43
OOGA: Time not right for severance tax increase
YOUNGSTOWN
Representatives from the Ohio Oil and Gas Association said the time is not right for a severance- tax increase.
Because of a global oversupply, oil prices have declined from more than $100 per barrel last summer to about $50, said David R. Hill, president of the association.
“These prices are in free fall,” he said.
Meanwhile, Republican Gov. John Kasich’s budget proposal, unveiled in February, would increase tax rates for oil and gas produced via horizontal hydraulic fracturing to 6.5 percent at the wellhead.
But Hill said the tax would affect gross proceeds and not profits because production has declined.
According to the Ohio Department of Natural Resources, the rig count has declined from 59 early last December to 24 as of Tuesday.
The industry in Ohio “is in full-blown retreat,” Hill said.
Ohio’s current severance tax is 20 cents per barrel of oil, and 3 cents per thousand cubic feet for natural gas. Hill said the severance tax adequately funds the industry’s regulatory body, ODNR, which was its original intended purpose.
But Jim Lynch, a spokesman for Kasich, said the proposed increase is appropriate for a maturing industry in Ohio.
“We think it’s fair and competitive,” he said, adding that the industry has had four years since drilling activity started in 2011 to recover cost.
The increased severance tax would serve as part of Kasich’s plan to reduce the state income tax. Under the plan, 20 percent of the revenue raised from that tax would serve communities affected by shale development.
But state Rep. Sean J. O’Brien of Bazetta, D-63rd, who supports a modest severance-tax increase, said the tax increase should serve local communities and their infrastructure affected by the industry rather than to reduce the state income tax.
Hill visited the the Youngstown/Warren Regional Chamber on Tuesday morning. Guy Coviello, the chamber’s vice president of government affairs, said the visit was informative. But the chamber’s Government Affairs Council would not make a recommendation now on whether to endorse or oppose the severance tax, he said.