Are Ohio’s oil and gas severance taxes too low?
Monday, April 24, 2023
With drilling set to expand in Ohio state parks, some believe Ohio’s oil and gas severance taxes are too low, according to Ohio Capital Journal.
Studies that have compared oil and gas tax rates to the volume of minerals pumped out of the ground and the value of those minerals have reported Ohio’s severance taxes among the lowest of any state.
A 2016 analysis by economists Daniel Raimi and Richard Newell compared state and local government revenue as a share of the value of oil and gas produced in the 16 largest oil-and-gas-producing states and found Ohio’s severance taxes were by far the lowest of the 16 states. The median states — Utah and Texas — were taxing oil and gas production at seven to eight times Ohio’s rate in 2013.
In light of a new bill that requires state officials to grant drilling leases on state lands, many are questioning whether these bottom-of-the-barrel tax rates need to be increased.
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Shale FAQ
What is fracking?
Fracking is a slang term for hydraulic fracturing. Fracturing is a process by which highly pressurized fluid is pumped thousands of feet into the ground to fracture rock formations. The goal is to release the natural gas that’s locked inside the rock.
Is it safe?
What most concerns people about fracturing is ground water contamination. The worry is that fractures underground, caused by the process, will extending upwards and into aquifers, releasing gas and chemicals into the ground water supply. There’s been no confirmed reports of such a thing happening. Though surface spills and drill site blowouts can lead to localized environmental concerns.
Will my water catch on fire?
Flammable water is caused by the release of methane gas into a drinking water supply. Methane gas occurs naturally and can be released by any kind of drilling, including water wells. In Pennsylvania officials fined Chesapeake Energy $1 million for contaminating ground water with methane. It was determined that the company had not properly cemented it’s boreholes and gas migrated up the well, between rock and into aquifers.