American Oil and Gas Reporter - June 2014 - 43

to get that included in the bill. That shows
that industry and environmentalists can
work together to achieve a greater good."
State Budget
Ohio lawmakers also are examining
HB 472, the Mid-Biennium Budget Review Bill, the state's comprehensive review
of state agencies and programs, Stewart
says. One component of the bill is HB
490, sponsored by Representative David
Hall, R-Millersburg, which has several
provisions that could impact oil and gas
companies, Stewart warns.
He says HB 490's most controversial
component would expand criminal liability
significantly for violations of oil and gas
law, a measure that greatly concerns OOGA.
"The association is in talks with DNR
and with the bill sponsors," Stewart says.
"If someone egregiously, willfully and
knowingly pollutes, OOGA is all for pros-

ecuting and punishing those individuals.
However, the association does not think
that small oil and gas producers, who are
trying to make a living operating a couple
hundred wells, should be deemed felons
if they do not know what is going on with
any particular well on a daily basis."
According to the legislative website,
HB 490 also:
* Authorizes the Division of Oil and
Gas Resources Management to suspend
activities of any person for violating state
regulations (current law specifies only the
owners are subject to suspension);
* Authorizes the division to deny an
application for a permit or registration
certificate if the applicant or any key employee has a history of noncompliance
with the Federal Water Pollution Control
Act or related state law; and
* Specifies that violating state statutes
governing managing, transporting and

disposing of brine is a felony.
"I do not know of any other industry
that is providing this much economic
bang as these folks are providing in Ohio.
I think they should be rewarded, not singled out and demonized," Stewart poses.
"I think there will be a protracted debate
over the MBR. The committee chairman
is calling for amendments, and OOGA is
working on helping him."
According to the Senate Finance Committee, the state's fiscal picture is strong,
Stewart says.
"The committee is looking over current
revenues and it thinks there is enough
money coming in that it is going to try to
reduce taxes singly," he says. "So the
state's budget is in fine shape. That tells
me you should take an industry such as
the oil and gas industry, and encourage it
to invest its money back into the ground
to expand reserves."
r

California Senate Stalls Severance Tax
SACRAMENTO, CA.-Another attempt
to introduce a statewide severance tax
made some progress before hitting a roadblock in the California Senate while a
proposal to allow cities or counties to ban
well stimulations didn't even survive its
first committee hearing, the California
Independent Petroleum Association reports.
Sponsored by Senator Noreen Evans,
D-Santa Rosa, SB 1017 would have imposed a severance tax on California oil
and natural gas production effective July
1, 2015, the state legislative website says.
After passing out of the Senate Government and Finance Committee, SB 1017
was being held in the Appropriations
Committee.
According to Evans' web page, SB
1017 would create a self-sustaining endowment to fund higher education, health
and human services, and state parks by
imposing an extraction tax on "big California oil companies."
Under the proposal, 9.5 percent of each
barrel of oil production and 3.5 percent
per unit of natural gas output would be
taxed, based on an average price as determined by the Department of Conservation.
Stripper wells, classified as those incapable
of producing more than 10 barrels a day,
would be exempt, the bill says.
The bill directs 50 percent of the new
revenues to a special fund to help education, including maintenance, equipment
replacement and debt reduction for state
universities, colleges and community colleges. The remaining funds would be
split between the Department of Parks
and Recreation and the California Health

and Human Services Agency.
The Board of Estimates projects the
tax would raise $1.6 billion in 2015-16.
The bill would allow oil and gas producers
to deduct the severance tax from earned
income, reducing their state income or
corporation tax liability.
In earlier versions of the legislation
introduced by Evans, CIPA observes, the
proposed revenues would have gone toward university and college debt payments
and building maintenance throughout the
state system instead of lowering tuition
for students.
The association adds it opposes the
measure because producers already pay
severance taxes in 12 California cities,
and also must pay ad valorem, sales and
corporate taxes.
Testimony during committee consideration of SB 1017 pointed out the tax
would reduce local property tax revenues,
which are used to fund services such as
firefighting, CIPA reports.
The legislative analysis for SB 1017
notes that, while one rationale for severance taxes is that they compensate future
generations for the irretrievable loss of a
nonrenewable natural resource, a true
severance tax also would apply to nonrenewable sources other than oil and natural
gas, such as nonfuel minerals. It adds
using revenue from a severance tax to
pay for current expenses increases the
volatility of the revenue system.
Stimulation Ban
The Committee on Local Government
rejected a proposal by Assemblyman

Adrin Nazarian, D-Los Angeles, to allow
local governments to adopt and enforce
ordinances prohibiting well stimulation
and treatments.
AB 2420 defines well stimulation as
any treatment designed to enhance oil
and gas production or recovery by increasing a formation's permeability. Treatments include hydraulic fracturing and
acidizing activities.
AB 2420 would have allowed the legislative body of a county or city to impose
an interim ordinance prohibiting any such
treatments, if they conflicted with a contemplated general plan, specific plan or
zoning proposal that the body was considering or intending to study. The bill
would have required a four-fifths vote to
adopt the interim ordinance, and limited
its effectiveness to 45 days, with a provision to extend it as long as 22 months
and 15 days.
CIPA opposed the measure, stating
AB 2420 conflicted with existing law,
including SB 4, which Governor Jerry
Brown signed in September and which
the association calls "arguably the most
stringent well stimulation measure in the
country and possibly the world." CIPA
also asserts while local governments have
jurisdiction over all surface impacts, the
California Division of Oil, Gas and Geothermal Resources has complete authority
over all below-surface impacts.
In addition, CIPA points out state regulations authorize local governments to
impose interim moratoria on drilling if a
demonstrated risk to public safety exists,
negating the need for AB 2420.
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JUNE 2014 43
American Oil and Gas Reporter - June 2014

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