Ohio Gov. Kasich says planning wellhead tax on oil, gas

Ohio Governor John Kasich said he will introduce a tax for oil and natural-gas producers and is trying to avoid a drain on the state’s services as the Utica basin is developed.

Kasich, a Republican, plans to introduce in a few weeks a so-called severance tax on oil and gas production, which will be used to lower the state’s income tax, he said today in an interview at CERAWeek, a Houston conference held by IHS Cambridge Energy Research Associates.

The governor has studied Pennsylvania’s debate over fees on some oil and gas wells, as well as the strain that rapid development put on North Dakota’s services, he said.

“What we learned from that is, let’s get it right from day one,” he said.

Companies including Exxon Mobil Corp. (XOM), Chesapeake Energy Corp. (CHK), and Devon Energy Corp. (DVN) have begun drilling in Ohio’s Utica Shale, a geological formation that may hold as much as 5.5 billion barrels of oil and 15.7 trillion cubic feet of gas. The producers are relying on hydraulic fracturing, or fracking, which involves injecting water, sand and chemicals into the formation at high pressure.

While the industry says fracking is safe, environmental groups say it can lead to water contamination. Kasich said he wants to have updated regulations in place soon on well construction, disclosure of the chemicals used in fracking, pipelines and disposal of wastewater from oil-and-gas production.