- Associated Press - Thursday, October 22, 2015

COLUMBUS, Ohio (AP) - A group studying Ohio’s tax on oil and gas drillers suggested in a report Thursday that the state slowly phase in changes to the tax or attach a “trigger” to any adjustments.

A severance tax increase has been a priority of Republican Gov. John Kasich for years. He contends Ohio’s tax on oil and gas drillers is too low, and he’s wanted to use proceeds of a tax hike on hydraulic fracturing, or fracking, to help cut the state’s income-tax rate.

The 56-page severance tax report released Thursday did not dispute Kasich’s assessment, though it did not call for a specific increase.

“Ohio’s total tax burden on the oil and gas industry is lower than or as low as every other state with a severance tax,” the report said, noting that an update should be comparable to other states.

Kasich called the result of the report “disappointing,” saying his approach has been reasonable.

“Make no mistake, our fight to get Ohioans the income tax cut they deserve will continue,” he said in a written statement through a spokesman.

In June, legislative leaders had asked for the severance tax report after talks on Kasich’s latest proposal stalled during the state budget debate. They placed the topic on the agenda of the 2020 Tax Policy Commission, which was created in the budget to examine Ohio’s tax code, and promised its recommendations on the issue by Oct. 1.

At the time, Senate President Keith Faber described negotiations as nearing fruition. He had called the October date a “hard deadline” for striking “meaningful compromise.”

While the informal study group met over the summer, the commission didn’t have its first public meeting until Thursday - partly because the budget provision creating the commission did not take effect until late September.

“The Commission’s issuance of a report by this date (Oct. 1) therefore became a logistical impossibility,” Thursday’s report says.

The document contains about a page of recommendations and key findings. It consists mainly of information the group collected about the state’s severance tax and how Ohio’s approach compares to other oil-and gas-producing states.

State Sen. Bob Peterson, a study group member and tax commission co-chair, said he didn’t believe it was the group’s role to outline a specific tax policy, but rather provide information that could be used to support future legislation. Still, he said, the group isn’t recommending a severance tax increase unless there’s some delayed implementation. “Really, what’s changed is the market climate,” said Peterson, a Sabina Republican.

Other findings and recommendations in the report include:

- The oil and gas industry is sensitive to market fluctuations and “is under financial duress.”

- “Ohio should not expect to see a new revenue stream materialize overnight until market conditions improve.”

- New revenue generated from an updated severance tax should be used to: help shale counties with infrastructure, equipment and services needed to accommodate their residents and the oil and gas industry; facilitate adjustments to Ohio’s income tax or possibly other taxes; and invest in opportunities that will grow Ohio’s economy.

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