Gov. Kasich's Energy Policy Targets Fracking

Ohio’s new energy policy will target natural gas and oil drillers in an attempt to make sure the state gets its fair share of what is expected to be a $5 billion-per-year industry. Gov. John Kasich is scheduled to unveil his energy policy next week, reports the Cleveland Plain Dealer.

The new plan, which will combine new taxes, fees and regulations, will be a compromise between Ohio collecting from the industry while avoiding rates that aren’t competitive with neighboring states.

Kasich’s proposal will include new severance taxes on oil, natural, and wet gases drawn through horizontal fracking. The proposed policy will also likely include an impact fee, which will help pay to repair damages to Ohio’s rural and small town roads from heavy trucks and equipment.

Neighboring Pennsylvania and West Virginia are already charging the industry taxes and fees. Pennsylvania has a locally enforced impact tax, but doesn’t charge for severance. Meanwhile West Virginia charges both fees.

Terry Fleming, executive director of the Ohio Petroleum Council, said the state can do well without the additional fees and taxes. He noted Ohio already collects about $14 million from the industry, and that rate could jump to more than $1 billion as more drills are built.

However, Ohio stands to gain much more by raising the fee: Boosting the severance tax to 5 percent, which would match rates in Michigan and West Virginia, could raise $1.7 billion in new revenue over the next decade, according to a report from the think tank Innovation Ohio. If the tax is raised to 7.5 percent, Ohio stands to gain $2.5 billion.

Innovation Ohio spokesman Dale Butland said it is not likely the industry would be scared away by new taxes and fees.

“You want to drill in shale, you have to go where the shale is, and Ohio has it,” said Butland. “It’s completely implausible that these companies are going to leave billions of dollars in profits on the table if they are asked to pay the same tax rates that they already pay in Texas."