E&P Companies Like Ohio for More than Just Geological Reasons

Drillers like Ohio for more than just geological reasons. Ohio is ideally located to take advantage of development and commercial networks in both the Midwest and on a national scale. Ohio is within 600 miles of 60% of the US population and more than half of the Canadian population. It has considerable existing infrastructure and one of the most favorable tax/business climates in America. Ohio has zero tax on inventory or corporate income, no tax on investments for inventory or equipment, no tax on products sold to customers out-of-state, and an ambitious entrepreneurship reward system which allows companies to take the first $1 M in profits absolutely tax free.

Development in the Utica shale has taken off more rapidly than other plays because rigs capable of drilling horizontal wells, frack crews, production infrastructure and other support services are already in place. Access to the Ohio River is a big plus too, both as a source of frack water and for transportation.

Ohio also has a quite favorable political and regulatory climate. Even before Gov. Kasich took office, Ohio was already described as having "laws among the most lenient in the nation" and with less regulation, leases can be obtained more affordably. Despite his determination to pass a severance tax on oil and gas production (which exists in one form or another in neighboring states, often labeled as an "impact fee"), Governor Kasich has generally been a friend to the industry and has been genuinely enthusiastic in promoting drilling here. "We need to be particularly mindful of the important role that exploration can have...in expanding Ohio's economic future and in carbon mitigation and maintaining clean air," he was recently quoted as saying.

Even his pet legislation, State Bill 315, which he described as being "the toughest law on fracking fluid in the nation", was generally well-received by industry participants. It requires operators to disclose where they intend to acquire fracking water as well as the rate and volume at which they will withdraw it. It also requires disclosure of all chemicals used during the process, although not the specific amounts of each.

Kasich knows his political future is largely linked to development of the Utica here. It is no secret that it has been instrumental in propping up Ohio's economy, adding jobs and revenue that would otherwise seem improbable. And, despite industry reluctance with regard to the severance tax, Kasich will surely prevail on that subject. It's simply a matter of how much the tax well be. Regardless, Kasich is likely to be re-elected and his popularity will likely soar once it passes. Why? He intends to give Ohio residents an across-the-board cut on state income taxes. Who wouldn't welcome that?

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Comment by Dan on June 24, 2014 at 9:04am
I wouldn't welcome that!
Comment by Harry E. Rose on June 23, 2014 at 11:57am
The o&g companies are now trying to transfer the severance tax to tbe poor land owners, so I am refering to money coming from the poor landowners in se Ohio and going to the rich & lazy all over the state. And you know the poor landowners do not have the money the o&g companies do to lobby. So you know what will happen in the end. IMHO.
Comment by John H on June 23, 2014 at 11:28am

Across-the-board income tax cuts cater to no particular group, whether political or economic so I do not see the connection.  If you are referring to taking from the rich (E&P Co's) to give to the poor (ordinary tax payers) by means of a severance tax, well, that is just inevitable.  The bill has already made significant progress in both houses and will likely be voted on and approved any day now.  I have done studies regarding the economics of these wells and a severance tax (especially one as watered down as this one will likely be) will do nothing to discourage exploration.  The cost to exploration companies will likely be less than the impact fees paid in neighboring states.

Comment by Harry E. Rose on June 23, 2014 at 10:42am
Are you OKing income redistrubution?

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