investment in the first year could apply to extend the 1.5% rate for a second year, but otherwise they would pay 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 calls 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 remain unchanged.
Connie Wehrkamp, Kasich's deputy press secretary, told NGI's Shale Daily that the governor was disappointed with Amstutz's decision.
"The governor has said for a long time that Ohio's income tax is too burdensome and needs to be lowered so [the state] can become more competitive in the global market," Wehrkamp said Monday. "We believe strongly that updating a 40-year-old oil and gas tax to ensure all Ohioans benefit from these resources -- rather than just out-of-state oil and gas companies and their shareholders -- is right and necessary.
"Every cent of new revenue would go toward an income tax cut to help families and small businesses. Even with this tax modernization, Ohio will still have one of the lowest severance tax rates among oil and gas producing states."
Revenue from the revamped tax structure would be used to finance a state income tax cut.