Taxing the Fracking in Ohio
Public News Service Ohio - January 9, 2012
By Mary Kuhlman
The oil and gas industry is anticipating a boom in natural gas and possibly oil production in Ohio, but a new report finds the state could lose out on a half-billion tax dollars that could help offset drilling-related costs. According to research by Policy Matters Ohio, if the state levied a severance tax of 5 percent, it could generate up to $538 million in new revenue between now and 2015.
Report author Wendy Patton, senior project director for Policy Matters Ohio, thinks Ohio should be compensated by the companies that are depleting its natural resources.
“We could use severance taxes to help local communities pay that upfront cost associated with drilling; that could help schools and local governments, which have been cut badly; and to help prepare for a future after the minerals are gone.”
Patton says the drilling boom also brings concerns about environmental and health risks. Just last week, an earthquake in eastern Ohio was reported to be the result of fracking wastewater wells in Youngstown, and there are reports of water contamination from using the process in Pennsylvania. Patton says such risks are exactly the reasons Ohio should consider raising its severance tax.
Ohio’s severance tax is one of the lowest among states with shale oil and gas potential. Patton says it’s important to create what she calls a more level playing field.
“Recommending that Ohio have a severance tax rate of five percent is really a very sort of middle-of-the-road level, and it’s also similar to that of our neighboring states of West Virginia and Michigan that also have some of the shale and gas resources.”
Some in the industry argue that higher taxation, at levels closer to other states, could ruin Ohio’s chances to attracting oil and gas business. But Patton says industry will drill where the resources are best, not where taxes are lowest.