By Russ Zimmer
The severance tax in Gov. John Kasich’s proposal effectively would transfer more than $920 million through fiscal year 2017 from oil and gas producers to every other income taxpayer in the state, especially small businesses.
Such a shift is being resisted by the industry, whose presence in the state has grown exponentially since the development of cost-effective ways to tap the energy-rich Utica Shale in eastern Ohio. They argue tens of thousands of jobs already have been created by shale development, that Ohio landowners will lose out on royalty income and that falling prices have lessened the drilling fervor.
Gathering support for raising the severance tax looks to be a tall order, but what the state is asking for is “definitely affordable for the industry,” said Douglas Southgate, an economics professor at Ohio State University with an expertise in oil and gas development.
“States with large energy sectors and with large Republican majorities in the state legislature, they have severance taxes with rates higher than what the governor is proposing,” Southgate said.