Rep. Cera Calls For New Severance Tax Revenue To Be Reinvested In Shale Communities
Legislative workgroup finds Ohio's rate lowest among comparable states
October 22, 2015
 
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State Rep. Jack Cera (D-Bellaire) today commented on the initial findings of an informal workgroup that over the summer studied modernizing Ohio’s severance tax on oil and gas. The workgroup, of which Rep. Cera was a member, submitted its findings and recommendations this week to the Ohio 2020 Tax Policy Study Commission. The Bellaire lawmaker also serves on the study commission.


“The severance tax workgroup did a good job of gathering information for the 2020 Tax Policy Study Commission to review,” said Cera. “I especially appreciate and support the recommendation that some revenue from any increase in the severance tax should go toward helping local communities in the shale region. These communities are directly impacted by the increase in drilling activity, and I believe a significant portion of the severance tax should go to investing in local infrastructure and basic services.”


The severance tax workgroup reviewed a number of state policies as they relate to the oil and gas industry, including Ohio’s tax rate and base as compared to other states, how other states use the revenue from their severance tax and the regulatory environment currently affecting the industry. The workgroup also reviewed previous severance tax proposals that have been introduced, including those from the governor, House Bill 375 – which passed the Ohio House but stalled in the Senate – and Rep. Cera’s House Bill 162.


Not all the workgroup’s recommendations were made unanimously, however; while some members of the group believed that new severance tax revenue should go toward an income tax cut, Rep. Cera disagreed.


“Due to the instability of severance tax revenue, it is a mistake to allocate that money in the state budget to pay for an income tax cut that won’t benefit the middle and working class,” said Cera. “Any increase in severance tax revenue should be used to support the shale communities and build infrastructure that can help the oil and gas and related industries in Eastern Ohio continue to grow.”


The 2020 Tax Policy Study Commission will examine increasing the severance tax as part of an overall examination of Ohio’s tax code. The commission is expected to make recommendations or propose legislation before the end of 2016.


Highlights of the informal workgroup’s findings and recommendations include:



  • Stock, commodity, and capital markets affecting the oil and gas industry have fluctuated widely in the recent past. The industry is especially sensitive to these fluctuations and is under financial duress.

  • Given the current market conditions, the legislature should consider a trigger or a slow phase-in of a reformed severance tax. Under such a phase-in, Ohio should not expect to see a new revenue stream materialize overnight until market conditions improve.

  • A new severance tax should provide adequate funding for the state's regulatory, administrative, and oversight aspects of the oil and gas industry, while additional resources should be directed back to infrastructure and other industry supported initiatives which will foster more exploration and extraction of oil.

  • Ohio's severance tax should be comparative with other shale play states across the nation. Ohio's total tax burden on the oil and gas industry is currently lower than or as low as every other state with a severance tax.

  • The new revenues generated should be used to:

    • Assist local governments in shale play counties to improve infrastructure, equipment, and services that will accommodate the oil and gas industry and also benefit the citizens within their counties.

    • Facilitate making adjustments to Ohio's income tax or possibly other taxes in an effort to make Ohio more competitive in the national and international marketplace.

    • Invest in asset building opportunities that will grow Ohio's economy and improve the quality of life of all Ohioans.




 

 
 
 
  
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