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Ohio Severance Tax Proposal Could Be Revisited in 2013
Republican leaders in the Ohio General Assembly indicated that they will give some consideration to Gov. John Kasich’s proposal to impose new severance taxes on hydraulic fracturing (fracking) and natural gas liquids (NGL) in 2013, after declining to do so in 2012.
During the governor’s annual year-end press conference on Wednesday, reports quoted Ohio House Speaker William Batchelder (R-Media) as being supportive of the tax proposal. “I don’t think there’s any question we will support it,” he said.
But Batchelder spokesman Mike Dittoe told NGI’s Shale Daily he was with the speaker when he made his comments and clarified that Batchelder and other members of the Ohio House of Representatives Republican Caucus would still be proceeding with caution.
“What he was really getting at was that if there are going to be any changes to the severance tax, it’s going to have to be something very convincing in the sense that it will not harm the industry,” Dittoe said Friday. “He has real concerns about the original proposal from the governor’s office, and those concerns are not necessarily eliminated yet.”
Last March, Kasich had proposed new taxes on fracking and NGL production, with the revenue passed along to Ohioans in the form of a personal income tax cut (see Shale Daily, March 6). But the Republican-controlled House was unenthusiastic about raising taxes and tabled the proposal (see Shale Daily, March 20).
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 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 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.
“This is not an easy issue; it’s extremely complex,” Dittoe said. “On top of that, our No. 1 priority is to ensure that we can continue to bring jobs to this area with this particular natural resource. The speaker would not be in favor of anything that is going to discourage that. His words were meant to convey willingness to work with the governor on the issue, and work with the other interested parties as well.”
Dittoe said Kasich would probably submit a budget, possibly including a severance tax proposal, during the first week of February.
Ohio’s crude oil production totaled 4.85 million bbl (averaging 13,296 b/d) in 2011, while natural gas production was about 73.3 Bcf (averaging 200.8 MMcf/d), according to the Ohio Department of Natural Resources (see Shale Daily, Dec. 7). That amounted to a 1.43% increase in oil and a 6.18% decrease in natural gas from 2010.
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