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Ohio House OKs tax increase for shale drillers, moves plan to Senate
By Marc Kovac
COLUMBUS
Over continued objections from Democrats and some Republican lawmakers, the Ohio House moved a long-debated frack-tax plan to the Senate on Wednesday, where the legislation faces an uncertain future.
House Bill 375 passed on a split vote of 55-35, capping more than two years of discussions on a proposal initially offered by Gov. John Kasich and significantly altered by the House.
A spokesman for the governor said this week that the current version of the legislation “falls short of what the governor believes is needed.”
Senate President Keith Faber of Celina, R-12th, told reporters that his chamber would take time to review the bill.
HB 375 would set the tax rate on oil and gas produced via horizontal hydraulic fracturing at 2.5 percent, with lower rates for vertical wells.
The first $10 million of production will not be taxed, allowing companies to recoup their initial well investments. The state also would provide nonrefundable tax credits for commercial-activity taxes paid on horizontal wells.
Of the resulting revenues, more than $20 million would go to state regulatory efforts, a new well-plugging program and geological mapping activities.
A total of 17.5 percent of the remainder would be directed to local governments, with specified amounts directed to eastern Ohio shale counties. The remaining money would be used for a statewide income-tax cut.
“That will be a significant amount of money,” state Rep. Matt Huffman of Lima, R-4th, said of the latter. “One estimate that we have ... is that will be about $316 million in income-tax relief to Ohioans in the next five years.”
Proponents of the bill said the legislation would provide clarity and certainty to producers, enable the state to gain some benefit from increased oil and gas production, cover regulatory costs and orphan-well capping and provide additional funding for communities near the state’s emerging shale oilfields.
Industry representatives are voicing support.
Tom Stewart, executive vice president of the Ohio Oil and Gas Association, said, “While we have concerns about aspects of the bill, which will increase the severance tax to 2.5 percent, we remain supportive of the legislation and urge swift approval by the Ohio Senate.”
But Democrats opposed, calling for more support for counties in Ohio’s Appalachian region and local governments rather than tax breaks that they say benefit wealthy residents.
Rep. Robert Hagan of Youngstown, D-58th, said the proposed tax rate is well below other states with fracking activities.
Rep. Nick Barborak of Lisbon, D-5th, said the bill doesn’t do enough to address drug addiction, infrastructure needs and other problems in eastern Ohio.