OH Gov. Kasich Signs New Drilling Law – Now, Back to Taxes

John KasichYesterday Ohio Gov. John Kasich signed new oil and gas legislation into law that will impact shale gas drilling in his state. For a summary of what’s in the new law, see this previous MDN story. Kasich said during the signing ceremony: "We were not going to develop shale gas at the expense of the environment…we have contained in this bill the most aggressive, clearest, fairest and strongest fracking regulations that you can find anywhere in the country." He later claimed that Ohio’s new law is, “the toughest law on fracking fluid in America.”

What happens next? Kasich has promised to return to pushing his plan to tax the shale drilling industry and pass along the proceeds as a small income tax cut to Ohioans:

The policy debate over hydraulic fracturing in Ohio doesn’t end with Gov. John Kasich’s signing of new drilling rules Monday.

A fellow Republican in the Ohio House said Monday that he and some GOP colleagues plan to revisit the governor’s proposed tax increase on the industry before the session ends in December, setting up a likely fight between lawmakers, the governor and the oil and gas industry.

Kasich wants to funnel proceeds from his proposed tax increase into modest statewide income-tax relief in two or three years, after a grace period in collections that would allow well operators time to recover their startup costs.*

The drilling industry is not in favor of Kasich’s plan:

Ohio Oil and Gas Association executive vice president Tom Stewart said his organization of energy producers is largely supportive of the sweeping energy bill that Kasich signed Monday at Echogen Power Systems in Akron.

But Stewart said he believes Kasich’s proposal to increase the tax to 4 percent singles out large oil and gas producers over smaller ones, raising a potential legal question.

"I think there could be some problems when you start singling out by (shale) formations, or certain sized businesses," he said. "You have problems regarding equal treatment under the law."

Stewart said the industry continues to fight the tax hike, and they have some support in the Republican-dominated state Legislature to make adjustments.

"I don’t think the conversation’s dead," Stewart said. "John Kasich is trying to do his best for the welfare of Ohio, I know that. He wants good things to happen for Ohio. But I don’t think he has a good handle on oil and gas right now. What we’re seeing is a lot of caution out there in the oil field."*

MDN is on record, and continues to hold the opinion, that Kasich’s idea to tax the shale industry to give away the proceeds for an unrelated purpose is a bad one. Deducting from one person (or industry) to give to another for a completely different purpose is socialism, pure and simple. No matter the “noble” purpose. If you tax, it should be for a good and sufficient reason. Pennsylvania’s impact fee comes to mind: use the proceeds to reimburse those areas affected by drilling.

It will be an interesting year now that Ohio has new rules in place and attention returns to the battle over taxation.

*The Intelligencer/Wheeling News-Register (Jun 12, 2012) – Kasich Signs Drilling Rules

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