House leaders are looking over Gov. John Kasich’s budget proposal which includes a big swing of the bat when it comes to a tax increase on oil and gas drilling. But the industry is ready to fight the plan.
Kasich is trying again to raise the so-called severance tax, this time proposing to move it to 6.5 percent, which he says would raise $325 million.
Shawn Bennett with the Ohio Oil and Gas Association says the industry is already hurting because of a drop in prices. He claims a higher tax rate will further discourage investment.
“As prices decrease and taxes increase you shrink the amount of economics that are available in the play so you’re taking what was once 3,800 square miles and maybe shrinking it down to 15 because it all depends on what the economics of that well is going to be,” said Bennett.
Bennett adds that the revenue directed back to local communities won’t outweigh the benefits those towns would reap with continued investment.
Though, Kasich is receiving support from an unlikely source. The liberal-leaning research group Policy Matters Ohio says it's encouraged by Kasich’s proposal.
The group’s Wendy Patton, who hasn’t been on board with the governor’s proposals in the past, says this is a “self-respecting” rate.
“He recognizes the value of the commodity that we have just as industry is recognizing that value and he is proposing a severance tax rate that is within the range of those of major producing states,” said Patton.
Patton remains concerned about where the estimated $325 million in revenue would go. She’d like more of it directed back to local communities. Right now that number’s set at 20 percent.
