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Ohio Republicans Turn Against Their Governor on Behalf of the Oil Industry

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Ohio (along with my own California) has one of the nation's biggest tax give-aways to the fossil fuel industry. It's severance tax on natural gas is essentially zero -- only 0.42 percent. Texas levies 7.5 percent, Oklahoma 7.1 percent, and neighboring West Virginia and Pennsylvania 5.79 percent.

So it might seem sensible that Governor John Kasich, whose proudest credential when he served in Congress was that he was serious about budgets and deficits, called on the Ohio legislature to raise the severance tax very modestly -- 1.4-4 percent, but only on oil and natural gas liquids and only 1 percent on methane itself. So small were the increases that groups concerned about the state's huge financial shortfall and cuts to education blasted them, pointing out that if Kasich had simply gone along with Texas, "enough money would be generated to pay for damages to local roads and infrastructure, stop the layoffs of thousands of police, fire and other public safety workers -- or prevent increases in local property taxes that pay for schools."

Former Presidential candidate Rick Santorum loudly proclaimed the Koch Brothers-Tea Party orthodoxy on such efforts to eliminate tax give-aways to oil and gas so they would "drive up the cost of energy, destroy this economy and do so at the behest of a bunch of radical environmentalists who do, in fact, want to drive up the cost of energy and slow down this economy..."

Of course Santorum was talking about President Obama, so you couldn't be sure if this was simply a partisan slam, or a serious, principled policy position -- that taxes on fossil fuels companies are bad, regardless of how low. But the reaction of the Tea Party in Ohio to Kasich's efforts is revealing; it shows just how far the oil industry's hold on the Tea Party faction of the Republican party goes, and how irrational the opposition to fair taxation has become.

Kasich was careful to make clear that he wasn't going to raises overall; the increases severance revenues would all go to fund a billion dollar cut in the state's income taxes. That didn't buy him any cover at all. First the Ohio Oil and Gas Association came out against the tax -- or any tax on natural gas liquids, the petroleum like substance that makes Ohio gas drilling profitable.

Kasich's response was blunt. "Special interests have a different point of view than I have on this. This appears to be the first inning of what's going to be a long ballgame," he said. Democrats in the legislature supported the tax -- although they wanted to devote the revenues to fund critical public services, not income tax cuts. But Republicans in the legislature simply shot it down as utterly unacceptable. The head of the fiscal committee of the House commented, "This aspect of the proposal touches on a high priority for our caucus: making Ohio's tax burden as equitable and competitive as possible." Let's be clear: to the Tea Party, zero severance tax on natural gas liquids, and $0.20 of tax on a barrel of oil is equitable and competitive -- even though no other major drilling state (except California) is anywhere like that level. As Kasich put, "This is what the oil companies in Ohio are paying in tax on a $107 barrel of oil -- 20 cents. I'm not kidding you. Do you understand what I just told you? This is what they pay for taking oil out of our ground and selling it to you, by the way, for $4.30 a gallon."

Kasich had also proposed similarly modest improvements in Ohio's regulatory framework for gas drilling -- these too were shot down by the Republicans in the legislature.

You really have to wonder what folks are thinking. To begin with, by shooting down Kasich's severance tax, Ohio Republicans have just disarmed their Presidential ticket in the state. When Mitt Romney repeats his attack on President Obama for trying to "crush the private enterprise system, to crush our ability to have energy, whether it's oil, gas, coal, nuclear," the President can calmly respond, "These folks are so extreme they think Governor Kasich shouldn't be trying to get rid of tax breaks for oil and gas. Now I have my differences with Governor Kasich, but his being anti-fossil fuel is not one of them."

And the oil and gas industry? Well, they are busily drilling wells in Pennsylvania -- even Texas with a 7.5 percent severance tax isn't suffering from a mass flight of drilling rigs. So they know they can live with the tax. What they can't live with is the lethal combination of public fear that they won't conduct drilling responsibly, combined with an enemy in the Governor's mansion. Kasich tried to point this out to them:

"If you try to jam this down people's throats, you'll fail," he told an audience dotted with representatives from the oil and gas, steel-making and chemical industries. The governor then went on to make a very direct promise, one that should have sent shivers down industry's spine: "If we do not have a good regulatory format," the governor said, "we're not going to issue (drilling) permits."

(Can you imagine the outcry from Fox News if Obama had made a similar statement after Republicans in Congress refused to pass his off-shore oil drilling reforms -- "We're not going to issue permits"?)

But apparently the dominant voices in the Ohio Oil and Gas industry would rather than 100 percent of nothing, rather than 96 percent of a healthy industry. Or perhaps they think that Kasich is just bluffing, pandering to their competitors in the Ohio coal industry -- who, incidentally, also pay an extraordinarily modest severance tax, $0.10/ton. They'll find out soon enough.

The reality is stunning enough: a rock-ribbed reactionary Governor who proposes a very modest tax increase on oil and gas that would not even begin to raise Ohio taxes to those in Texas and Oklahoma is broadsided by his own party, while the local voice of the oil and gas industry, oblivious to public sentiment, sandbags even the most modest efforts to improve oversight.

It's a commonplace these days how many people in Washington, D.C. who hated him at the time wish for the return of Richard Nixon. Here in Ohio the missing voice of sanity might be the Ohio GOP's Old Guard lodestar, Mr. Republican, Bob Taft Sr. Taft would never have confused conservatism with insanity. Some of his successors lack that gift.

A veteran leader in the environmental movement, Carl Pope is the former executive director and chairman of the Sierra Club. Mr. Pope is co-author -- along with Paul Rauber -- of Strategic Ignorance: Why the Bush Administration Is Recklessly Destroying a Century of Environmental Progress, which the New York Review of Books called "a splendidly fierce book."

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