Gov. Kasich sends mixed signals on House GOP's severance tax package

By MARC KOVAC @ohiocapitalblog mkovac@dixcom.com Published:

COLUMBUS -- Gov. John Kasich sent some mixed signals concerning House Republicans' revamped severance tax package.

During a speech to chamber of commerce groups earlier this month, Kasich complimented the chamber's GOP members for finally moving on the issue after putting the kibosh on his plan to increase taxes on oil and gas produced via horizontal hydraulic fracturing, with the proceeds used to cut income tax rates.

"I want to make sure as they deplete our resources that they pay for it, mostly out-of-state people, and that we use those resources to benefit every Ohioan by reducing the tax burden (for) every Ohioan," the governor said. "I think it's important we get that done."

But Kasich isn't endorsing the new Republican plan, either.

"It's not enough, and I've already told them that, it's not acceptable," he told reporters following his chamber speech. "We're working through the process. They understand how I feel about it. But I want to encourage them to say hey, we're trying to get somewhere on this."

Kasich was commenting on House Bill 375, which calls for lower taxes on existing conventional wells and increasing rates on those drilled horizontally, with excess proceeds devoted to plugging abandoned wells and potentially cutting income tax rates.

Horizontal wells would be subject to a 1 percent tax on gross receipts over the first five years of production, then 2 percent thereafter as long as production remains above certain levels. The lower rate during the initial years will allow producers to recoup their costs.

Proceeds from the increased severance tax will first go to state regulators overseeing the fracking industry, with extra collections used to cap orphan oil and gas wells and for potential income tax rate cuts.

HB 375 also includes additional tax breaks for well owners.

House Speaker Bill Batchelder, R-Medina, a co-sponsor, is calling the bill a "comprehensive, carefully constructed piece of legislation that incorporates many important aspects of oil and gas exploration in Ohio."

Kasich and his administration have indicated they will work with Republican lawmakers on a plan to increase the severance tax. During his chamber speech, Kasich said the state needs to implement a reasonable rate so "that somebody doesn't come along later and put one on the ballot that could pass the state that could become a real impediment to the operation of this long term."

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