OUR VIEW: More equitable tax on oil, gas production needed

proposals by Kasich, Hagan on severance tax merit consideration

Published:

Another voice has joined Gov. John Kasich and Statehouse Republicans in the debate over Ohio's severance tax on natural gas.

State Rep. Bob Hagan, a Youngstown Democrat whose district has been impacted by horizontal hydraulic fracturing of oil and gas, is offering House Bill 212 as an alternative to the severance tax proposals being pursued by the governor and House Republicans.

Ohio's severance tax on natural gas, a levy on oil and gas producers, is roughly 1 percent, which is one of the lowest rates in the nation. Neighboring West Virginia and Michigan impose a 5 percent severance tax.

Hagan's measure would boost it to 7.5 percent, with 5 percent earmarked for local governments, with counties in eastern Ohio shale areas, such as Mahoning and presumably Portage, receiving more. Another 1.5 percent would be used for regulatory efforts, including hiring more inspectors and capping orphan wells. The remaining 1 percent would be set aside in a Severance Tax Trust Fund that could not be tapped until 2020, when investment earnings could be used for job training and related efforts.

As a Democrat in a Republican-controlled legislature, Hagan's chances of seeing passage of his bill are slim at best, but it deserves consideration -- as does Governor Kasich's contention that HB 375, the Republican severance tax measure, does not do enough in terms of returning revenue to Ohio.

Oil and natural gas are finite resources, and the burgeoning industry that is benefiting from them ought to be paying a fair share to the state in return for what it is receiving. The present severance tax, which was put in place before the boom in fracking, is inadequate.

Kasich's plan calls for increasing the severance tax, using the additional revenue generated to reduce the state's income tax. The GOP majority in the legislature has balked at that, with opponents saying a hike in the severance tax could stifle oil and gas exploration. Their alternative is revamping taxes on oil and gas production, including cutting taxes on existing conventional wells in half, with additional tax breaks for well owners.

"Instead of gifting yet another tax break to the wealthy, we should focus on restoring the resources to local governments so they can provide basic services to their citizens," Hagan told the Ohio House's Agriculture Committee, which held the first hearing on his bill this week. "The influx of oil and gas drilling in Ohio's eastern counties is significantly impacting the roads, bridges and environment of the affected communities, and it is critical that we protect them from having to bear these costs brought on by the oil and gas industry on their own."

Hagan -- and Governor Kasich -- are right. The present severance tax is too low, and the GOP alternative doesn't go far enough in terms of returning revenue to Ohioans. We hope a more equitable solution emerges.

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  • In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other.
    -- Voltaire (1764)
     

  • Interesting to note that North Dakota and TExas that are having an oil and gas bonanza and tremendous employment opportunities...have provided tax rebate incentives on the severence taxes.

  • ~~Neighboring West Virginia and Michigan impose a 5 percent severance tax." neighboring Pa is 0%, Kentucky is 4.5%, Michigan 4% to 6.6%