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Keep drilling fees competitive

January 31, 2012
Salem News

O hio has an advantage over other states in the region where gas drilling has become a bonanza for thousands of property owners and energy companies. That does not mean the Buckeye State automatically enjoys a competitive edge, however.

Several eastern states, including West Virginia, Pennsylvania and the southeastern edge of Ohio, are underlain by the Marcellus Shale rock formation. Relatively new technology is allowing energy companies to tap into vast quantities of natural gas in the formation.

But Ohio has something other states in the region lack. It is vast deposits of gas - and oil - in another formation, the Utica Shale. Wells already have been drilled into the Utica in several East Ohio counties.

As was the situation with other gas-rich states, Ohio entered the new boom with drilling regulations enacted decades ago. New technology and new concerns about property and mineral owners' rights and the environment make it vital states update their laws. West Virginia did so late last year.

Gov. John Kasich's administration has been investigating the potential and pitfalls of drilling and is nearly ready to propose a package of regulatory updates.

Also included in the governor's plan are changes in energy taxes. Revisions in the natural resources severance tax, along with a new "impact tax," are envisioned.

The idea behind the latter proposal is that energy companies should pay a new tax to help communities, counties and the state cope with the cost of drilling. Infrastructure, including roads, may need repairs as a result of drilling industry activity.

That certainly is a concern, but there are different ways of addressing it. For example, West Virginia law makes drillers directly responsible for repairing any damage their trucks cause to highways.

What Kasich and Ohio legislators need to keep in mind is competitiveness. The presence of the Utica Shale in this region of the state gives Ohio an advantage - but not one that will outweigh energy companies' concern about what they may view as unnecessarily burdensome taxes.

If Ohioans are to enjoy the maximum benefit from the drilling boom, a competitive tax and fee environment will be imperative. Again, the governor and lawmakers should keep that in mind.



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