On Monday, July 10, 2017, The Ohio Controlling Board did something that shocked the oil and gas industry –they approved a $15,000,000 raid on the Oil and Gas Well Fund. Money in this fund is generated through fees, severance taxes and penalties all paid by the oil and gas industry.
The Controlling Board is made up of six legislators, three from the House and three from the Senate and the Board President who is a representative from the Office of Budget and Management. The Legislators who sit on the panel are supposed to act as a road block to rogue Agency spending requests.
On July 6, 2017, the Controlling Board members were alerted to the requests that would be considered at their July 10th meeting. One of those requests came from the Ohio Department of Natural Resources who was requesting $15 million be taken from the oil and gas fund so that they could fund a settlement negotiated through a protracted legal battle brought by landowners at Grand Lake St. Marys in Mercer County. The request for $15 million dollars from the oil and gas well fund to pay for something that was completely unrelated to oil and gas regulation or the idle and orphan well program was stunning, considering the Ohio Revised Code clearly stipulates how money collected from the oil and gas industry can be used.
Now, raids on rotary funds are not a new concept in the state. Rotary funds are accounts in various agencies that generally are program specific. There are likely hundreds of these “rotary funds” across state government. Normally, we see raids on these accounts during the biannual budget deliberation process during the legislative session when the budget is tight and there are projected shortfalls in revenue as compared to expenditures – as was the case during the most recent state legislative budget process. Often times, specific movement of funds are delineated in the final budget bill. However that was not the case for the oil and gas well fund. The ODNR slipped language into the bill that would allow the agency to access funds “for the purposes of satisfying judgments, settlements, or administrative awards ordered or approved by the Court of Claims or by any other court of competent jurisdiction in connection with civil actions against the state.” According to testimony by ODNR at the Controlling Board Hearing, the Agency could raid the oil and gas well fund any time there is another legal settlement that needs to be paid out.
Unfortunately, four of the seven members on the panel that day did not stand up for the oil and gas industry. That being said, three members did and we would like to commend them for their actions. State Representatives Jack Cera and Scott Ryan, along with State Senator Charletta Tavares. All of these members formally objected to the request, raised relevant issues questioning the timing of ODNR’s request and the public policy questions of using the oil and gas well fund for unrelated purposes.