COLUMBUS, OH - Ohio Governor John Kasich confirmed earlier this week that he intends to propose a tax on oil and gas extraction within the state, covering the cost of infrastructure damage, the Columbus Dispatch reports.
Kasich, a former member of Congress, said he has communicated his plans to industry leaders, who are investing billions of dollars to drill for oil and gas in Ohio??s Utica shale.
Drilling activity is expected to increase truck traffic on rural roads, which could potentially damage roads and bridges.
"We have to make sure we have impact fees," Kasich said. "At some point, these counties are going to benefit, but in the early years, when it comes to the erosion of roads and infrastructure, we need to make sure that these locals are going to be in a position to manage their infrastructure."
Kasich said he has not yet determined the fee amount and that the proposal could be included in his mid-biennial budget review during the first half of this year.
Opposing the new tax is the Ohio Oil and Gas Association, whose soon-to-be-released report projects that Ohio state and local governments will realize a $1 billion increase in annual tax income from its industry by 2015 under the current tax system. The figure represents a 4% boost in proceeds from all businesses.
"It??s just not good policy to start a new tax because you can," said Tom Stewart, executive vice president of the trade group.
Environmental advocates support Kasich??s proposal, as long as some of the proceeds help communities cover the costs associated with drilling activity.
"There will be more and more stress on local communities to have the fire and emergency support there to help fund the infrastructure that??s needed" for drilling, said Trent Dougherty, a staff attorney for the Ohio Environmental Council.
Donald Tobin, tax policy professor at the Moritz College of Law at Ohio State University, said new taxes must be structured carefully, so as not to scare off investment.
"The question is whether the tax is at such a level to discourage the activity," he said.
Kasich said the tax is not meant to discourage development, adding, "You can??t have the local people out there having their roads undone and say, 'It??s not my problem.??"