COLUMBUS — A lawmaker panel offered yet another version of legislation May 7 to revamp tax rates on oil and gas produced via horizontal hydraulic fracturing.
The latest substitute House Bill 375 would levy a 2.5 percent tax rate on production, up from 2.25 percent proposed earlier. The legislation also would provide a $10 million exemption for drillers to recover the initial costs of their horizontal wells.
The first $21 million in resulting tax collections would go to the Ohio Department of Natural Resources to regulate the oil and gas industry and to cap orphan wells.
Fifteen percent of collections (up from 10 percent in the original bill) would be distributed to local governments. Any additional collections would be used to cut the state’s income tax rates.
The changes, offered during the Ohio House Ways and Means Committee, are the latest as Republican lawmakers and Gov. John Kasich haggle behind the scenes on an oil and gas tax increase.
The governor, who has offered his own frack tax plan with a higher rate increase, is not backing the latest substitute legislation.
“The governor’s committed to continuing to reduce Ohio’s income taxes,” said Rob Nichols, the governor’s spokesman. “Unfortunately their new plan still falls short of what the governor believes is needed.”
Tom Stewart, executive vice president of the Ohio Oil and Gas Association, said his group is “not thrilled” that the rate in the bill has been increased to 2.5 percent and would like to see exemptions for producers from the commercial activity tax.
“But there’s a lot of good things in this bill,” he said. “The industry gets certainty, the regulatory agency is adequately funded, there’s going to be a more robust idle, orphan well plugging program… Those are all good things.”
Committee Chairman Jeff McClain (R-Upper Sandusky) said he expected another hearing on the bill, additional amendments and a potential floor vote next week.
The May 7 hearing included testimony from residents who want increased taxes from oil and gas produced via fracking to be directed to affected communities near eastern Ohio’s emerging shale oilfields.
“Now with the severance tax, Ohio has a chance to do something right,” said Caitlin Johnson, an organizer with the Ohio Organizing Collaborative. “Our legislators have a chance to show their constituents that they care more about people than corporate interests.”
Marc Kovac is the Dix Capital Bureau Chief. Email him at email@example.com or on Twitter at OhioCapitalBlog.