Fracking has impacted communities in Eastern and Southern Ohio. Drilling companies come in, take the oil and gas from underneath our feet, and sell it. Yes, jobs have been created, but many of those are filled by out of state workers. Rents have sky-rocketed, traffic accidents are up, and there is a high level of concern over environmental damage in the short and long-term. What can be done to help now and to plan for the future?
Oil and gas drillers pay an extremely small tax for the right to have access to the resources of Ohio. Ohio is one of the lowest tax states for oil and gas drilling in the entire country. The Governor, environmentalists, local officials and many others have agreed that the industry needs to pay their fair share.
HB 375 was introduced last winter with the intent of raising the severance tax. The bill will receive its 9th hearing on Tuesday May 13th. However, this bill falls short on our moral obligation to be good stewards of limited resources and to adequately plan for the future.
Instead, this Bill (in its 3rd version):
Cuts the rate in half for some wells. The Cost Recovery Fee will be eliminated and vertical (traditional) wells will continue to pay $0.10 per barrel of oil and $0.015 per Mcf of natural gas.
Imposes a 2.5% rate on gross receipts of oil and natural gas from fracking wells (after exempting the first $10 million). This will leave Ohio well below other states in the region and across the country. For example, West Virginia has a rate of 5%, Texas a rate of 7%.
Regulatory initiatives The proposal will allocate $21 million toward ODNR regulation, geological mapping, and plugging orphan wells. Some of this work was funded under the old tax structure as well.
Creates new tax credits and loopholes for businesses and investors that could cost the states general operating budget $10 million in 2016.
Creates a legacy fund. The concept is simple – the oil and gas will run out at some point, but lets use the revenue now to plan for the future. Local communities could start accessing the funds in 2025, but if we do not put aside enough now, it will be under-capitalized and ineffective at long-term financial security. It will only receive $1.5 million in 2016. North Dakota – in 3 years has built up a principal amount of $1.3 billion. Since 1976 New Mexico has a principal amount of $4.1 billion, and Wyoming $6.3 billion. With a strong principal, communities can benefit for decades on the interest of those investments.
Local Government and Infrastructure will receive about $22 million in 2016. Local communities have to deal with massive infrastructure needs to handle the fracking industry – including bigger roads, sewage systems, more maintenance, more car accidents, more work for public safety, and social needs such as rise in drug and prostitution, increased rents and much more. $22 is well short of the need that exists. These investments will probably not replace the cuts these communities have seen over the past 4 years.
Tax Cuts primarily for the wealthy. Estimated at $54 million in 2016. Most Ohioans will receive such a minuscule amount of this money that it will likely have no impact. This revenue should be used to strengthen the legacy fund, assist local governments. Others have proposed also using the revenue to invest in alternative energy, environmental stewardship, education and training (to make sure that Ohioans qualify for these drilling jobs, and other projects.
As a state, we have a moral obligation to the next generation to adequately plan and be good stewards of our limited resources. We need revenue to invest in Ohio’s future not for a $4 income tax cut today.