Over the past month the Association has provided testimony for House Bill 64 and House Bill 8, both of which impact our membership. On March 3, OOGA Executive Vice President Shawn Bennett appeared before the House Ways and Means Committee to discuss the severance tax provision of HB 64. The membership of the Association opposes the severance tax provisions proposed in HB 64.
The current market forces that are impacting the oil and gas industry provide a clear explanation that the industry is entering a recession. Crude oil prices have dropped over 50% since June of 2014 and has slowed many projects.
Governor Kasich's executive budget proposal includes a substantial severance tax increase. This high severance tax rate will curb exploration of Ohio's Utica Shale and diminish many company's drilling schedules.
The new rate would also be calculated on the commodity's "spot price" as determined by the tax commissioner, and not the actual value that the producer received.
Commodity prices have a direct impact on industry activity. Companies base drilling schedules on economics and geology. In times when the industry is facing low commodity prices, schedules are curtailed in line with how much minerals the rock will produce and how economic those minerals will be. Lumping a severance tax increase on top of these market factors will further depress drilling activity.
View the Association's entire testimony of HB 64 here.
On February 17, 2015 Bennett appeared before the House Energy and Natural Resources Committee to offer proponent testimony regarding House Bill 8. The bill will provide for timely consideration of unitization requests submitted by our membership's operators, as well as urge county auditors to follow the law when when establishing Ad Valoreum valuation on minerals in their county.
Unitization is the process by which landowners can share in the benefits of oil and natural gas resources by combining their acreage into a "unit." It is a process which ensures that majority mineral interest are not blocked from development by minority mineral interest. Currently the industry is experiencing unnecessary delays in the process when the minority interest involves state-owned lands.
HB 8 streamlines the current process by creating a statutory timeline by which the Ohio Department of Natural Resources would need to schedule a hearing or make a determination on a unitization application. Each day of unnecessary delay could lead to less revenue for energy companies, businesses, and landowners.
View the Association's entire testimony of HB 8 here.