American Oil and Gas Reporter - February 2017 - 86

ConventionSection: Ohio Oil & Gas Association

OOGA Promises To Protect
Ohio Industry Evolution
By Bill Campbell
COLUMBUS, OH.-The Ohio oil and
gas industry is evolving, assesses the new
president of the Ohio Oil & Gas Association on the eve of the group's 2017
winter meeting, scheduled for March 810 at the Easton Hilton Hotel in Columbus.
"Ohio is in transition," suggests Jim
Aslanides, president of MFC Drilling
Inc. in Coshocton, Oh., a company he
founded in 1981. "We are proud to have
both successful unconventional and conventional drilling in the state.
"On the conventional side," Aslanides
says, "we are determining what part of
the state truly is profitable and what isn't.
It has proved it deserves more capital because the potential is there and a lot of
infrastructure has been built as a result
of it."
Conventional producers, he continues,
are developing new strategies for enhanced
recovery while adopting what he calls
"an unconventional approach in conventional plays" that includes limited horizontal drilling in traditional reservoirs.
Along with MFC Drilling's two other
officers, Rob Claus and Jackie Wilkins,
Aslanides says he operates nearly 600
wells across Ohio, ranging from Ashtabula
County in the north to Noble County in
the south, and from Belmont County in
the east to Fairfield County in the west.
Aslanides succeeded David R. Hill,
owner of David R. Hill Inc. in Byesville,
Oh., as OOGA president at the beginning
of the year. As he looks forward to his
two-year term, he cites as his priorities
for the association, continuing to provide
a common voice "to ensure that the regulatory environment in the state is not
overburdensome, and that legislative initiatives don't impede our ability to manage
the risk we take."
2015-16 General Assembly
The 2015-16 session of the Ohio General Assembly ended on mixed note for
the oil and gas industry, reflects OOGA
Executive Vice President Shawn Bennett.
On Jan. 4, he reports, Governor John
86 THE AMERICAN OIL & GAS REPORTER

Kasich signed HB 463, which includes a
provision that should make it more difficult
for activists to put anti-oil-and-gas ballot
initiatives before voters. But the governor
also vetoed SB 235 on Dec. 22, which
Bennett says would have clarified the
definition of exploration and production
as it applies to the state's sales tax exemption.
Published reports describe HB 463 as
a "grab-bag" that contains provisions
ranging from autism services to recalling
municipal officials. Included in the bill,
Bennett says, is a provision that the Ohio
Legislative Services Commission says
"requires a board of elections or the secretary of state to invalidate a local initiative
petition if the board or secretary determines
the petition . . . does not fall within the
scope of the local government's constitutional authority to enact ordinances."
Hopefully, Bennett expresses, the new
law will slow the rash of initiatives, such
as a so-called community bill of rights
defeated for the sixth time on Nov. 8 by
Youngstown, Oh., voters that essentially
would have banned any oil and gas activity
related to hydraulic fracturing.
"In my opinion, HB 463 is a very big
step forward, not only for our industry,
but for the state in general," says Bennett,
citing the cost in time for both voters and
local officials, as well as budgetary resources, of repeatedly pushing referendums
that cannot withstand judicial scrutiny,
even if passed.
Less positive was Governor Kasich's
veto of SB 235. Ohio law exempts from
sales tax, tangible personal property that
is "directly used in production." In his
veto message, the governor contends SB
235 would have expanded the exemption
"well beyond direct use," and would have
created "future, annual revenue losses to
the state, counties and transit authorities
in the tens of millions of dollars," as well
as "a more favorable tax treatment for
the oil and gas industry than for other industries."
That is not how OOGA sees it, Bennett
counters. He says HB 235 merely clarified
a longstanding industry sales tax exemption
that had been jeopardized by a series of

what OOGA considers over-aggressive
audits of operating companies by the
Ohio Department of Taxation.
"There was no expansion," Bennett
insists, "although it was mischaracterized
as such. We merely were spelling out
what was and was not taxable for oil and
gas operations."
Although not specified in statute, he
says the exemptions "have been afforded
the oil and gas industry for decades."
SB 235 would have made the statutory
definition of exempt equipment retroactive
to 2010, prompting the governor to contend
the bill would have put state and local
governments on the hook for $264 million
in tax refunds.
Again, Bennett says, OOGA begs to
differ. There are no refunds to give, he
insists, because sales taxes historically
have not been paid on the equipment or
services in question. What is at stake, he
counters, are bills for past taxes issued to
operators by the Department of Taxation.
"We were trying to stop the department
from shaking down our operators," he
characterizes, vowing that OOGA will
be pushing again for similar legislation
in the 2017-18.
"We are going to double down on that
in the next general assembly," he promises.
Legislative Priorities
Taxes again will be a priority for
OOGA in the 2017-18 Ohio General Assembly. In addition to the sales tax issue,
Bennett says he expects Governor Kasich
to again propose raising the state's severance tax rate, as he has done each biennial budget cycle since 2013.
Prior attempts to increase severance
taxes have been tied to cutting state
income taxes, but Bennett says OOGA
anticipates this year's justification may
be budget balancing. "The governor has
made statements about the state moving
into a recession, and the numbers are
down," he observes. "We will have to
see what the budget looks like, but I
don't think any state for any reason should
rely consistently on oil and gas revenues.
As we have seen, those revenues go down

American Oil and Gas Reporter - February 2017

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