Energy Group Blasts Kasich's New Severance Tax Plan
COLUMBUS, Ohio – Gov. John Kasich’s proposed increase in the severance tax on shale energy in Ohio will slow development and cost high-paying jobs, the Ohio Petroleum Council warned Monday.
The budget proposals, unveiled yesterday afternoon, puts a severance tax in place for high-volume wells operating in the Utica shale formation, while leaving in place the taxstructure for conventional wells. For horizontal wells, the proposal sets a 1% tax rate for natural gas and a 4% rate for oil, natural gas liquids and condensate, except for the first year of production, when the rate would be 1.5%, to allow producers to recover the cost of preparing the well site and drilling the well.
Even with the 4% rate, the Kasich Administration argues in its budget overview, the tax burden on revenues from these wells would be lower than in other states. The revenues would be used to fund a proposed income tax cut for individuals and small businesses.
In a statement following the proposal’s release, Robert Eshenbaugh, legislative analyst for the Ohio Petroleum Council, argued against the tax.
“While we agree with the governor that all Ohioans should benefit from development of the Utica shale, the last thing a recovering economy needs is more taxes; and the last thing Ohio’s economy needs is a hefty, tax increase that will harm job growth,” Eshenbaugh said. “Ohioans are already benefiting from shale energy development. We are an industry investing in putting people to work, paying high wages and already generating billions in revenue for the state. This proposal is ill-conceived and ill-timed.”
The Ohio Petroleum Council cited a January report by the Ohio Department of Jobs and Family Services that found the jobs created within the oil and natural gas industry offered considerably higher wages than jobs in other industries across the state.
From 2011 to 2012, oil and natural gas workers were paid an average wage of $73,934, approximately $30,247 more than the average wage offered in the state’s other industries, according to the study. In addition, jobs supporting the oil and natural gas industry paid an annual wage of $58,765, approximately $15,078 higher than jobs in other industries.
A separate study by the global information and research firm IHS showed the oil and natural gas industry in Ohio also paid more than $910 million in state and local taxes in 2011, the Ohio Petroleum Council noted.
“More than 38,000 oil and natural gas related jobs were created in Ohio in the past year, with over 266,000 new jobs projected by 2035,” Eshenbaugh stated. “Ohio has its foot in the door for an unparalleled opportunity that is changing the face of American energy and our nation’s economic future. Ohio’s future is bright, but our state can do even more, provided the state government does not create obstacles based on a flawed fiscal framework.”
The chairman of the Ohio Republican Party, Bob Bennett, described Kasich's budget blueprint as a win for Ohio families. The proposal “tackles the big challenges facing Ohio, and is a blueprint to provide funding for our schools, incentives to our college students to graduate faster, while also cutting income taxes, sales taxes, and taxes on small businesses.”
Published by The Business Journal, Youngstown, Ohio.