With high unemployment, housing foreclosures and families struggling to make ends meet, there's no denying that many Ohioans are hurting financially. And nowhere is that more apparent than in southeast Ohio, a region that has struggled economically for decades.
But there is hope.
Ohio is fortunate to rest upon the Utica shale, an oil-and-gas-rich geologic formation thousands of feet below the topsoil. Due to expanding oil and gas exploration and development in the region, Ohio is on the cusp of a potential energy boom that could provide tens of thousands of jobs and generate substantial tax revenue that would benefit citizens throughout the state, including in Marietta.
While there's plenty of excitement about the positive economic impact that oil and gas development could bring to the state, there's already talk about imposing impact fees and increasing taxes on oil and gas producers. With Utica-shale exploration in its infancy, even the threat of increased taxes and fees could bring capital investment and job growth within the state to a grinding halt.
Under Ohio's current tax structure, the average oil and gas producer pays five different taxes - commercial activity (CAT), income, sales, ad valorem (property tax) and a severance tax on the amount of oil and gas extracted from the ground.
In 2010, the state's crude-oil and natural-gas producers generated more than $23 million in tax revenue at the municipal, county and state level. If the current tax structure remains intact and planned industry spending and development in the Utica shale moves forward, oil and gas production could generate $1.05 billion in annual tax revenue in 2015.
That amount would provide $129 million to Ohio's counties, $255 million to municipalities and $670 million to the state. For example, with an overflowing tax coffer, Marietta could make vital and valuable investments in education, infrastructure and development projects. The opportunities are limitless, just step up and grab them.
The oil-and-gas opposition will no doubt claim that the oil and gas industry is just greedy and doesn't want to pay its fair share. Not true. Oil and gas exploration is an expensive endeavor that requires millions in up-front investment. After development costs, royalties and taxes, the average oil and gas producer is lucky to earn about 6 cents for every dollar of natural gas they produce. And unlike many other businesses, oil and gas producers typically wait 20 years or more to see a return on their investment.
The oil and gas companies working in Ohio aren't asking for a handout, just a fair tax and fee structure, which is what we've got. Let's not ruin a good thing by imposing needless taxes and fees on capital investment and job growth, especially now when the positive impact of both are beginning to revive and restore communities throughout the state.
Thomas E. Stewart is executive vice president of the Ohio Oil and Gas Association.
