American Oil and Gas Reporter - February 2019 - 101

ConventionSection: Ohio Oil & Gas Association
The effort puts Ohio at the forefront
of well plugging as other states in the
Appalachian Basin, including adjacent
West Virginia and Pennsylvania, grapple
with similar issues, Downey says.
"Funding for plugging wells is available
from the Department of Natural Resources
through our severance tax," he says. "No
other state in our region has that. We are
at the juncture to implement a program
to plug idle and orphaned wells and are
in talks with the DNR on how to effectively
utilize those funds, set up the program
and lead the nation in plugging wells."
Taxation Issues
On another subject, OOGA members
are hopeful the DeWine administration
will apply sales and use tax exemptions
and levies in keeping with legally sanctioned
practice from the latest legislation and
previous court decisions, Downey says.
"Many of our member operators received sales and use tax audit bills based
on a premise that the state didn't employ
historically," he says. "It has been a huge
issue for operators in Ohio, and we are
hoping the new administration assumes
the normal practice in applying sales and
use taxes."
The association is awaiting the rule
making to implement requirements of
HB 430, which clarifies for the Department
of Taxation and association members
what is taxable and what is exempt under
state statute. The rules would clarify
items used directly in the exploration and
production of minerals, while also clarifying the pollution control sales tax exemption, which can be utilized for some
disposal well costs, pad construction and
other matters, Hammond says.
While the transition from Governor
Kasich to Governor DeWine has slowed
the rule-making process, he says, OOGA
expects it to get in full swing this year.
"We certainly are looking forward to
working with the Tax Department to finalize that rule to make sure everything
is buttoned up and that the state understands what the law says and complies
with it as such," Hammond assures.
While early in his term, Governor Kasich wanted to raise severance taxes, talk
of hiking the levy has subsided some in
recent years, Hammond says. However,
OOGA's leadership remains cautious and
seeks to retain the effective severance
tax rate of 3 cents an Mcf on natural gas
and 20 cents a barrel on crude oil.
"With a new administration, we obvi-

ously are always mindful of tax policy,
whether it involves severance taxes, sales
or ad valorem taxes, to make sure Ohio
remains competitive with other states
where producers have options to go drill
wells and invest capital," Hammond reflects. "The Appalachian Basin receives
some of the lowest natural gas prices in
the country, and it is hard to remain competitive because of that."
While severance tax revenue was close

to $40 million, Kasich raided the fund to
divert monies to other government functions, he says.
"Those funds were raided in the neighborhood of $60 million plus over several
years, and those were dollars that should
have gone back into the ground for plugging wells," Downey says. "As producers,
we pay into that fund through our severance taxes and it was very unsettling for
us to learn that those dollars were being

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FEBRUARY 2019 101

American Oil and Gas Reporter - February 2019

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