COLUMBUS, Ohio (AP) — After years of debate, a tax
compromise backed by the oil and gas industry cleared the Republican-led
House on Wednesday amid criticism from Democrats who said it failed to
adequately protect local communities and the environment and from Gov.
John Kasich who wanted a bigger tax hike.
Kasich, also a
Republican who has tried previously to raise taxes on the industry, said
the compromise doesn’t raise enough revenue to cover a statewide income
tax break.
The legislation passed the House, 55-35, one day after it cleared a committee by a single vote.
Democrats
expressed disappointment and frustration over taxing drillers at a
severance tax rate of 2.5 percent on horizontal wells, which opponents
said isn’t enough of a return to compensate the state for the resources
and related infrastructure impacts.
The rate is less than the 4
percent Kasich initially sought and below other states in the region,
but the industry has said it’s four times what other Ohio industries pay
on gross receipts through the state commercial activity tax.
Oil
and gas producers have said a higher tax stands a chance of scaring off
potential hydraulic fracturing, or fracking, development that’s taking
place mostly in the eastern part of the state.
Rep. Mike Foley, a
Cleveland Democrat, called it "irrational" not to raise the tax to a
level, in his view, that raises enough to remediate the environmental
and infrastructure impacts of drilling.
"I’m frustrated that the
science (on climate change) is out there, the science is clear and no
one seems to be paying attention to it," he said.
Rep. Dave Hall, a
Holmes County Republican, urged fellow lawmakers to "look at the big
picture" and to realize the benefits coming to the state from the shale
boom.
Proceeds of the tax would be divvied up between regulation,
abandoned well cleanup, geological mapping, county payouts and grants
and, finally, the state income tax reduction fund. Because of those
earmarks, and relief the bill delivers to drillers on other taxes they
currently pay, it is unclear whether any statewide income-tax cut would
result.
In an amendment, lawmakers increased the percentage of tax
proceeds that would go to local communities from 15 percent to 17.5
percent. Of that share, the first portion would go to restore state
local-government and library funds that lose revenue because of tax
exemptions and incentives in the bill.
A quarter of the remaining allotment would go directly to county budgets, down from the 50 percent
proposed earlier.
The
final bill leaves the distribution of competitive county grants — such
as for infrastructure — to a commission appointed by the governor and
majority party of the Legislature.