· March 23, 2012

Kasich adopts one of IO’s recommendation on fracking law, falls short on others

Innovation Ohio has called for for a number of changes to the state’s oil and gas laws in anticipation of a shale exploration boom in Ohio. Among our recommendations are laws aimed at protecting the state’s environment and infrastructure from fracking, specifically:

• Requiring drillers to conduct baseline tests of local water supplies within 1500 feet of fracking locations
• Mandatory disclosure to the public of chemicals used in the fracking process in each individual well
• Funding for local governments to cope with the impacts of fracking on infrastructure, health, environment and public safety

Yesterday, Governor Kasich’s administration introduced its changes to Ohio’s fracking laws, in the form of new legislation—SB315 (full text)—sponsored by Senator Shannon Jones. In terms of addressing the concerns raised by Innovation Ohio, the bill represents a hit and several misses. The Kasich fracking policy adopts, nearly word for word, Innovation Ohio’s recommendation to require drillers to conduct baseline testing of local water supplies within 1,500 feet of planned fracking sites (Sec. 1509.06(A) of SB315). We applaud the administration for incorporating our recommendation into their legislation. Baseline tests will be greatly helpful to landowners and residents seeking to determine whether the presence of contaminates in water supplies can be associated with the onset of nearby drilling. The Kasich policy falls short of our recommendation—and the Governor’s past promise—for disclosure of fracking chemicals.

• Namely, the legislation requires disclosure to a state agency, but offers a new loophole to shield the disclosure of the exact nature of “proprietary” chemicals [Sec. 1509.10.  (A) (9) and (10) and Sec. 1509.10 (F)] .
• The bill also, curiously, only requires public disclosure of the list of chemicals used in the servicing, operating and plugging of an individual well [Sec. 1509.10 (G)], but not those used in drilling and well stimulation, which is when the vast majority of fracking chemicals are used.

Lawmakers must take action to close these loopholes to ensure Ohio has a meaningful policy on the public disclosure of fracking chemicals. Finally, the policy proposals contained in SB315 do nothing for local governments dealing with the impacts of fracking.

• The bill introduces a requirement for drillers to sign an agreement with local governments pertaining to responsibility for road repairs, but creates a massive loophole by allowing drillers an out if they affirm that they have made a “good faith” effort but were unsuccessful to reach an agreement [Sec. Sec. 1509.06. (A)(12)]. No definition of “good faith” is provided, but ODNR is left to take the driller’s word for it.
• Also not helpful to local governments is a provision originally included in HB487, but removed by the House Finance Committee, that would have imposed a new, up front $25,000 per well impact fee on drillers for the benefit of local governments. The catch is that drillers would then recoup the full $25,000 as a discount on property tax payments. In other words, the money would flow into local coffers in the form of the fee, then go right back out the door in reduced tax collections.

In addition to these considerations, IO has called for Ohio to adopt a more competitive severance tax rate on oil and gas companies. We have previously commented on the administration’s proposal, introduced last week, to raise (slightly) Ohio’s taxes on oil and gas drilling and use the proceeds to fund an income tax cut. You can see our analysis of Kasich’s tax proposals here.