The continuously debated oil and gas severance tax bill, House Bill 375, passed the Ohio House yesterday by a 55-35 vote. While the bill has continued to undergo changes since it was introduced last year, the most recent version imposes a 2.5 percent severance tax on production from horizontal wells. In addition, this newest version provides an exemption for the first $10 million worth of oil and gas produced by each well, and allows drillers to deduct commercial activity tax (CAT tax) payments from their severance tax liability. The bill would also require distribution to each county a share of the severance tax revenue in direct proportion to the well head gross receipts attributable to horizontal wells within that county.

Despite the apparent compromises in this version of the bill, many interested groups may continue to oppose at least some portion of its provisions. The Ohio Oil and Gas Association has long fought an increase of the severance tax rate, and Governor Kasich has been pushing for a substantial increase in the rate since 2011. Additionally, the legislature has been under pressure from eastern Ohio communities to increase the portion of the tax revenue earmarked to directly benefit communities with drilling operations.

The Toledo Blade carries the full story.

The bill may yet undergo more changes as it proceeds through the legislative process. To monitor House Bill 375 and other energy legislation pending before the Ohio General Assembly, visit our Legislation + Regulation section.