Ohio oil association questions governor's proposed tax changes

Ohio Gov. John Kasich’s proposed changes to his state’s oil and natural gas severance tax to help finance a planned $1 billion state income tax cut by 2015 has prompted the Ohio Oil & Gas Association to issue a statement outlining industry’s questions and concerns.

While explaining his plan during a Mar. 14 speech in Columbus, Kasich said the state's 40-year-old severance tax system for oil and gas production needed comprehensive updating.

OOGA Executive Vice-Pres. Thomas E. Stewart said, “Ohio’s current oil-and-gas tax structure, which was reformed only 2 years ago with the bipartisan passage of Senate Bill 165, is fair, competitive with neighboring states, and attractive to investment, which may total more than $34 billion in the state throughout the next several years.”

Under Kasich’s proposal, oil and natural gas liquids recovered through hydraulic fracturing in the Utica and Marcellus shale plays would be taxed at 1.5% of annual gross sales in the first year and 4% after that.

An initial 1.5% rate could be extended for an additional year only if initial costs to drill the well had not been recovered, Kasich said. Ohio's currently has no tax specifically covering NGLs.

Stewart said, “Crude oil and natural gas exploration in the state is still in its infancy and increasing the severance tax at this critical juncture will negatively impact the economic future of Ohio and its residents.”

Noting OOGA generally supports an income-tax decrease, Stewart said the organization objects to the idea of one industry being asked to disproportionately finance it. OOGA has more than 2,250 members involved in the exploration, development, and production of oil and gas in Ohio.

Contact Paula Dittrick at paulad@ogjonline.com.

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