Ohio’s House passed a bill that seeks to tax fracking on Wednesday, with its supporters arguing it will better guide companies intending to frack the state’s shale reserves.
The bill charges a severance tax of 2.5 percent on hydraulic fracturing, an amount Democrats called a pittance.
“We think it’s OK to be fooled by the oil and gas industry,” said Rep. Robert F. Hagan, D-Youngstown. “Why are we so afraid to make them pay their fair share?”
However, the Republican House Speaker, William G. Batchelder, argued the tax rate is good as any further increases will scare away investors, reported Columbus Dispatch.
“Maybe in the future there will be sufficient productivity to entice other carriers here,” he said after the 55-35 vote. “I’m hopeful we will attract more companies once there is some certainty in what the tax may be.”
The independent Legislative Service commission estimates that the tax will rake in about $173 million in five years. This exceeds the current law by about $96 million at the high end, while the present law will raise $21 million more than the proposed tax in the low end. The bill, whose tax rate of 2.5 percent is less than Governor John Kasich’s proposed 2.75 percent, permits energy firms to subtract taxes for commercial activity from the severance-tax charge.
It also lowers the severance tax payable on the normal vertical wells. It also provides an exemption from the initial $10 million in total revenues from a well to allow companies to recoup their investment in developing the well.
All that is left is now for the Senate to debate the bill, which may only happen after the summer recess, probably in November. The Ohio Department of Natural Resources will receive $15 million for regulation of fracking, and $3 million to conduct geological mapping and cleanup of orphan wells.
The remainder of the funds, about $63 million per year, will go towards funding a reduction in annual income tax, which is estimated at 0.5 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Jonathan Millet at firstname.lastname@example.org