Legislators consider plans for drilling tax

State Rep. Sean O’Brien says when the Ohio House returns from its break next week, he intends to begin negotiating a change to a proposal that revises tax rates on horizontally drilled oil and gas wells in Ohio.

The Democrat from Brookfield wants a portion of those new tax dollars funneled back to counties most impacted by the still-developing industry.

”I’m still studying the bill and looking at considerations for bringing money back to the localities. That is something we are definitely looking at in Columbus and discussing,” the Hubbard Democrat said.

House Bill 375, introduced in December by Lima Republican, state Rep. Matt Huffman, and backed by the Ohio Oil and Gas Association would put into place a 1 percent tax during the first five years of production and 2 percent thereafter. When production at a well begins to decline, the tax would drop back down to 1 percent.

Right now, Ohio has a nominal severance tax of 3 cents per a thousand cubic feet (mcf) for natural gas and 20 cents a barrel.

The legislation also would roll back similar taxes on traditional wells.

It does not include a provision to give some of the tax proceeds back to the counties with increased activity to maintain and improve infrastructure damaged by the industry.

O’Brien said doing so ”makes sense” because counties experiencing the boom are ”bearing the burden,” and he doesn’t believe funneling some of the money back will affect agreements county engineers have with drilling companies to protect roads and bridges.

”These road use maintenance agreements benefit both sides,” O’Brien said. The agreements let drilling companies know exactly what they are required to do and benefit the county, ”because they also know what they are getting,” O’Brien said.

Columbiana County Engineer Bert Dawson said some county engineers worry if money is funneled back to the impacted counties from the severance tax, drilling companies would take away the money they’re spending on road improvements.

Fred Pausch, executive director of the County Engineer’s Association of Ohio, said the group is monitoring HB 375 and the impact to road use maintenance agreements, what he called ”one of the best things we have going right now” and ”vital” to counties that need infrastructure improvements.

Commonly known as a RUMA, the voluntary agreement between the county and drilling companies create standards to protect roads and bridges. The agreements require drilling companies to address the road improvements upfront or if the road is good enough condition, do the improvement after they’ve finished.

Trumbull County Engineer Randy Smith said he can see Dawson’s point, but ”money directed this way” is ”always welcome.”

Smith said, ”if there is going to be an additional tax, I’d like to see a portion dedicated back to the counties where it’s happening.” That’s a view shared by Dawson.

Trumbull Engineer’s relationship with drilling companies, Smith said, has been positive and so far, the RUMA process has worked well.

”From my perspective, that’s all I can ask for, for companies to step up to the plate, take responsibility for the impacts that they have cause and to date, they’ve done that,” Smith said.

Reporter Tom Giambroni contributed to this report.