Whether you are for or against taxes — they are a necessity in our society.
OK, now that we got that out of the way.Let’s talk about Ohio and the possibility of an oil and gas severance tax.
Mr. Tax Man
Gov. John Kasich suggested that one be enacted in Ohio on oil and gas producers. Normally, I just absorb what is being said and move on. However, this week is a little different. I attended the Hart Energy Marcellus and Utica Midstream Conference in Pittsburgh, Pa. this week. One of the speakers at the conference was Pa. Gov. Tom Corbett.
Guess what he was talking about at the conference? Don’t worry, I’ll tell you!
Corbett was talking about the benefits the shale boom has brought to the state of Pennsylvania. He talked about the 110,000 jobs created in the past five years directly related to the shale industry and how if the cracker plant is built, it will mean another 10,000 jobs in the construction field alone. He also talked about the impact fee, which the state of Pennsylvania passed last February.
Now, there will always be those that are negative about a tax. But after one year, it does appear to be working in Pennsylvania. The impact fee generated $204 million. Approximately 70 percent of it goes back to the county where it was generated. The funds can then be used for county government, police, fire, libraries and other social needs.
According to the legislation, the drillers pay $50,000 per well. Smaller vertical wells will be assessed $10,000. Legislators estimate the fee will generate around $180 million. The fee will be different from year to year because it will be based on natural gas prices and the Consumer Price Index.
My feeling is this, maybe Ohio shouldn’t reinvent the wheel. Maybe we should look at our neighbor and see how and what they are doing. Maybe our severance tax could be modeled after what they are doing there. I mean $204 million of which 70 percent goes to local communities and 30 percent goes to state agencies would mean a big boost.
After all, it doesn’t appear to have slowed down the plans for wells there. Even Bradford County, where the shale boom is considered to have begun continued to get new permits in 2012.
I guess we will see what Kasich has planned when he rolls out the budget plan Feb. 4.