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Cash-strapped States Weigh Tax Policy On Drilling

As it stands, Ohio's production tax rates â¿¿ 20 cents a barrel on oil and 3 cents per 1,000 cubic feet of natural gas â¿¿ are among the lowest in the country. Annual collections on oil production have remained roughly flat from 2007 to 2011.

According to the Ohio Department of Taxation, tax revenue on natural gas production rose by less than 2 percent last year â¿¿ up $40,000 to $2.1 million â¿¿ despite an explosion of drilling activity that has included 391 new shale wells permitted the last 20 months. And Ohio never thought to tax natural gas liquids, a newly developing revenue area for the industry.

By contrast, total taxable sales in Carroll County rose 33 percent from 2011 to 2012, from $94.9 million from January to June of last year to $125.7 million during the same period this year. That meant more than $300,000 in additional sales tax revenue for the county â¿¿ one of about two dozen across eastern and southern Ohio benefiting from the boom in exploration mostly of the Utica Shale formation.

That uptick comes in a county that had been struggling against rising unemployment.

Dairies that once thrived in Carroll, the state's smallest county in total area, dwindled over the past 20 years as family farms struggled and shrank as it became harder to make money in the milk business. Tree and nursery farming â¿¿ a business dependent on people having extra spending money â¿¿ is now the county's largest industry.

Oil and gas taxes collected in Carroll and Ohio's 87 other counties are sent to state oil and gas regulatory programs, not to the general revenue fund, as in many other states. Texas, for example, saw $3.6 billion added to state coffers from its oil and gas severance taxes in the fiscal year that ended last month, according to the state comptroller's office.

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