American Oil and Gas Reporter - February 2016 - 86

ConventionSection: Ohio Oil & Gas Association

Severance Tax Proposal
Still Alive In Ohio
By Dan Holder
COLUMBUS, OH.-Even if the United
States was not in the midst of a presidential
election year, politics would be a significant challenge to the nation's oil and natural gas industry, assesses Shawn Bennett,
executive vice president of the Ohio Oil
& Gas Association.
Oil and gas prices are set in international markets, where Ohio operators
have no voice. While OOGA vigorously
participates in shaping national and state
regulations, it has few weapons aside
from public comments or lawsuits, he
says.
"So, the association must be vigilant
in its efforts to first, support those politicians who support our industry, and second, protect industry's interests at the
federal level when it comes to the Obama
administration's regulatory assaults," he
says.
OOGA President David R. Hill says
his conversations with operators in and
outside the Appalachian Basin suggest
some optimism that the downturn may
be at least reaching a floor.
"We certainly hope so; 18 months
ago, there were 59 rigs running in Ohio.
The last time I checked with the Ohio
Department of Natural Resources, there
were 14," says Hill, owner and operator
of David R. Hill Inc., in Byesville, Oh.
"At some point, that decline will be reflected in decreased production, which is
what the market needs to see right now."
Ohio producers, suppliers and service
companies are applying lessons learned
in earlier downturns and making smart
decisions regarding tightening budgets,
examining their operations for any unneeded expenses and seeking to maximize
revenues, Hill asserts.
"These market conditions really have
forced people to examine very closely
how they do their business," Hill says.
"Companies are slowing down and taking
a look at everything they do. As long as
they can do that and survive, it is a good
thing."
Analyzing how politics will impact
oil and gas operators will be a prominent
86 THE AMERICAN OIL & GAS REPORTER

part of the agenda for OOGA's winter
meeting, to be held March 16-18, at the
Hilton Columbus at Easton, Oh., Bennett
says. One timely speaker will be David
Wasserman, political analyst for The Cook
Political Report, Bennett points out.
"March 1 is Super Tuesday. It is so
great that the association has Wasserman
coming to speak, because what we will
learn at that time is really going to shape
the election," Bennett says of the date
when 14 states will hold primaries or
caucuses to elect delegates to national
conventions. "OOGA will get one of the
first insights on how this 2016 general
election is shaping up."
Ohio Politics
On the state level, politics promises
to remain a concern as Ohio Governor
John Kasich continues efforts to cut the
state income tax. According to media reports, Kasich vowed in late December to
seek a severance tax increase as part of
his tax overhaul in 2016.
Bennett adds that statehouse rumors
indicate many legislators are receptive to
those severance tax proposals given the
state of the industry. "We are an industry
that never looks for handouts," he asserts.
"However, the industry will rather have
a hand up instead of another barrier blocking development. A severance tax would
constitute a barrier, more so now than at
any other time. Times are hard enough.
We need to take away the barriers instead
of adding them."
Bennett points out a severance tax
will dampen the employment prospects
for many workers across eastern Ohio
who already worry about their companies'
survival in the face of low commodity
prices. "The only thing imposing a severance tax will do is increase the number
of people from the oil and gas industry
who are collecting unemployment," he
predicts.
Ohio legislators understand the global
problems affecting the state's operators,
Bennett says, and none of them want to
harm the industry. When lawmakers talk
about levying higher taxes on oil and gas
production, the smart course is to take a

"do no harm" approach, and not provide
more reasons to lay off Ohio workers, he
offers.
How long the political and business
turmoil undercutting commodity prices
will last and what impact it ultimately
will have on the world is unknown, but
Bennett predicts the oil and gas industry
will be very different when the recovery
arrives. "Gone is the heyday from 2008
to 2013. Now, you have much more discipline within these companies because
they are seeing the downturn's effects.
That market discipline really is going to
change the way companies operate whenever we do move into the recovery," he
says.
Regulatory Concerns
The two-year budget that Kasich signed
in June did not include a severance tax
increase, but did authorize several changes
to the Ohio oil and gas regulatory code.
Bennett says those include increased civil
penalties for violations.
According to the state Department of
Natural Resources website, the changes,
which took effect Sept. 29, include:
* Increasing daily fines from $4,000
to $10,000 the maximum civil penalty
that can be imposed for regulatory violations;
* Requiring notification of fires, explosions or oil, gas or brine releases to
the department within 30 minutes of the
event, unless such reporting is impractical;
* Expanding the scope of violations
to persons affected by violating payment of damages and the "actual cost of
rectifying the violations and conditions
caused by the violations;" and
* Authorizing the department to include lands owned by the state Department of Transportation in drilling units.
Bennett says the regulatory changes
are unlikely to impact most OOGA members.
"I take pride in our membership," he
applauds. "They all are top-of-the-line
operators, and thankfully no incidents
imposing civil penalties have taken place.
Those laws only took effect in September,

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