A Republican Governor’s Robin Hood Proposal: Take From Oil Companies, Give To Taxpayers

A hydraulic fracturing operation near Malvern, Ohio. Credit: flickr user Chiot's Run.

A “Mid-biennium Review” sounds like just about the least exciting thing in the world.

But Ohio governor John Kasich used his “Mid-biennium” budget talk yesterday for a ground-shaking announcement. Among a number of proposals unveiled, the governor announced new taxes for the many companies that are trying to extract natural gas and oil from Ohio shale.

If you haven’t heard by now, Ohio is sitting on an oil and gas bonanza. Up until a few years ago, no one could get at it, because it’s locked away in Ohio’s shale formations. But because of a new drilling procedure you’ve probably heard of called hydraulic fracturing, or “fracking,” all that gas and oil is now available.

As our own Dan Bobkoff reported in December, there is no shortage of hype about the possibilites for fracking in Ohio. The industry says it will create, or sustain 200,000 jobs. $200 billion could be invested over the next twenty years.

Tuesday, Chesapeake Energy announced plans for a $900 million plant to process all the oil and gas it’s pulling out of Ohio’s shale formations. So the boom times have already begun.

And yesterday, governor Kasich said he wants Ohioans to get a cut of all the profits from this new industry.

The Cincinnati Enquirer quoted Kasich:

“If Ohioans aren’t benefiting, then some shareholder in Texas will benefit. There’s gold in them thar hills. How much gold, we’re not sure. But I’d rather be sharing the wealth with Ohioans than investors living elsewhere.”

So, Kasich plans to impose new taxes on oil and gas drilling in Ohio (though small producers get an exemption), and 100 percent of what the government collects will go back to Ohioans in the form of tax breaks. The governor’s office estimates the oil and gas taxes will generate between $900 million and $1 billion in five years. The tax breaks will go to people in every income bracket, though the specifics have yet to be announced.

One complication to the plan is that it means Ohioans’ tax rates will fluctuate year-to-year, depending on how much money the energy companies make.

And, of course, the energy companies don’t like the idea much.

In a statement, the Ohio Oil and Gas Association says:

“Crude oil and natural gas exploration in the state is still in its infancy and increasing the severance tax at this critical juncture will negatively impact the economic future of Ohio and its residents. For this reason, we oppose a tax increase of any kind, particularly one targeting an emerging industry.”

Kasich says the new taxes will be competitive with other states. He’s also proposing new regulations on the industry, to try to address some of the environmental concerns it creates. Among other things, the industry will have to disclose all of the chemicals it uses in the fracking process. And the governor says some areas will be off limits to drilling.

Many of the proposals in Kasich’s “Mid-biennial” review will have to get approval from the state legislature before they go into effect.

Leave a Reply