Two state lawmakers in Ohio, home of the Utica Shale play, are preparing legislation that would offer tax credits for five years for converting cars and trucks powered by gasoline or diesel fuel into bi-fuel vehicles, and for purchasing vehicles powered by gaseous fuels, including propane and compressed natural gas (CNG).

Rep. Sean O’Brien (D-Hubbard) told NGI’s Shale Daily that the one-time tax credit would cover up to 50% of the cost of a new purchase or a conversion, with a maximum of $5,000 for light vehicles, $10,000 for medium trucks and $25,000 for heavy-duty trucks.

“I agreed with Gov. [John] Kasich when he said Ohio needs to be a leader in this area, but yet we really haven’t done anything,” O’Brien said Friday (see Shale Daily, Sept. 26, 2011). “We didn’t want to reinvent the wheel. We looked at what’s worked in other states, Texas, Oklahoma, Pennsylvania…even Indiana, and we’re finding that these states are really starting to move up. They’re getting more CNG vehicles on the road using some form of tax incentives.

“The fact that Ohio [isn’t offering an incentive] is a paradox. We have the Utica Shale, a big shale play, and we’re not using our own natural resource. So that’s why hoping to push this forward, to get out of [that situation] and get the chicken-and-egg question answered.”

While Utica development is still in its infancy when compared to the neighboring Marcellus Shale, well permitting in the play is picking up. According to the Ohio Department of Natural Resources (ODNR), 75 permits were issued during July for wells targeting the Utica Shale (see Shale Daily, Aug. 16).

O’Brien emphasized that the tax credits would only be offered for five years. “The idea behind this is that government can help kick start it and get it going,” he said. “But once it does, it’s really up to the marketplace and the private sector to determine how CNG vehicles are going to fare in the state.”

Rep. David Hall (R-Millersburg), who chairs the House Agriculture and Natural Resources Committee, told NGI’s Shale Daily that the tax credits would be funded in part by the state’s severance taxes on oil and gas, but other funding sources were also under consideration.

“We’re trying to figure what will play in for the five-year period,” Hall said Friday. “There may be other things added and things pulled back.”

Hall said that he and O’Brien had been working on the bill for about year, and that both men wanted to get the legislation right the first time. “In the process we had a lot of issues,” Hall said. “We had to make sure that we had all the regulations in for the drilling process. We had to make sure we had the infrastructure put in for pipelines and that we had code there. I think we’re going to be fine.

“We are already having some movement with independent business leaders. They are already putting infrastructure in, like CNG gas stations, right now. I think as we move forward, you’re going to see more excitement.”

Hall added that when the bill is introduced to committee, lawmakers will consider how to let local governments and school districts qualify for the tax credits. “The larger businesses in Ohio have already taken this on and converted their fleets,” Hall said. “We’re looking at what we can do to help [local] governments in lean times be able to stretch their dollars and maybe convert their fleets over potentially to CNG.

“Hopefully in the committee process we will have members who want to buy into this. At this time we haven’t put that in the bill, but as we are talking to members I think they’re feeling like they would like to see something like this added to the bill.”

Asked if he thought the bill would pass, Hall said, “I’m looking forward to discussing this with fellow members. I know that many of the legislators in the state House are excited about what’s happening in Ohio and the opportunities. This is another opportunity that I feel will help move Ohio forward.”

Both chambers of the Ohio General Assembly are scheduled to reconvene during the first week of October; the state Senate returns on Oct. 1, the House of Representatives on Oct. 2. O’Brien said the tax credit bill would probably be introduced in mid-October, after one or two more meetings to work out last-minute details.