Kasich Pushes Tax On Drilling
COLUMBUS, Ohio – Sen. Lou Gentile is reserving judgment on Gov. John Kasich’s plan to increase taxes on the oil and gas industry until he can learn more about exactly how it would impact East Ohio.
Kasich is seeking support for his proposed severance tax increase by offering to send a quarter of the proceeds back to Appalachian counties. However, Gentile, D-Steubenville, said the plan was not a part of the budget bill that passed out of the state Senate in a 23-10 party line vote Thursday. Kasich’s emerging proposal is likely to surface as part of compromise talks on the $61.7 billion, two-year state budget. Both GOP-led legislative chambers have thus far rejected the drilling tax increase, but they supported significantly different tax packages that will need to be reconciled.
Gentile, who voted against the budget, also has not seen any specific bill or amendment pertaining to the severance tax plan, so a number of question about the proposal remain unanswered, he said. Among those question are:
- Exactly what percentage of the proceeds would be returned to oil- and gas-producing counties? Although reports state Kasich is offering 25 percent, Gentile said he has heard variations of the plan and noted he would like to see that figure be as large as possible.
- If that figure turns out to be 25 percent, would that amount of money be enough to help the counties that are generating the revenue restore public safety operations that have been reduced following local government funding cuts or to help maintain their roads and bridges?
- With the balance of the 4.5 percent severance tax hike likely to fund a statewide income tax cut, would the state be able to adequately fund oversight and regulation of the oil and gas industry?
- And how would the money returned to Ohio’s 32 “Appalachian counties” be distributed among them? Would counties defined as “Appalachian” by the Appalachian Regional Commission all receive an equal share of the funds, or would the four or five counties that are producing large amounts of oil and gas receive a bigger share?
“If the legislature and governor decide they are going to increase the severance tax, my expectation would be that a significant portion of the money be returned to those counties that are drilling for gas and oil,” he said.
Pointing out that the state is operating with a $1.7 billion surplus, Gentile proposed a budget amendment Thursday that would have restored $396 million to local government funding across Ohio over two years. Despite the fact that $1.4 billion has been cut from local government funds – prompting counties and municipalities to reduce – Gentile said that amendment was voted down.
“The legislature and governor have really starved our local communities, jeopardizing their ability to keep police officers on the streets … ,” he added. “So anytime I can capture some revenue for Appalachian Ohio, I would certainly encourage legislative leaders and the governor to do that. I would prefer to see at least a majority of those (oil and gas tax) resources coming back to our counties and not giving tax breaks to people in all parts of the state.”
The Republican governor initially proposed raising severance taxes on Ohio’s burgeoning shale drilling industry to 4 percent and directing proceeds toward a statewide income-tax cut. Tax-averse lawmakers, energy companies and economically challenged eastern Ohio counties balked, forcing the administration to regroup.
The new plan would raise the severance tax rate to 4.5 percent and send 25 percent of the revenues to Appalachian counties, through their development agencies. The remaining 75 percent would still go to statewide income-tax reductions. That could mean more than $370 million for the region and $1.1 billion in tax cuts over five years.
Kasich spokesman Rob Nichols said that through discussions on the tax, the administration has determined that offering a portion of proceeds to the region where drilling is booming is “the right thing to do.”
“All of Ohio stands to benefit enormously from the shale boom, especially eastern Ohio,” he said. “As the boom continues to grow it’s only right that eastern Ohio communities have the resources they need to both address new demands and also make sure these new opportunities produce significant, sustainable benefits for local families.”
The industry remains opposed to Kasich’s tax swap plan, Tom Stewart of the Ohio Oil and Gas Association said.
“It’s like taking a $100 bill from eastern Ohio landowners, then ripping off a quarter of that bill and giving it back to them,” he said. “What do you do with that?”