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State Budget Bill Finalized with Impacts on Oil and Gas Operations

Posted By Brian Hickman, Director of Government Affairs, Operations Managing Director, Wednesday, July 15, 2015

Now that the final version of House Bill 64 (Fiscal Year 2016-2017 State Budget Bill) has been passed and enacted, several new provisions have been placed into Ohio oil and gas law. While the focus of this year’s budget bill seemed to be the implementation of a higher severance tax on oil and gas interests, other regulatory changes were implemented into Ohio law.

A higher severance tax rate was not enacted in the final version of the budget bill. What was enacted was a special study committee on the issue as a part of the 2020 Tax Study Commission. The Commission will be comprised of seven members: three from the Ohio House, three from the Ohio Senate, and one appointment by the Governor. These members will analyze the issue and present their findings to the Ohio legislature by October 1, 2015.

Another issue that was inserted into the budget bill during conference committee deliberations was unitization. As you recall, a substantive overhaul of Ohio’s unitization statute (Ohio Revised Code Section 1509.28) was included in the Governor’s executive budget proposal. While this language was removed, language was inserted into the bill that would permit ODNR to issue unitization orders for properties that are wholly owned or partially owned by the Ohio Department of Transportation (ODOT).

The largest regulatory undertaking during the budget bill was a discussion on providing the Ohio Department of Natural Resources (ODNR) with notification during select emergency situations. The measure was originally proposed in the Governor’s executive budget proposal. After holding several negotiations with the ODNR, language was amended in the “As Passed By The House” version of the budget. This was the final language that was approved by the Conference Committee on the matter.

However, in all state budget bills, the Governor has the ability to line-item veto provisions. Governor John Kasich issued a line-item veto of this emergency notification provisions. He noted that the final language was “ambiguous and could result in unnecessary disputes regarding compliance”. The Governor went on to note that he intends to issue an Executive Order in the near future that would institute this notification for the ODNR.

Language that would streamline EPCRA reporting remained in House Bill 64 after conference committee deliberations. With this language now part of Ohio law, the ODNR will work on upgrading their current online system for reporting chemicals used on a well site. It is the hope, with this legislation now streamlined, that paper reporting for EPCRA will not need to be done for 2016.

These four topics are only a glimpse of the changes to Ohio law as it pertains to the oil and gas industry. For more information on all the changes, be on the lookout for the August edition of the OOGA Bulletin. If you have specific questions, feel free to contact the Association. 

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