Latest Ohio Legislature Bill on Severance Tax 12/2013

Here is link to the latest bill on severance tax  for Ohio.

http://www.legislature.state.oh.us/bills.cfm?ID=130_HB_375

Here is comment by the Ohio Oil and Gas Association on this bill; they seem to like it.

How will it affect royalty owners?

http://www.ohio.com/blogs/drilling/ohio-utica-shale-1.291290/ohio-o...

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Permalink Reply by Joseph-Ohio on December 4, 2013 at 4:14pm
Not at all complicated is it ?
Glad they kept it simple and easy to follow / determine whether or not our landowner rights are being protected / preserved.
Well, enough of my attempts at levity / being facetious.
I've read enough to determine that I'd rather not own a gas / oil well.
Gas / oil well ownership appears over my head as an individual.
Appears to me gas / oil well ownership in Ohio requires a staff of attornies and accountants.
IMHO as a layman landowner.
Permalink Reply by MJ on December 4, 2013 at 4:36pm

It would require a lot more than Attornies and Accountants - How about a boatload of Money!

Have a good evening my northern neighbor.

Permalink Reply by Joseph-Ohio on December 4, 2013 at 4:45pm
Was writing in reference to even owning a portion of a well.
Or as a result of being force pooled / forced into a partial ownership situation.
That means if you don't accept lease terms you're forced into an ownership stake.
Same as being forced into accepting lease terms as you choose to avoid ownership.
I see it all as landowner abusive myself.
How do others view it ? ?
You have a good evening as well MJ (my neighbor to the south).
Permalink Reply by Mud Flaps on December 4, 2013 at 7:31pm

I don't see a problem with the current severance tax.  Since Horizontal wells produce more, the government will get more.  Now they want to raise it to 2%.  This Bill is sponsored/co-sponsored by mostly, if not all by Republicans.  I guess income taxes are just not good enough, and they need more.  This is really unfair.  how many other prosperous endeavors have a severance tax? GM? Good Year? Cleveland Clinic? VMI? Lockheed Martin? Bob Evans? Wendy's?  This sounds very much like establishment politics.  The Governor and the Libs wanted a 5% severance so the go along get along Republicans agree to 2%.  

Tea Party please come rescue Ohio.

Permalink Reply by Joseph-Ohio on December 5, 2013 at 1:04am
We're like this :

2% is ok as long as it's paid by the E & P developer and not the landowner / lessor.

But of course the landowner / lessor will end up taking a hit anyway since royalty and signing bonus will be less as the E & P developer will seek to minimize their new tax burden.

What we see as the worst is loss of all leverage in lease negotiations.

E & P dictates either accept my lease offer or become force pooled and a well owner (or partial owner) and pay your staff of adjusters / accountants / lawyers a boatload of money (as MJ calls it above).

Like choosing between lethal poisons.

Where are the landowner / lessor / prospective lessor protections ? ?

I can't find any.

It' seems like legalizing extortion.

It's a free and competitive market as long as your not a landowner / lessor / prospective lessor.

All as always in my ever so humble landowner / prospective lessor opinion.
Permalink Reply by Dan on December 5, 2013 at 2:36am
Joseph,
This on top of the new sales tax and other increases. If the landowner doesn't eat the increase. We and other consumers will always pay in the end. The energy company will recover their $2.00 per hundred dollars, then the pipeline transport adds their 25% margin. By the time the refiner, wholesaler and distributor all add their % to the increase, final product could cost about 4 to 7% more. A can of beans went from a quarter to a dollar over a few short years. They say we have a very low inflation rate now though?
Although I don't think a sales tax only would be a fair tax system, there are a lot of benefits to waiting to tax at the sale of final products. Studies show that folks will readily buy a snake cake for 99 cents and not even consider another 5 to 20% sales tax but if the cake is priced at $1.05 to 1.20 sales plummet. Taxing raw materials and up thru the stream adds way more to over all price but employs many more government workers to collect, account for and sometimes ultimately steal the funds. Even more folks that we will promise benefits to that will often never be funded. Of course just taxing true income would eliminate all the compounding taxes and sales tax. Good luck to us all!
Permalink Reply by Joseph-Ohio on December 5, 2013 at 2:45am
Tax increases of any sort are inflationary vehicles / instruments.
But there is no preferred choice / option.
There's the rock and the hard place.
We can take our pick / choose.
Just like voting - politician R or politician D - both the same - both politicians.
Situation is pathetic.
Permalink Reply by Garfield on December 5, 2013 at 5:34am

A severance tax is a gross receipts tax, irrespective of whether the operator makes or looses money.  I call that government theft.  The state government is basically saying that 2% of every landowner's minerals belong to the state.  THAT IS WRONG....  those minerals are privately owned property.  Let's not argue about a percentage, it's about principle !

 

Of the millions of acres that are prospective for Utica shale development, only a very small percentage can be considered "core".  The majority of the acreage is "marginal" (i.e. high risk of being uneconomic), and development of those marginal areas will be stalled or altogether prevented by new severance taxes.  Our state legislators have dollar signs in their eyes.  The truth is that a new severance tax will kill jobs and suck the value out of all mineral owners' pockets, especially the majority located in marginal areas.  Stop the theft !!!  

Permalink Reply by tony blankenship on December 5, 2013 at 7:18am

Are you really trying to blame the democratic party for a tax increase in a republican controlled state, that republicans wrote and sponsored and then your asking more republicans to help? man you must be a blast at bonfires throwing gas on top of gas on a gas fire.

Permalink Reply by Joseph-Ohio on December 5, 2013 at 7:31am
Not D's not R's, BOTH.
Politicians preying on landowners are to blame.
Forget the landowners' investments in Real Estate - just change the rules and fleece them (us) taking good care of themselves and cohorts in the process.
Permalink Reply by Mud Flaps on December 5, 2013 at 9:05am

I think there's a huge conflict of interest here on behalf of government.  They have the ability to "bless and approve" force pooling applications.  I wonder how much scrutiny they will apply, and wait to see how lenient they are on the matter now that they are pondering cutting themselves out a 2% overriding royalty or as severance tax as they call it.  There are too many RHINO's and fraudulent Republican everywhere.  

The severance is completely unnecessary as vast increased tax revenue will or already be collected through:

Pre-drilling revenue:

1. sign-on bonus- TAXED.  I estimate the sign-on bonus for a 1280 acre unit at $5,000/ acre would have yielded government an approximate $1.2 million in tax dollars.

Salaries TAXED of landman, title agents, surveyors, well construction workers, excavators, rental property owners, restauran/ hotel workers, truck drivers etc, etc, etc.

Note: I doubt each well requires a million dollars worth of government oversight.

But let's not stop there.

Drilling revenue:

1.  Again, all the increased salaries to tax and the windfall of greater volume of economic activity year after year.

2. Current income TAXES collected from sales/ income produced at the well year after year.

3. now they need another 2% TAXED on top of that year after year.

4. Ohh don't forget the Obamacare TAX , too, year after year.

These people just do not stop.

Permalink Reply by Joseph-Ohio on December 6, 2013 at 8:35am
However it appears all the Representatives named on the Bill are R's .

Fancy that.

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