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Sunday, May 20,2012

City of Athens may try to tax frackers

By David DeWitt
Photo Credits: Kyle Schultz

The city of Athens is now considering its own severance tax for oil and gas companies in the hopes of using monies collected for a "clean-up" fund to be established in the city.

Fourth Ward member Christine Fahl introduced the idea during a planning and development committee meeting Monday night, where the body also discussed creating a permit system for unmetered water usage.

She said she's been working with members of Athens Mayor Paul Wiehl's administration, as well as an environmental advisory body, on these issues. Earlier this month, City Council adopted an ordinance banning oil and gas drilling activities in its wellhead protection zone, located on the city's northwest side.

Athens has been stepping up these efforts in response to concerns about the controversial horizontal hydraulic fracturing drilling technique coming to Athens County. Several companies have held lease-signing events in the area, though it remains to be seen whether the county – or city of Athens specifically – has the carbon resources that drilling companies are seeking.

Also, sole oil and gas regulatory authority in the state of Ohio has been given to the Ohio Department of Natural Resources' Division of Oil and Gas Resources Management. The ODNR has stated that it does not take local ordinances into account when deciding whether to grant a drilling lease.

Council members said that they wanted to pass the bans on fracking in the wellhead protection zone anyway, in an attempt to do all they can to protect the city's water supply. Fahl introduced the idea of an oil and gas severance tax with that same goal in mind.

"The idea behind this is to provide funds for an oil and gas mitigation and restoration fund for the city of Athens," she said. Reading from the proposed language, she continued, "to meet environmental and resource management needs for the city; and to reclaim lands affected by mining, oil and gas extraction, and waste disposal. And this hereby levies an excise tax on the privilege of engaging in the severance of natural resources from over, under or upon the city of Athens."

Fahl pointed out that the state already does have a severance tax, which has been receiving attention recently because Ohio Gov. John Kasich, R-Westerville, is currently proposing to raise that tax and use the proceeds for a general income tax reduction.

Currently, Fahl said, the oil and gas severance costs are minimal compared to the rest of the country. She cited Texas, Oklahoma and Louisiana specifically as having some of the highest severance taxes.

"The idea that they won't come because you're charging a tax is not something that I personally believe," she said. "It's not like the oil is going to move over to Indiana."

As for Kasich wanting to increase the tax and use the proceeds to fund an income tax reduction, Fahl said that's nice but it doesn't help the people impacted the most - the people who are having these resources extracted from their land and neighborhoods.

"That's why I would like to have an oil and gas severance tax for the city of Athens to help solve potential problems that extraction could result in," she said.

The model ordinance is similar to the state law, she said, and the office of city Auditor Kathy Hecht is currently looking it over to make sure that all of the penalty language makes sense.

"This is a work in progress," Fahl acknowledged. "When I get the language, and several more drafts, I'll send it out again. This will be introduced in a couple more meetings (time)."

Hecht said at the meeting that city Law Director Pat Lang has not yet completed review of all of the proposed language.

First Ward council member Kent Butler proposed possibly making fines more severe. Fahl was amenable to that idea.

"There is a balance between too high a penalty and too low a penalty," she said. "There are also limits in the (Ohio Revised Code) on how much of a penalty until you have to jump into court."

The idea for an ordinance imposing permitting for unmetered water usage is also going through the proper channels for review, Fahl said.


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This approach is what the City should have spent their time doing at first, instead of wasting its effort on a feel-good, empty and worthless prohibition ordinance that sets a very poor example of lawlessness with respect to Ohio state law and their own law director's recommendation.

I'm glad that our Democrats here in Athens can understand that if you tax something, you get less of it. I hope they transfer that thought to other parts of the city economy (e.g., a very, very, very high strip joint tax, for example, to help clean up that potentially toxic moral plume, and low business taxes).

I'm also glad that they say they are saying they want to save any revenue for potential spill cleanup. But whether or not that really happens, or it just goes into the general budget remains to be seen.



Well, the main point is that they won't have any better luck taxing drilling than they will any other sort of regulation. They can't beat the state if this goes to the courts, and it will end up in the courts if Athens tries to stop, regulate or tax drilling in the city limits. The tax proposal has the precise same benefit as the water protection regulations -- it's a sympolic move that may have PR benefits but it won't actually stop anyone from drilling, or force them to pay the city any money. TS



Can someone explain why it is so difficult to get council's attention directed towards the basics? I'm referring to things like streets, street lights, litter control, etc. I know they're not flashy issues, but they are important and more in line with what the job (council member) requires. Stick to the basics for a while, you'll be shocked at how many people will appreciate that more than a lot of this knee jerking to every cause that comes up.



Dean Bruckner, your comments are genious and should be mentioned at city council meetings (regarding the 'strip joint').

Tax it ! Dont fight it, Tax It !




Thanks for the input. My understanding was that some level of city taxation on this activity was permitted, but I'm not a lawyer. I guess we'll wait for the Law Director's input to see.

I wonder who the "environmental advisory body" is. Is it If so, it's liable to be more feel-good window dressing, and that would be disappointing.