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Republican Ohio (STOOH1) Governor John Kasich is vowing to fight lawmakers from his own party to increase the tax on oil and natural-gas drillers.
Kasich, a 59-year-old former congressman and Fox News commentator, today told reporters on a conference call that the Republican-controlled Ohio House of Representatives won’t consider the plan he unveiled March 14. That won’t deter him from trying to get it enacted in an effort to raise money for an income-tax cut for individuals and small businesses, he said.
“Special interests have a different point of view than I have on this,” Kasich said, declining to identify them. “This appears to be the first inning of what’s going to be a long ballgame.”
States including Ohio, Pennsylvania and North Dakota are weighing how to regulate and tax the products of hydraulic fracturing. The drilling technique known as fracking involves injecting water, sand and chemicals underground at high pressure to bring fossil fuels to the surface.
Companies including Exxon Mobil Corp. (XOM), Chesapeake Energy Corp. (CHK) and Devon Energy Corp. (DVN) have begun drilling in Ohio’s Utica Shale, a geological formation that may hold as much as 5.5 billion barrels of oil and 15.7 trillion cubic feet of gas. Ohio drillers also are tapping into the Marcellus Shale, which stretches across Pennsylvania to New York.
Kasich scheduled the conference call less than an hour after Representative Ron Amstutz, the chairman of the House Finance Committee, issued a press release saying he will put the governor’s proposal on hold for more study.
“There are key questions that cannot be sufficiently answered and resolved within the available legislative time frame,” Amstutz said in the release.
Asked in a telephone interview how long the proposal would be put off, Amstutz said “indefinitely.”
Drillers would pay a severance tax as high as 4 percent that would generate as much as $1 billion by 2016, according to Kasich’s office.
It’s a choice between letting out-of-state companies and their shareholders reap most of the gas boom’s benefits or allowing all Ohioans to share in them, Kasich has said.
Amstutz said he’s concerned about the total tax burden on drillers when other levies are considered. Kasich called that argument “silly,” saying, “Add them all together, we’re still on the low end” compared with other states.
Ohio’s drilling boom is just starting, and Kasich’s tax could discourage investment, said Jerry James, president of the Ohio Oil and Gas Association and Marietta-based Artex Oil Co.
“When something’s in its infancy, and you’re going to put an onerous tax on it, that’s going to have a definite effect,” James said in a telephone interview.
Kasich noted that Chesapeake announced a partnership March 13 to build a $900 million processing plant in eastern Ohio (STOOH1). Denver-based MarkWest Energy Partners LP (MWE) announced Jan. 31 that the company and a joint-venture partner plan three natural-gas processing plants in eastern Ohio.
“We’re going to be pleasantly aggressive,” Kasich said. “I’m disappointed, but it’s not over by a long shot.”
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