Ohio’s oil and gas industry needs a boost, not a bite

If we’re going to realize gains, we need policies that encourage development

  • JeffBuschor-JPG


  • Buschor

    This Chesapeake Energy Corp. water collection station is part of a fracking site at a private lake in Carroll County, Ohio.
    This Chesapeake Energy Corp. water collection station is part of a fracking site at a private lake in Carroll County, Ohio.

    GOV. John Kasich’s proposal to cut taxes on Ohio families and businesses makes good sense for our state’s economy. But his plan to simultaneously hike taxes on our oil and natural gas industry doesn’t make sense.

    Thanks to the Utica shale formation, Ohio’s economy is on the cusp of tremendous growth. Already, total employment related to the development of the shale rock beneath Ohio is nearing 170,000 jobs, up 17 percent from just one year ago.

    These are good jobs too. According to the Ohio Department of Job and Family Services, the average wage in the industry was $74,000 in 2012, about $30,000 more than the state average.

    Many of these jobs are in parts of the state that are still reeling from the departure of the steel industry. A 2011 study found that Youngstown had the highest concentration of poverty in the nation.

    But now, thanks in large part to the development of the Marcellus and Utica shale formations, the unemployment rate has dropped into the single digits. The benefits to the state economy are unquestionable, and the future is bright.

    A study last year by the Ohio Shale Coalition estimated that our oil and gas industry will bring more than 65,000 new jobs and nearly $5 billion in economic output in 2014. Another study foresees even greater benefits, with more than 204,000 new jobs by 2015.

    Governor Kasich has spoken of the potential of the energy sector for Ohio families in terms of dollars and jobs. The governor has also noted that this industry is at a pivotal point in its development.

    If we’re going to realize the gains it promises, we need policies that encourage development. That’s why Governor Kasich’s proposal to increase the severance tax — a tax incurred when non-renewable natural resources are extracted — on oil and gas makes little sense now.

    Do we really want to stifle the growth of an industry that is so important to our economic future? The industry is young in our state, and taxing it now will only encourage oil and gas firms to look elsewhere as they seek to capitalize on the current energy boom.

    States such as West Virginia and North Dakota are rocketing forward economically, thanks to shale development. Ohio must remain competitive. Raising taxes has just the opposite effect.

    Across our eastern border, Pennsylvania has no severance tax at all. The rate of drilling in the Keystone State far outpaces that of states with the tax.

    Just as distressing, the governor has made no promises to dedicate the revenue from his proposed tax increase to economic development.

    The Ohio General Assembly smartly shelved this proposal when the governor brought it up a year ago. The harm from increasing taxes on Ohio’s oil and gas industry could easily outweigh the benefits from other tax cuts. Let’s make sure that doesn’t happen.

    Jeff Buschor is president of Hometown Mortgage Lending Co. in St. Marys, Ohio.