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Friday, July 10, 2015

EID: $80 Million in Tax Revenue Coming to Ohio Counties

From Energy in Depth:
So how much money will the counties realize from this tax? 
EID asked several conventional well drillers to provide us with the ad valorem taxes they have paid for the past 10 years on their top producing wells. Based on two of the top producing wells in Southeastern Ohio, we learned that each well generated approximately $130,000 per well over the course of a decade when prices were much higher than today. Note, the wells normally produce more initially and decline over the decade. 
Therefore, we can conservatively assume that a Utica well, where production numbers have grown by over 350 percent for gas, and 200 percent for oil, will produce at least $100,000 per well for 10 years in ad valorem tax revenue. Given these assumptions, EID calculated all the producing wells (832) in the most active Utica Shale counties based on the first quarter of 2015 production numbers, and arrived at ad valorem tax revenue calculation of $80 million over the course of 10 years. 
It is important to note that these estimates are very conservative. We assumed only the wells producing to date will pay the tax and no contribution from wells drilled but not producing or wells to be drilled. For example, when you factor in economic impact studies that have reported property taxes on minerals amounting to between $150,000 and $540,000 per Utica well over the course of 10 years, or $15,000 to $54,000 per year, we can see how an assumption of $100,000 per well is likely a considerable underestimate.
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