Report on oil and gas taxes released
Why does it take 18 months to two years for eastern Ohio counties to see the profits from natural gas and oil production from their communities?
“The process can run a 24-month cycle between when the oil and gas is produced, then reported to (Ohio Department of Natural Resources) and then ODNR determines the value of production to then report that to the Ohio Department of Taxation,” explained Jefferson County Auditor E.J. Conn, Wednesday in a conference call with local journalists, the Ohio Oil and Gas Association and Energy in Depth.
OOGA and Energy in Depth have released an updated report on ad valorem property taxes paid to local counties–taxes on oil and gas production from 2016 and 2017 paid to local governments in 2018 and 2019, respectively.
“Each individual producer reports their laterals to the ODNR,” explained Mike Chadsey, director of public relations for OOGA Monday. “They keep track of where their lines go underground.”
Tracking those lines through longitude and latitude, local school district, township, county, fire and emergency levies they are applied to the profits of minerals extracted.
“The process is pretty smooth,” said Dan Alfaro, director of Energy in Depth. “With horizontal wells, you might have a lateral crossing multiple taxing districts and across multiple counties, so the taxing districts get the money they deserve because we map out exactly where the locations of those laterals go for miles underground in any direction.”
According to the Ohio Department of Taxation, once production of the oil or gas reserve begins, its taxable value is determined by the application of an appraisal formula outlined in Ohio Revised Code 5713.051.
“The Ohio Department of Natural Resources, Division of Oil and Gas Resources Management and the Ohio Department of Taxation have partnered to develop a system that relieves oil and gas producers of the burden of filing tax returns in every county in which they operate,” explains the taxation website.
For 2017 ad valorem tax, collected in February and July this year, rates applied include:
• For wells producing an average of less than one barrel a day: $2,710 taxable value per barrel.
• For wells producing an average of one barrel or more a day: $4,510 taxable value per barrel.
• For wells producing an average of less than 8,000 cubic feet per day: $95 taxable value per MCF.
• For wells producing an average of 8,000 cubic feet or more per day: $190 taxable value per MCF.
According to the OOGA/Energy In Depth report, the highest levels of gas and oil production took place in 2016 and 2017 in Monroe County and in 2016 in Noble county. Washington County was not included in the report because it was a low production area during that time.
Currently, the two counties boast 505 producing wells between the Utica and Marcellus shales.
But when comparing numbers of taxes received, Chadsey noted additional factors in fluctuating production and profit numbers.
“If you follow the timeline of production, (2011-12) is when we started our downturn too with commodity prices,” explained Chadsey on Monday. “Because of the lag in payments, it’s a little confusing to look at, but 2011-2015 our industry was really gauging where would be the ‘lowest hanging fruit’ where we could drill and see worthwhile returns. That’s when rigs were moving around and heading into more parts of Harrison and Belmont counties, too.”
Janelle Patterson can be reached at firstname.lastname@example.org.
By the numbers
Year: Barrels of oil produced; Natural gas produced (mcf= per 1,000 cubic feet); Ad valorem property tax distributed.
• 2010: NA; NA; $113,897.
• 2011: NA; NA; $129,062.
• 2012: 733 barrels; 232,847 mcf; $118,069.
• 2013: 41,230 barrels; 9,723,827 mcf; $115,607.
• 2014: 145,186 barrels; 59,403,849 mcf; $862,784.
• 2015: 206,766 barrels; 137,606,188 mcf; $3,460,418.
• 2016: 239,1869 barrels; 259,949,927 mcf; $5,225,577.79.
• 2017: 105,752 barrels; 304,684,192 mcf; $7.177.381.02.
• 2010: NA; NA; $113,139.
• 2011: NA; NA; $172,945.
• 2012: 92,359 barrels; 358,193 mcf; $99,443.
• 2013: 270,874 barrels; 4,267,316 mcf; $154,947.
• 2014: 2,165,721 barrels; 38,341,044 mcf; $369,989.
• 2015: 2,863,215 barrels; 98,900,727 mcf; $3,153,112.
• 2016: 1,553,652 barrels; 111,363,703 mcf; $4,257,530.43.
• 2017: 1,244,607 barrels; 109,668,947 mcf; $4,689,845.11.
Sources: Ohio Department of Natural Resources, Ohio Department of Taxation and Ohio Oil and Gas Association.