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Cash-strapped States Weigh Tax Policy On Drilling

Some states â¿¿ including Alaska, Wyoming and New Mexico â¿¿ reserve a portion of the oil and gas production taxes they collect for permanent funds. Interest from the funds can be used to help balance state budgets, providing support to government services like education, health care and environmental protection.

Oil and gas producers in Ohio oppose Kasich's plan. They argue that growth will result in the industry paying $1 billion in new taxes by 2015, even without any regulatory changes. They also point to local communities like Carroll County that are benefiting greatly from the boom.

Governments that raise taxes and increase impact fees risk driving away a lucrative new industry that could help with budget woes, said Kathryn Klaber, president of the Marcellus Shale Coalition, which represents producers.

"Businesses are looking at the return on the significant investment to explore and extract a resource and their overall costs, including what they're being asked to pay in taxes and fees," Klaber said. "Governments are looking at it from kind of the other side of that coin, which is how much can we extract revenue for government needs and position this revenue in a politically salient way. Those two perspectives often result in a real mismatch of interests."

The Kasich administration argues that if energy companies want the resources badly enough, they will have to come to Ohio to get them. The governor points to the nearly 400 new wells permitted, and 140 drilled in the Marcellus and Utica formations since December 2009.

Carroll County's Rutledge said she just wants to guarantee her county is standing strong when the boom subsides.

"It's not that we don't want to share, but we should be given more of a consideration because it's happening here," she said. "We're the ones that have to deal with all the things that come with progress: more traffic, more people, more crime. At this point, the companies have been taking great care of the roads, but who's to say what's going to happen for the next 15 years?"

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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