American Oil and Gas Reporter - April 2018 - 160

ConventionCoverage: Ohio Oil & Gas Association
Clarksville, and Senate President pro
tempore Bob Peterson, R-Washington
Court House, were among the lawmakers
who spoke. The legislative leaders lauded
the industry's contribution to Ohio's economy, and expressed their intention not to
disrupt that with measures such as tax
increases.
"I have the philosophical belief that if
you want less of something, tax it," Peterson articulated. "I do not want less oil
and gas."
Representative Andy Thompson, RMarietta, said he authored HB 225 to
benefit both the industry and landowners.
He said the legislation was designed to
sequester severance tax revenues in a
way that ensured they went to the Oil
and Gas Well Fund, which would allow
the agency to address orphan wells.
Thompson estimated Ohio's official orphan
well count at 600-700, and suggested the
unofficial number was probably significantly greater. If it becomes law, he said,
HB 225 will help the state identify orphan
wells and determine their plugging priority
through a scoring matrix.
"We need to tackle this problem as
expeditiously as possible," he advised.
"The division says it can plug about 80
wells in the next year. That is exciting,
because it not only addresses the health
and safety of Ohioans, but it is also
creates a lot of job opportunities."
Senator Matt Huffman, R-Lima, sponsor

of SB 236, thanked OOGA for its help on
the affected mines bill. "You have a great
team working on this," he remarked.
Such consultation is especially important because no lawmaker can be an
expert on every subject, he considered.
"Legislators are, by nature and necessity,
generalists," he stated. "It is important to
educate us so we can carry things forward.
We should solve the affected mines issue
now so we do not have to talk about it
every session."
Flimsy Reasoning
Tony Ehler, a partner and tax group
chairman at Vorys, Sater, Seymour and
Pease LLP, offered insights to the impetus
for HB 430, which he said boiled down
to the lack of legal rationale for some
positions the Ohio Tax Department has
taken regarding sales and use, real property,
personal property, commercial activity
and petroleum activity taxes.
Much of the case law about those tax
issues seemed to have been resolved by
1994, he recounted. "I compiled a list of
cases and authorities, put it on a shelf
and there it sat, gathering dust until 2013
or '14," he described. "Then Ohio's audit
wave came through."
Department of Taxation agents told
many of those audited oil and gas companies they owed the state after decades
of peace on the matter, Ehler detailed.
"I looked at my files, and said 'That's

Pausing after their panel discussion are, from left, Jackie Stewart of Energy in DepthOhio, Jimmy Stewart from the Ohio Gas Association, Rebecca Heimlich with the
American Petroleum Institute and moderator Mike Chadsey with OOGA.

160 THE AMERICAN OIL & GAS REPORTER

easy,'" he recounted. "'We know brine
injection wells are not subject to tax. We
know where to draw the line on drilling.
We know a road is real property. We
know oil and gas separators are not
taxable. Go back and tell the agents.'"
However, he continued, the agents demurred, even though the statutes, rules
and case law had not changed. He offered
a number of examples, including one in
which state officials suddenly began to
change the way they treated roads.
"I asked them to explain it (in light of)
the valid rule still on the books and they
responded that they no longer followed
it-as though anyone could know what
was in their minds and could have predicted
any of these policy changes," Ehler detailed.
"They say they simply have a different
interpretation, but they should have told
people. There should be debate and dialogue about the issues. Surprising people
by looking back six-seven years in audits
is unfair to taxpayers."
That approach suggests orders from
above, he said. "I can only conclude
that they have been told to tax as much
as they think they can, to pressure the
industry and let you defend yourselves,"
Ehler deduced. "I cannot think of a legal
reason to justify their explanation. I can
tell you 'two plus two equals five because
the Grand Canyon is big,' but is that
persuasive?"
And when legislators ask tax department officials about the origins of their
new reasoning, they are told the information is confidential, he said. "The tax
commissioner was asked twice to testify
in the House, and he declined," Ehler recounted. "Why do they require the industry
to push legislation and expend resources
instead of just explaining their position?
It makes me think they don't have a very
good position."
Local Conflicts
The OOGA convention also considered
local issues. OOGA Director of Public
Relations Mike Chadsey addressed the
subject during a morning breakout session
on the conference's second day, and then
again during a panel discussion he moderated later that afternoon.
During the breakout session, Chadsey
discussed development of minerals under
the Wayne National Forest. He noted that
companies had spent $8 million leasing
2,000 forest acres in parts of Ohio's Monroe and Washington counties. Most of
the recent public attention on the matter
focused on the forest plan, which was



American Oil and Gas Reporter - April 2018

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Contents
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