American Oil and Gas Reporter - August 2017 - 34

State Legislative Reports

Industry Tax Hikes Lose Again In Ohio
COLUMBUS, OH.-Years of unsuccessful attempts have not dissuaded Ohio
Governor John Kasich from trying to
raise taxes on the state's oil and gas producers, but the budget bill the 2017 Ohio
General Assembly passed at the end of
June contained no such tax hikes. Stymied
hopes extended in both directions, however, since the governor used his lineitem veto to thwart an end-around that
lawmakers had passed to speed the onset
of mineral leasing on state-owned lands.
After the 2017 Ohio General Assembly
broke in mid-July for its summer recess,
Ohio Oil & Gas Association Executive
Vice President Shawn Bennett expressed
satisfaction that the severance tax status
quo prevailed during a year in which the
governor's proposed budget sought a
fivefold increase.
"The administration has spent a number
of years trying to increase severance taxes," Bennett observes. "We were very
successful in making sure that did not
happen in this budget."
Ohioans should resist policies that
could discourage investment and consider
the oil and gas industry's place in the
bigger picture, he suggests. Although hydrocarbon production is a major driver
of the eastern Ohio economy, with Utica
Shale activity bringing significant wealth
to many impoverished areas, he says the
effects extend further, and will reverberate
more with time-unless policymakers seize
defeat from the jaws of victory.
"If this is done right, Ohio can have a
manufacturing renaissance, and growth
across the state is going to be significant,"
Bennett predicts. "People have to look at
the economic impact beyond only where
oil and gas are developed, and consider
the affordable energy prices and how the
boost for manufacturing will improve
Ohio's entire economy."
State Lands Leasing
One item that did appear in the final
budget bill, HB 49, before Kasich's veto
pen excised it would have transferred to
the general assembly, the governor's authority to appoint members to the Oil
and Gas Leasing Commission. Ohio law
places oil and gas activity on state lands
under the commission's oversight, but,
Bennett notes, the governor has not nominated any commissioners to authorize
such activity.
"Members of the general assembly
have been receiving inquiries from both

34 THE AMERICAN OIL & GAS REPORTER

landowners and the industry about when
this commission will be appointed," Bennett relates.
Moreover, he continues, the statute does
not leave the timing to gubernatorial discretion. Although media reports emphasize
that the public lands in question include
state parks, he points out that the scope of
state-owned lands is much wider, including
even road easements and prison property.
"Anyone who understands oil and gas
development knows it is necessary to get
a minimum amount of acreage before
beginning development, and landowners
whose minerals are adjacent to or near
any state-owned land essentially have
been cut off from monetizing them,"
Bennett considers. "The governor was to
make those commission appointments
within 45 days after the bill was signed
in June 2011."
The legislature attempted to jumpstart that process by adding to HB 49 a
provision that would have given lawmakers appointment authority, but Kasich
killed it. According to his veto message,
the language "creates the potential for
conflicts in how public lands under the
jurisdiction of executive branch agencies
are utilized. No provision is made for
how those conflicts would be resolved
or how utilization policies would be harmonized, which could potentially lead to
harm to Ohio's public lands."
Before it left for the summer recess,
Bennett says the House voted to override
the veto, leaving the ball in the Senate's
court. "The House override contains no
time limit, so the Senate has until session's
end to act," he reports. "I hope when
senators return, they will begin taking up
overrides and we will get a better read
on whether they will take up this particular
issue."
Media accounts note that anti-development groups are applauding the stasis
at the Oil and Gas Leasing Commission
because it blocks development, but Bennett
indicates that ship has sailed. "The state
lands issue was debated heavily in 2011
and it was decided that there would be
development, so that issue is no longer
up for discussion," he emphasizes. "Environmental groups' opposition to commission appointments is irrelevant because
this is now about the rule of law."
Other Matters
According to Bennett, one item in the
budget that survived the governor's veto

pen was a provision to increase funding
for Ohio's program to plug idle and orphaned wells. "It was introduced at $3
million a year and we were able to increase
it to $6 million," he reveals. "We applaud
the legislature for increasing that funding
because our industry pays into that and
we like to see the money used that way.
Not only does it put guys who know how
to plug those wells to work, but it also
takes those wells off landowners' properties and deals with some authentic environmental concerns. We are very proud
of that."
Bennett also mentions that OOGA
continues to seek opportunities to rectify
a subtle tax increase that deals with a
sales tax exemption for tangible personal
property. Companies had claimed that
sales tax exemption for property used in
producing oil and gas until the Kasich
administration said they could not.
"The administration and tax department
went against rulings by previous administrations and tax departments regarding
exemptions that always applied to the
industry," Bennett recounts. "The state
re-imagined the case law and practices
of the past. Essentially, it was a money
grab to take away tax treatments that always had been afforded to the industry."
In December 2016, he relates, the
Ohio General Assembly passed legislation
to clarify that oil and gas companies
could claim those exemptions only to
see Kasich veto it. OOGA has continued
to work on the issue since, Bennett says.
"We went back to drawing board after
the governor vetoed that, and now we
are looking at different vehicles and language that will clarify exactly what we
are attempting to do," he describes. "We
want to make sure it is written explicitly
in Ohio revised code so that future administrations, tax departments and legislatures will know what is and is not exempt."
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Coming In September

Reservoir Evaluation special reports, highlighting how integrated
geophysics technologies are helping
extend the boundaries of the Wolfcamp fairway. Guest authors also
present field applications of next-generation machine-learning, geosteering
and logging technologies.
American Oil and Gas Reporter - August 2017

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