Oil and gas: Drilling tax hike proposed by Kasich on rocks

Associated Press

COLUMBUS, Ohio (AP) — A drilling tax increase proposed by Republican Gov. John Kasich isn't likely to re-emerge in the Ohio Senate budget revisions due Monday.

Participants in negotiations among the industry, administration and lawmakers indicated last week that nothing close to a compromise on the Senate proposal has been struck yet. Once the Senate passes its version of the $71.5 billion, two-year spending blueprint, the bill will go to a conference committee where some version of adrilling tax could be re-inserted.

Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, an industry group that opposes the increase, said the last compromise suitable to the industry came last session. An industry-backed proposalat the time cleared the Ohio House.

Energy companies extracting oil, natural gas and natural gas liquids from the Utica Shale in eastern Ohio hoped it would satisfy the Senate and governor. But Kasich said the plan was inadequate, not raising enough to cover income tax cuts he wanted to pay for with the increase.

The bill, which never became law, would have taxed drillers at a severance tax rate of 2.5 percent on horizontal wells, less than the 4 percent Kasich was pursuing at the time.

Kasich's current budget proposal calls for an extraction tax of 6.5 percent at the wellhead on oil and natural gas, and a lower 4.5 percent for natural gas and natural gas liquids sold downstream. The House stripped thatproposal from the bill.

The governor, a potential 2016 presidential contender, has predicted a ballot campaign if a legislative compromise can't be reached this time around. He says backers of a ballot campaign would probably push for a rate of 10 percent and entice voters by earmarking the proceeds for services or programs voters favor.

The industry so far has successfully persuaded the Republican-led Legislature that the tax increases Kasichseeks would kill momentum and cost jobs.

Senate President Keith Faber has pledged a budget that lowers taxes. Though considered a Kasich ally, Faber has been critical of the governor tax package for raising certain taxes and shifting others. He says the Senate plan would deliver a net tax cut over the House plan.

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