Two of the biggest controversies in the oil and gas business in recent years have been taxes and local fracking bans, and the Ohio legislature just gave big wins to the industry on both counts. The question is whether Republican Governor John Kasich will take the presents away.
Local fracking bans have been an issue in many states impacted by the boom in hydraulic fracturing in recent years. State governments tended to be supportive of oil and gas production, in large part because they benefit from the royalties. As a result, activists have pushed for local governments to shut down oil and gas operations in Colorado, Pennsylvania, California, and elsewhere.
In 2015, the Ohio Supreme Court ruled that cities cannot use local zoning rules to block a state-issued drilling permit. That ruling left some ambiguity between state and local roles, though, and a bill just passed by the Ohio legislature would tip the scales towards industry by allowing the Ohio Secretary of State to invalidate ballot initiatives that conflict with state law. In theory, this would allow authorities to kill legally-dubious citizen initiatives early in the process.
Oil and gas extraction taxes, or severance taxes, have been another major controversy in states like Pennsylvania. The Ohio legislature just passed a bill that would create a tax exemption for the costs of well pad construction and similar extraction-related costs. This exemption would be retroactive to 2010, meaning the state would have to pay out $215 million in refunds. Industry advocates say these expenses never should have been taxed, and the bill is just fixing an error, but not everyone agrees.
The fate of these two bills now lie in the hands of Gov. John Kasich. The governor has not said what he will do. He has generally kept quiet on the idea of local fracking bans, responding to calls for a fracking ban by saying only that the state had strong regulations in place. He has been far more outspoken on taxes. He called the state’s oil and gas taxes in general a “total and complete rip-off,” and he appears to have said negative things about the specific exemption in question now. He has ten days to either sign the provisions into law or veto them.
The two bills could certainly bolster the oil and gas industry in our region, and if you are looking to expand Cimmaron Land is here to help your company lock up the acreage you need.