4.25.2011

That's OK, go ahead and drill

We'll just sit here and watch. [the website won't allow me to C&P, so go to the link to read it.]

Basically, Ohio is missing out on hundreds of thousands of dollars of severance tax revenue (taxes on gas extracted from their shale). Neighboring states (W. Virginia, Michigan, Kentucky, even indirectly Pennsylvania, though their taxes are structured differently) charge a tax based on the value of gas or oil extracted whereas Ohio charges only a flat fee. As expected, Gov. Kasich will not bring Ohio's severance fee in line with those states. Meanwhile, he's planning to allow for drilling within state parks, including one of Coeruleus' favorites, in order to raise revenues for the maintenance of those parks.

These underground gas reserves don't move, and though in limited instances you can choose to drill in one state over another, it's foolish for any state to think they can attract more drilling if they keep severance taxes low. The drillers will want to drill, regardless! The worst that could happen is that they could wait a few years to see if they could force the state legislature to reduce their severance tax to keep them in line with neighboring states. But the incentive for that just doesn't exist: drillers want to drill!