County commissioners fight for shale gas tax revenue
County Commissioners from Northeast Ohio are working hard to see tax revenue from oil and gas exploration in the Marcellus and Utica Shale plays come back to their counties for infrastructure needs.
The commissioners testified before the House Ways and Means Committee recently, presenting the importance of severance tax revenue distribution to their communities.
The commissioners – including Columbiana County Commissioner Tim Weigle – said the revenue is needed to help their counties respond to the challenges of building the infrastructure needed to address the economic development needs of the oil and gas and ancillary industries that will be coming as drilling activity increases.
Commissioners who testified with Weigle were Ginny Favede of Belmont County who also serves as secretary to the state commissioners’ association board of directors, Chris Abbuhl and Belle Everett of Tuscarawas, Carl Davis of Monroe and Robert Wirkner of Carroll.
The commissioners are especially concerned about the ramifications of House Bill 375, and according to Favede those concerns are mainly regarding the impact it will have on Local Government Funding (LGF), which could decrease by “tens of millions.”
According to a joint press release issued by the commissioners who testified, the legislation will decrease the funding through the tax credit created and the exemption of oil and gas from the commercial activity tax (CAT) and other provisions.
Commissioners urged the committee to ensure the overall LGF not be reduced by the proposed tax package, including severance tax, income tax and the CAT tax changes, and argued that any new tax proposals for the state should not result in a negative impact on local governments still struggling with budget cuts.
Another concern is the legislation does not provide any funding to local governments specifically where oil and gas extraction is occurring.
Commissioners Wirkner and Everett said the severance tax proposal should include a provision that a portion of the revenue be given back to counties in the Eastern Ohio region.
According to Everett, distributing funds in the area where they were originated is not new to Ohio, and noted that transportation funds from the Ohio turnpike were given to projects within the geographic “nexus” of the turnpike.
“We need to help you understand that it is going to cost each of our counties money for infrastructure to accept new developments, rail spurs, water, sewer, wastewater treatment and road improvements. Money that we do not have,” Favede said.
Belmont County alone has identified $28.8 million in real infrastructure needs with no oil and gas revenue stream to offset those costs, she added.
Costs also include additional employees and office equipment at the county engineer, recorder and probate offices to bear the additional workload.
Weigle agreed the development underway has resulted in a financial strain on most government entities in Columbiana County.
“We have managed to endure increased expenses in services, however there will be a point we may not be able to continue,” he said.
According to the release, oil and gas companies have spent $12 million in road upgrades to date in Columbiana County, yet the infrastructure upgrades will require a substantial amount of money to obtain them.
Weigle said that while the county has embraced the development and welcomed the shale drilling opportunity the county is concerned about where the additional funds will come from.
Commissioner Abbuhl is concerned about whether Tuscarawas County will have the funding available to handle the infrastructure side effects that come along with the $500 million oil and gas processing plant being constructed there by Kinder Morgan.
“With that type of investment and the jobs that it will create we want to make certain that we can meet the needs of that company,” he said.
He estimated the plant will require water and sewer upgrades costing up to $3.5 million.
“It would be very unfortunate if the county were unable to fund a water and sewer project that would enhance economic development in our county due to a lack of available funding,” he said.
Ohio Township Association executive director Matt DeTemple told the House committee members their concerns that an increase in the proposed severance tax rate will drive the industry out of Ohio is “nonsense.”
“They are here because oil and gas is here … these people aren’t going anywhere, even if the severance tax is raised,” he said, adding the state has issued at least 1,048 horizontal drilling permits and JobsOhio estimates that $2.3 billion dollars has already been invested in 10 Ohio counties alone for Utica Shale development.
He cautioned, however, that the oil and gas won’t always be around and the state needs a “reasonable severance tax that targets some of the revenue to townships and other local governments.”
The township association is working alongside the state commissioner’s association and the Ohio Municipal League with Reps. Brian Hill (R-Zanesville), Kirk Schuring (R-Canton) and Jack Cera (D-Bellaire) to offer a proposal that will provide funding from the tax to support infrastructure development in the shale play counties, according to the release.
A substitute bill is anticipated to be offered this week and a House Floor vote on HB 375 is expected before the end of this month.