Oil and gas industry opposes frack-tax increase

By Marc Kovac

news@vindy.com

COLUMBUS

Industry representatives voiced opposition Tuesday to Gov. John Kasich’s proposed tax increase on oil and gas produced via horizontal hydraulic fracturing.

The Ohio Oil and Gas Association, the American Petroleum Institute and others reiterated what they’ve been saying for several years, since the governor initially proposed the severance-tax change — that is, a tax increase would drive away exploration and investment and any resulting economic boost in eastern Ohio’s emerging shale-oil fields.

Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, told the Ohio House’s Ways and Means Committee that dropping oil prices have prompted a retreat in investment in the state.

He offered a list of companies that have pulled out of Ohio, waiting for commodity prices to rebound.

“In December of 2014, Ohio had a record 59 rigs operating in the Utica,” Bennett said in testimony submitted to lawmakers. “Today, a third of those rigs have simply left the state.”

He added, “The proposed severance tax before this Legislature will dramatically decrease the chance of success in this effort and only serves as a deterrent to future recovery, growth and stability in Ohio’s oil and gas industry.”

The administration and others have countered such assertions, saying Ohio’s current and proposed severance-tax rates are well below other shale-oil states and would not deter exploration and production.

Kasich’s budget proposal calls for increased tax rates for oil and gas produced via fracking to 6.5 percent. Twenty percent of the proceeds would be directed to communities in eastern Ohio’s emerging shale-oil fields.

“I’m disappointed by those who say the severance-tax reform will kill the industry,” Kasich said during his State of the State speech last month. “That’s a joke. That’s a big, fat joke because I’ve talked to them in private. And I’ll tell you what, our severance tax will still be competitive with our energy-rich states. And you know what? Let’s reform the severance tax so all Ohioans can have lower income taxes, and we all benefit from this whole industry.”

But Chis Zeigler, executive director of the American Petroleum Institute of Ohio, said there could not be a worse time to raise severance taxes.

“There should be no doubt that development of Ohio’s shale resources in 2015 will look markedly different from just last year,” he said. “The impending economic impact on supporting small businesses and local governments is yet to be determined. Again, there is never a good time to be the recipient of increased taxes, but for the oil and natural gas industry and supporting businesses, the results could be devastating.”