(Posted by Trent A. Dougherty, Director of Legal Affairs, Ohio Environmental Council, Director of Ohio Environmental Law Center)
On Wednesday Governor Kasich unveiled his plan to cut Ohio income tax, across the board, with proceeds from a severance tax on Governor Kasich’s fact sheet on his Mid-Biennium Review Income Tax Cut contains an intriguing and provocative sentiment that “new revenue from Ohio’s Shale oil and gas production should go to Ohio taxpayers, and not government.” If the Governor’s sentiment was based on the belief that prehistoric natural resources under Ohio, in part, belong to Ohioans, I agree wholeheartedly. If that is the case, then we have a modern-day Huey Long in the Buckeye State.
Yet, if that is the case, why are we proposing severance taxes that are drastically less than our neighboring states? The fact sheet shows that the proposed 1% tax on Natural Gas pales in comparison to West Virginia and Michigan’s 5%. Don’t we owe ourselves to drive a better bargain to get a bigger piece of the pie? I would at least have started off with a number that would have allowed room to negotiate during the legislative process.
Admittedly, I am not a tax attorney, so I will leave further discussion of tax structures to others. However, the statement that the revenues should not go to the government, I believe, is only partially true. A portion, and I proffer, a large portion, should go directly to the local governments who have an unfunded mandate to protect their citizens from any issues related to drilling, even though they have no authority to regulate the practice. The severance tax should, to a degree, act as a local impact fee to cover the costs of Are we expecting landowners to take their portion of the tax cut to purchase their own water replacement if a gas well fouls their water? Use the tax refund to find shelter if an injection well causes more quakes? Perhaps, in the deliberations over this plan a portion of this estimated $1 billion can be set aside as a ‘rainy day fund” for local first responders and infrastructure improvements in Ohio’s Gaslands.
Another interesting note in the Governor’s shale tax plan is who does not get taxed. For over a year, the ODNR and the Oil and Gas industry have worked hard to convince us that there is no difference between a shale well and a “conventional” well – we have been drilling wells for over a century in Ohio, and fracking since before the Cold War, they say. Why now are they saying that these shale wells are somehow un-conventional? And the conventional wells should not be taxed at all?
He giveth, then he taketh away
On the same day the Governor rolls out his income tax cut plan he also unveils his Capital Budget which all but eliminates the Clean Ohio Fund. Other than $6M in new funding for trails, there does not appear to be any other appropriation for the Clean Ohio Fund.
Ohio plans to make most of Ohio’s pastoral eastern half of the state into shale industrial parks, passing some of the revenue onto you. Yet, Ohio is refusing to spend the money Ohioans authorized by a resounding YES vote approving the availability of funding, and etched in the Ohio Constitution, to keep the few remaining green spaces green. The constitutional amendment that voters approved in 2008 extended the original Clean Ohio program created in 2000.
Out of a potential of $100M for green projects, the Office of Budget & Management (OBM) chose to include only 6% of that in new funding. In his testimony, OBM Director Tim Keen noted that current state debt is still way below the debt ceiling, which is calculated as 5% of state revenues.
Nevertheless, there is ample room to appropriate the additional bonding for Clean Ohio — one of the most successful Public Works programs around, in my humble opinion. I hope the Legislature does its due diligence to make sure the funding finds its way back. Investment in trails, farmland preservation, parks, and greenspace is one of the best uses of our resources that the Administration can make in the quality of life of our state.