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Monday, January 30, 2017

Kasich Again Calls for Increased Oil and Gas Severance Tax in Latest Budget Plan

Gov. John Kasich is trying once again to raise Ohio's tax rate on fracking activity in the state. But his latest budget plan, released Monday, calls for a much higher tax than he's sought in the past. 
Kasich's two-year budget plan, unveiled Monday, would charge horizontal drillers in eastern Ohio a severance tax of 6.5 percent for crude oil and natural gas sold at the source -- or $3.25 per $50 barrel of oil. 
Natural gas and natural gas liquids that go through processing would be assessed a 4.5 percent tax per thousand cubic feet, which would equal about 16 cents given a spot price of $3.59 in December
Currently, Ohio charges 20 cents per barrel of oil, while the tax on natural gas is 3 cents per thousand cubic feet. 
Conventional drillers in the state would continue to pay the same rates currently in place.
We received the following statement from Shawn Bennett, the Executive Vice President of the Ohio Oil and Gas Association, in response to the governor's budget plan:
Once again the Administration’s severance tax proposal is not in tune with the current market realities surrounding oil and gas production in Ohio. While this industry continues to struggle from a market downturn, an increase of any kind would stifle development even further. For the Ohioans working in every facet of this industry including those who were laid off during the downturn, the last thing this industry needs is an added barrier to impede them from providing for their families.
For his part, Kasich acknowledges that he does not expect the state legislature to approve the severance tax increase.  From The Columbus Dispatch:
Kasich acknowledged the legislature again will reject his desired severance tax hike. He said he keeps proposing it for the same reason he kept introducing balanced federal budgets that didn't pass - because one day it will. 
"You don't give up just because you don't get anything done," he said.

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