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State Net Capitol Journal Legislative Updates: Ohio Governor Continues to Push for Shale Fracking Tax

KASICH CONTINUES PUSH FOR DRILLING TAX: Ohio Gov. John Kasich (R) renewed his call to impose steeper oil and gas drilling taxes on out-of-state oil companies in order to pay for an income tax cut for Buckeye State residents, telling reporters, "The point is for out-of-state oil companies to pay more and all Ohioans pay less."

The governor said that the expected boom from shale oil and natural gas drilling - an estimated peak of about $500 million annually - is a chance to ensure that the predominantly out-of-state companies doing most of the drilling will pay for an in-state tax cut. But the proposal has drawn harsh resistance among Kasich's GOP colleagues in the Legislature, who are leery of endorsing anything that sounds like a tax increase in an election year. Although they have said they are willing to discuss the issue further, Republican lawmakers that control the General Assembly removed the proposal from the budget review bill last March and have not brought it up for further discussion.

Under Kasich's proposal, Ohio would continue its current policy of charging companies 20 cents a barrel for oil retrieved through conventional wells. But oil obtained through hydraulic fracturing, or fracking, would be taxed at 1.5 percent of the annual gross sales for companies in their first year of operation. After that, the tax would grow to 4 percent of gross sales. Natural gas drillers would also be impacted, with companies that produce less than 10,000 cubic feet per day through traditional wells - about 90 percent of the state's natural gas producers - would no longer pay a tax, while those producing more than 10,000 cubic feet per day would pay a 1 percent tax, down from the current rate of 3 percent. All natural gas produced through fracking would be taxed at 1 percent regardless of how much is drawn.

Lawmakers would ultimately have control over the revenues generated by the taxes. But a decision on the governor's proposal is not forthcoming any time soon. The Legislature has recessed for the summer and may not return until after the Nov. 6 election. (CLEVELAND PLAIN DEALER, TOLEDO BLADE).

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