COLUMBUS, Ohio (AP) – A proposed tax increase on Ohio oil-and-gas drillers that’s been intensely negotiated for weeks – and debated for years – won’t be included in the two-year state budget, legislative leaders said Tuesday.
Senate President Keith Faber and House Speaker Cliff Rosenberger, both Republicans, said that negotiations on a long-standing priority of Gov. John Kasich have been fruitful but need more time.
“Unfortunately, time is never an ally in the budget process as you get toward the end,” Faber said. “So, today we have a choice: Halt that dialogue, move forward with an unfinished policy in the budget, and fight it out in conference committee; or to continue the progress outside of the budget and work toward a meaningful compromise during the next three months.”
The tax increase’s omission from the two-year, $71 billion state operating budget that’s nearing a final vote comes as a political blow to Kasich, a likely 2016 presidential contender who has spent considerable political capital pushing the increase as a way to pay for income-tax reductions.
An increase now would come well after the frenzy of new fracking activity in eastern Ohio’s mostly Utica Shale deposits has ebbed.
“Updating this outdated tax policy remains a priority for the administration, especially since new technologies in recent years have completely transformed this industry,” said Kasich spokesman Rob Nichols. “We’re obviously disappointed with the delay. We need to move forward with what’s best for Ohio.”
Nichols said generating more money from a modernized severance tax could allow for “even more tax cuts to keep that growth going.”
Budget amendments accepted Tuesday create a legislative task force to review the issue and produce a final report by Oct. 1. The panel will be co-chaired by the Ways and Means chairs of the Ohio House and Senate and include two Republicans and one Democrat from each chamber, as well as Kasich’s budget director. Energy industry groups, which continue to oppose the tax increase, will also be involved.
Rosenberger said it is the first time all sides will sit at one table.
The Senate’s lead negotiators – Bob Peterson and Troy Balderson – provided virtually no new details of an eventual compromise at Tuesday’s news conference, though Faber described the progress that’s been made as “substantial.” Faber said Balderson wants to assure that proceeds of any tax increase support local infrastructure projects in shale country.
“Our goal, Sen. Balderson’s and mine, at the start of this process was to get to the point where everybody is a little bit uncomfortable, both the administration and the industry, but nobody’s painfully uncomfortable,” Peterson said. “We wanted to find that true compromise.”
Faber sought to head off critics who might suggest that creating the task force represents a stall tactic that could fizzle without result. He said the parties are so close to agreement that “concepts and ideas are actually being drafted into legislation,” at least in the Senate.
The heart of the matter – raising the tax – still appeared to be a sticking point, however.
Faber, Rosenberger and Peterson all said that increasing severance tax rates on extraction of oil, natural gas and natural gas liquids – if even slightly – is a key assumption of the talks. Yet two energy industry groups said in statements Tuesday that they remain opposed.
“Working together without arbitrary deadlines, we are confident long-term policy solutions can be achieved to provide Ohioans with the greatest economic benefit from our emerging industry,” American Petroleum Institute Ohio Director Chris Zeigler said in a statement.
Ohio Oil and Gas Association Executive Vice President Shawn Bennett said, “While we remain opposed to an increase in the severance tax rate, especially during this extremely difficult commodity price environment, we are open to continuing discussions on this issue.”
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