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November 23, 2014
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Severance Tax and its impact on Ohioans

With the discovery of large deposits of oil and gas in the eastern part of Ohio, we have an opportunity to work with Ohio’s oil and gas industry to offset costs incurred by the tax payers for road maintenance and regulation associated with the industry.  As we learn more about this growing economic benefit in Appalachia we must have a serious discussion at the state level to determine the best government policies moving forward.

Since Ohio contains such an abundance of natural gas, tapping into it helps our state in countless ways. In order to reap all the benefits of the oil and gas beneath our feet, a severance tax must be implemented. The revenue that is created by this tax can help sustain Ohio’s growing economy by helping us lower Ohio’s personal income tax.

House Bill 375 addresses the issues at hand by modifying the existing severance tax and working with the State Government and those in the field to establish a competitive severance tax for Ohio. The discussion surrounding the bill development focused on the safety of Ohioans, a competitive tax rate and funding for communities affected by the growth in oil and gas exploration in eastern Ohio. The result is a severance tax rate that is high enough to provide revenue for the community, but low enough to ensure Ohio can attract more development in our oil and gas fields.

The first $21 million in revenue will fund the regulatory programs of the oil and gas industry by the Ohio Department of Natural Resources. Additional revenue produced will provide tax relief to Ohioans by funding the Ohio Income Tax Reduction Fund, which will total more than $325 million over the next five years.

Another goal was to be sure that local governments would receive revenue as well.  I’m happy to say that 17.5 percent of the total tax revenue will be distributed to local governments. This money will help to make improvements to local infrastructure that has experienced wear and tear as a result of the increased industrial activity in eastern Ohio.

To ensure oil and gas production in Ohio is safe for our people and the environment some of the dollars will be used to increase funding for Ohio’s orphan well program.  Closing wells that are no longer in use and have been abandoned in some cases for decades is a very important environmental practice.  This is just one more tool that will allow Ohio to grow as an energy producer.

The extraction of natural gas has already created many private sector jobs and investments. House Bill 375 adds to this by providing economic stability and long term safety precautions for oil and gas extraction. It sets the stage for a stronger and safer Ohio, and continued growth in the energy sector right here in Ohio.

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