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Kasich calls for fivefold hike in brine tax



Published: Sat, March 24, 2012 @ 12:09 a.m.

By Karl Henkel

khenkel@vindy.com

YOUNGSTOWN

Local brine-injection well operators are questioning Ohio Gov. John Kasich’s latest proposal to quintuple taxes on out-of-state fracking wastewater.

Kasich’s proposal, included in Senate Bill 315, calls for a 10-cents-per-barrel tax on all injected fracking wastewater that originates from Ohio and a $1-per-barrel tax on injected wastewater from out of state — the latter a fivefold increase from current rates.

“No business can thrive when its tax burden is increased this dramatically, but this proposal will have an especially negative impact on Ohio-based operators,” said Nicholas C. Paparodis, senior executive vice president of Youngstown-based D&L Energy Inc. “Energy producers need injection wells in order to operate. If Gov. Kasich taxes locally-owned Ohio disposal wells out of existence, it will have a negative effect on the state’s oil and gas industry as a whole.”

Current rates are 5 cents per barrel on all injected brine that originates from Ohio and 20 cents per barrel on injected brine from out of state.

D&L’s Youngstown well, for example, processed about 2,000 barrels per day. Depending on specific contracts, a gas or oil driller could pay an injection-well operator about $4 a barrel to dispose the liquid.

The injection well operator would make $8,000 from the 2,000 barrels.

Under the current tax system, the state would levy a $400 tax on the operator. Under the proposed tax system, the operator would pay $2,000 in taxes.

Rob Nichols, spokesman for Kasich, said Friday the increased fees will make up for the fact that out-of-state brine haulers do not pay permitting fees or severance taxes in Ohio. Though the injection well operator is the taxed party, the trickle-down effect of the tax increase will be felt by the brine’s originating source.

Bob Kleese of Kleese Development Associates in Warren, which has injection wells in the Mahoning Valley and deals primarily with out-of-state brine, said any tax hike would be passed on to extraction well operators.

“It’s going to have some type of effect,” said Kleese, who was unfamiliar with the nuances of the proposal.

Ohio’s 177 injection wells disposed about 12 million barrels of wastewater in 2011 and brought $1.5 million in brine taxes to the state.

Had the 2011 totals been taxed at Kasich’s proposed rate, the tax revenue would have reached nearly $7 million.

That taxed money, according to SB 165, goes to the Oil and Gas Well Fund and is used for the Division of Oil & Gas Resources Management, which receives no state general-revenue funding and operates solely on fees and severance taxes.

The new tax rate could disproportionately affect some well operators more than others.

For instance, nearly 94 percent of the 550,000 barrels of wastewater disposed at D&L’s now shuttered Youngstown well site originated from someplace other than Ohio.

The state taxed D&L the current maximum of $100,000 at that well in 2011, but using the proposed figures, that total would have surpassed the newly proposed $500,000 annual maximum.

Wells will be taxed first on the wastewater received from out of state, then taxed on in-state brine.

Ninety percent of the revenue generated from the taxation will still go toward the Oil and Gas Well fund, which Nichols said would help pay for creation of a brine-disposal electronic permitting system, a brine-disposal database, a brine-hauler transponder system, a chemical disclosure reporting system and for the addition of 10 staffers to ODNR’s injection-well program.

The remaining 10 percent will go into a statewide geological mapping fund that aims to discover any unknown fault lines that could spur earthquakes.

The state concluded that the Youngstown well triggered 13 earthquakes in less than a year.


Comments

1lee(544 comments)posted 2 years, 4 months ago

Stop raising taxes, just because it's a tax on someone else does not make it right CUT SPENDING

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2gdog4766(1401 comments)posted 2 years, 4 months ago

TAX AND SPEND TAX AND SPEND job killing idea now all these jobs will go to china this commie idea.

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3coolnumbers(63 comments)posted 2 years, 4 months ago

Why! Why! WHY!? WHY!?!?!?!?

Let's drive people and companies and jobs away....

Cut the damn spending. Cut the free insurance. I pay a good chunk of mine everyone should do the same.

Drive the employers out and we can all live on the state and then what will you do without a working tax base?

Rep or Dem it is always the same....

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4CongressWatcher(154 comments)posted 2 years, 4 months ago

I might actually vote for Kasich next time around if he keeps this common sense stuff up!

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5jrolley325(787 comments)posted 2 years, 4 months ago

lol if ted strickland did this the angry republicans here would be throwing a huge fit.

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6thinkthentalk(258 comments)posted 2 years, 4 months ago

Youre absolutely right jrolley. In addition, somehow they would spin in an Obama socialist muslim comment. BTW, is the turnpike still for sale?

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7thinkthentalk(258 comments)posted 2 years, 4 months ago

The indiana pike was crap when i went on it a few yrs ago. They do the minimal amount of bandaid repairs to keep it barely acceptable. The ohio pike has money to burn, so it seems like they keep it to a higher standard. But i think if it goes private, they would sap the big profit from the tolls, but the condition would drop like indianas. The last few years, weve been going down 71, and taking 30 across to illinois. Light traffic, virtually zero trucks, no tolls. The toll saving paid for the gas.

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8UticaShale(850 comments)posted 2 years, 4 months ago

How can we get the brains drained to return. This area is so blessed and affordable, but all I read from ya' ll is pure crap! Man, no wonder why Youngstown is the poorest in the nation, there are no smart people left.

This town used to be the greatest steel mills in the world, what have ya'll done with the place? You have the cheapest real estate in the country, plenty of water and get this...................the largest oil reserves ever discovered in modern times and you still don't get it. Don't worry, us energy people will get you straight, we love the place.

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9Bigben(1996 comments)posted 2 years, 3 months ago

They are upset by a dollar a barrel on toxic water from out of state? You have to be kidding me. This crap shouldn't be coming here at all .

- - If this toxic water is so great why do other states say no to injection wells in their states ?Why should we be a dump for the rest of the country?Jobs my rear end .They don't have to hire here.You don't think jobs are needed in PA, New York , Indiana, Texas ECT? Wake up your being screwed .

Imagine how much is being injected here if a dollar a barrel sound expensive .

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10Bigben(1996 comments)posted 2 years, 3 months ago

As far as calling it brine water that is a load of crap too it is full of chemicals that don't have to be listed thanks to the clean water act.

Why don't these corporations bring in salt water from the ocean so they don 't screw up our limited fresh water? - -Oh that would be expensive oh goodness.

If they are going to be drilling long term and it takes millions of gallons of water to do just one well how much fresh water will be left in this area ?

The kick in the head is they don't have to sell the gas to us .They can ship wherever.

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