Tag Archives: ohio

CENTRAL APPALACHIA REGIONAL NETWORK RELEASES SEVERANCE TAX POLICY SCAN – SUGGESTS PERMANENT FUND

July 16, 2012 –Huntington, WV – In an effort to provide a foundation to identify severance tax best practices, and create a long-term financial legacy for Central Appalachian communities, the Central Appalachia Regional Network (CARN) has completed the Central Appalachia Severance Tax Policy Scan. The scan outlines the severance tax policies in the six states CARN serves – Kentucky, Maryland, Ohio, Tennessee, Virginia and           WestVirginia – and is the first of its kind to assess and compare these policies in each state.

The scan compiles data about each state’s policy, including which agencies oversee disbursement of revenues, which minerals are taxed, the rate at which they are taxed and the total annual revenue each state receives from the taxes.

A permanent trust fund should be created in each of CARN’s six states with severance tax dollars. Alaska, Montana, Wyoming, New Mexico, North Dakota and Utah have established permanent funds, some as long ago as the early 1970s. As the West Virginia Center for Budget and Policy pointed out, those states are now reaping the benefits of millions, and sometimes billions, for state programs. A permanent fund in Central Appalachia would allow a percentage of collected severance taxes to be saved. The interest on these savings could be used to fund public projects long after the mineral resources of those states have been depleted.

CARN advocates that a minimum of 1 percent of severance taxes collected be placed in these permanent funds for use by and for the communities from which the resources were extracted. If Kentucky, Maryland, Ohio, Tennessee, Virginia and West Virginia had implemented a permanent fund in 1990, it would have generated about $1.4 billion in earnings to date.

The permanent fund could contribute to sustaining Central Appalachian communities for future generations by establishing a lasting economic legacy.

To download the Central Appalachia Severance Tax Policy Scan and CARN’s policy recommendations, visit http://www.CARNnet.org.

Direct Links:
http://carnnet.org/docs/CARN_SeveranceTaxReport.pdf
http://carnnet.org/docs/CARN_SeveranceTaxPolicyRecommendations.pdf

Blog Post From Dept of Interior: Is the Recent Increase in Felt Earthquakes in the Central US Natural or Manmade?


By David J. Hayes, Deputy Secretary, U.S. Department of the Interior

Last week, following the publication of an abstract intended to preview an upcoming talk by a U.S. Geological Survey (USGS) scientist, a number of news articles started popping up about new scientific evidence of a link between unconventional oil and gas production here in the United States, and seismic activity (earthquakes).

Unfortunately – although not surprisingly given the limited information available in the abstract – the accuracy of these media reports varied greatly. With this blog post, I want to clarify a few points about USGS’s important and ongoing work to study induced seismicity.

Science will continue to play a critical role as the Obama administration moves forward with an all-of-the-above strategy for American energy. USGS’s contributions to this effort, including scientist Bill Ellsworth’s work on the correlation between wastewater injection sites and seismicity, represent an important part of the overall dialogue about how we can continue to expand domestic oil and gas production safely and responsibly.

Background

As part of its ongoing effort to study a variety of potential impacts of U.S. energy production, USGS scientists have been investigating the recent increase in the number of magnitude 3 and greater earthquakes in the midcontinent of the United States. Beginning in 2001, the average number of earthquakes occurring per year of magnitude 3 or greater increased significantly, culminating in a six-fold increase in 2011 over 20th century levels.

These earthquakes are fairly small – large enough to have been felt by many people, yet small enough to rarely have caused damage.

An increase in earthquakes such as this prompts an important question: are they natural, or man-made? To address this question, a team of USGS scientists led by Bill Ellsworth of the Earthquake Science Center analyzed changes in the rate of earthquake occurrence in the midcontinent using large USGS databases of earthquakes recorded since 1970.

Our scientists then took a closer look at earthquake rates in regions where energy production activities have changed in recent years. The following findings will be presented on April 18 at the annual meeting of the Seismological Society of America, with a published study forthcoming.

Preliminary Findings

USGS’s studies do not suggest that hydraulic fracturing, commonly known as “fracking,” causes the increased rate of earthquakes. USGS’s scientists have found, however, that at some locations the increase in seismicity coincides with the injection of wastewater in deep disposal wells.

Wastewater is a byproduct of oil and natural gas production from tight shale formations and coal beds. Generally, wastewater produced from many oil and gas production wells within a field may be injected through a single or just a few disposal wells.

In preliminary findings, our scientists cite a series of examples for which an uptick in seismic activity is observed in areas where the disposal of wastewater through deep-well injection increased significantly. These areas tend to be in the middle of the country – mostly in Colorado, Texas, Arkansas, Oklahoma and Ohio.

What We Know

While it appears likely that the observed seismicity rate changes in the middle part of the United States in recent years are manmade, it remains to be determined if they are related to either changes in production methodologies or to the rate of oil and gas production.

We also find that there is no evidence to suggest that hydraulic fracturing itself is the cause of the increased rate of earthquakes. The fact that the disposal (injection) of wastewater produced while extracting resources has the potential to cause earthquakes has long been known. One of the earliest documented case histories with a scientific consensus of wastewater inducing earthquakes, is at the Rocky Mountain Arsenal well, near Denver. There, a large volume of wastewater was injected from 1962-1966, inducing a series of earthquakes (below magnitude 5).

We also have previously reported that the production of oil and gas (extraction) can potentially cause earthquakes when changes in the underground stresses created by the removal of large volumes of oil, gas or water are large enough.

And, of course, we know that the Earth’s crust is pervasively fractured at depth by faults. These faults can sustain high stresses without slipping because natural “tectonic” stress and the weight of the overlying rock pushes the opposing sides of the fault together, increasing the frictional resistance to fault slip. The injected wastewater in deep wells can counteract the frictional forces on faults, causing an earthquake.

Not all wastewater disposal wells induce earthquakes. Of approximately 150,000 Class II injection wells in the United States, including roughly 40,000 waste fluid disposal wells for oil and gas operations, only a tiny fraction of these disposal wells have induced earthquakes that are large enough to be of concern to the public. Information on wastewater disposal wells and the US Environmental Protection Agency’s Underground Injection Control program is available online.

Earthquakes induced by fluid-injection activities are not always located close to the point of injection. In some cases, the induced earthquakes have been located as far as 6 miles from the injection well.

Current and Future Research

The USGS is coordinating with other federal agencies, including the EPA and Department of Energy, to better understand the occurrence of induced seismicity through both internal research and by funding university-based research with a focus on injection-induced earthquakes from wastewater disposal technologies. For instance, USGS and its university partners have deployed seismometers at sites of known or possible injection-induced earthquakes in Arkansas, southern Colorado, Oklahoma, and Ohio.

Currently, there are no methods available to anticipate whether a planned wastewater disposal activity will trigger earthquakes that are large enough to be of concern. Evidence from some case histories suggests that the magnitude of the largest earthquake tends to increase as the total volume of injected wastewater increases. Injection pressure and rate of injection may also be factors. More research is needed to determine answers to these important questions.

Although we cannot eliminate the possibility, there have been no conclusive examples linking wastewater injection activity to triggering of large, major earthquakes even when located near a known fault.

It’s clear that science is a key part of the Obama administration’s all-of-the-above strategy for American energy, and we will continue to research these important questions – working with industry and our state, federal and academic partners to ensure that we continue to expand oil and gas production safely and responsibly in the United States.

Link to Original: http://www.doi.gov/news/doinews/Is-the-Recent-Increase-in-Felt-Earthquakes-in-the-Central-US-Natural-or-Manmade.cfm

Extension Educator Says: Shale payments subject to Ohio’s Commercial Activity Tax

Landowners across Ohio may be surprised to learn the bonus lease and royalty dollars received for their Marcellus or Utica Shale leases will be subject to theOhio commercial activity tax (CAT) if payments of over $150,000 are received.

What is it?

The CAT was enacted in House Bill 66, which was passed by the 126th General Assembly in 2005. The CAT is an annual tax imposed on “the privilege of doing business in Ohio,” measured by taxable gross receipts from most business activities.

Most receipts generated in the ordinary course of business are included in a taxpayer’s CAT base. This tax applies to all types of businesses: e.g., retailers, service providers (such as lawyers, accountants, and doctors), manufacturers, and other types of businesses.

The CAT applies to all entities regardless of form, (e.g., sole proprietorships, partnerships, LLCs, and all types of corporations). The tax does have limited exclusions for certain types of businesses, such as financial institutions, dealers in intangibles, insurance companies and some public utilities if those businesses pay specific other Ohio taxes.

A person with taxable gross receipts of more than $150,000 per calendar year is subject to this tax, which requires such person to register with the Department of Taxation as a taxpayer.

The term “gross receipts” is broadly defined to include most business types of receipts from the sale of property or in the performance of a service. Please note that certain receipts are not taxable receipts, such as interest income.

The following are some other examples of receipts that are excluded from a taxpayer’s CAT base: dividends, capital gains, wages reported on a W-2, interest (other than from credit sales), or gifts.

 

Oil and gas income

Internal Revenue Code section 1231 provides guidance on why the oil and gas receipts are included in a taxpayer’s CAT base. Specifically, the Code states that timber, coal, and iron ore are considered property used in the trade or business, assuming they are contained in the ground.

Once the mineral is removed from the ground, however, it is no longer an asset used in the trade or business, and therefore receipts from the sale of this mineral are included in a taxpayer’s CAT base.

$150 and 0.26%

 So what are the tax rates for the CAT? The rate for the first $1 million in taxable gross receipts (from $150,000 to $1 million) is a flat $150. The rate for receipts above $1 million is 0.26 percent.

The $150 annual minimum tax is due by May 10 of each year with the annual tax return for calendar year taxpayers or with the first quarter return for calendar quarter taxpayers.

A calendar year taxpayer who will have over $1 million in taxable gross receipts for a calendar year is required to switch to a quarterly taxpayer in the subsequent year and, if it elects to, can switch to a quarterly taxpayer at any time during the current calendar year.

CAT Example

 John B. Landowner owns 400 acres in northeastern Ohio and is a teacher at the local high school. He leases his land for $3,000 per acre, which totals a bonus payment of $1.2 million. To calculate his CAT obligation, Mr. Landowner would pay $150 for the first million dollars and then apply the .26% tax rate for the remainder ($200,000), which equals $520.

He has no other commercial business activity so his total CAT obligation would be $150 + $520 =$670.

Link to original: http://www.farmanddairy.com/news/shale-payments-subject-to-ohios-cat-tax/35664.html

 

ABOUT THE AUTHOR 

David Marrison is an agricultural extension educator in Ashtabula County.

E-mail: marrison.2@osu.edu

Athen’s County: Lease situation gives signers more time to reassess situation

A letter to the Editor of the Athens News that mentions “Look Before You Lease”. Thanks to Bob Sheak for helping us to spread the word about the importance of information based decision making around shale development. We don’t know how this will play out in Athens county, but there is a renewed urgency for those who are in the position to extend their lease agreement to review our landowner toolkit and and learn about the other groups mentioned in Mr.Sheak’s letter before making the decision to extend, work out additional terms, wait and see how the first wells produce, or wait for results from studies currently being conducted by federal agencies before making a final decision. If you have a neighbor or friend who is in the group awaiting payment from Cunningham, or is thinking about leasing through another landowner group make sure they have visited our site, or request a landowner toolkit for them. We will send a CD version by mail.

To the Editor:

This Cunningham Energy decision not to sign the oil and gas leases aggregated by local attorney John Lavelle illustrates how little control Athens Countians have in such matters, even with legal advice. Low natural gas prices, too much supply, a moderate winter, perhaps new questions about how to dispose of wastewater — all may help to explain why Cunningham has had trouble finding a corporate partner prepared to share the costs of shale gas/oil mining and to take responsibility for the various operational aspects of such mining.

Groups and individuals such as Look Before You Lease, SD-Frac, Sierra Club, Heather Cantino, Christine Hughes and their many strong allies, letter writers, and others in Athens have worked hard to educate local officials and the general population about the extensively documented dangers of shale gas mining. According to a student-driven poll of over 350 mostly Athens County residents reported Monday in The Athens NEWS, about half of the respondents opposed the option of going ahead with fracking until there are adequate safety regulations in place. My guess is that, despite the economic recession that still rages, the number is this high because of the educational efforts of the aforementioned groups.

I also guess that when, for example, natural gas prices rise and the infrastructure to move the gas is in place, Cunningham will find a corporate partner to commence the drilling in Athens. There are not many large economic alternatives available now for new public investments, publicly supported projects, or a significant shift to solar or wind energy. And the low-or-no tax and small-government policies of Republicans seem to resonate powerfully with a large number of citizens across Ohio and the U.S. So, if there is oil or gas in our part of the Utica shale formation and it can be profitably extracted, the mining corporations will be back.

In the meantime, from the perspective of about half of Athens County, there is some welcome additional time for residents to learn and think about and perhaps see implemented (to some extent) more adequate regulations than now exist. Though we probably should not count on much regulatory assistance from Ohio Gov. John Kasich and the Republicans at the state level. At the state level, with Kasich at the helm, we may well end up unfortunately looking more like Pennsylvania (very supportive of gas/oil shale mining) than New York (which continues to postpone final decisions on the acceptability of shale-gas mining).

Bob Sheak
Athens

(A-news) Editor’s note: Though this won’t be known until actually drilling begins in this area, some geological experts predict that the main “play” in Athens County and the surrounding area will be for oil rather than “dry” natural gas. Currently, natural gas prices are depressed while oil prices are relatively high. TS

 

Link to original Article: http://www.athensnews.com/ohio/article-36389-lease-situation-gives-signers-more-time-to-reassess-situation.html

Cunningham Energy seeks to postpone lease bonus payments, attorney says

Posted: Sunday, March 11, 2012 5:56 pm | Updated: 7:16 am, Mon Mar 12, 2012.

By STEVE ROBB Messenger staff journalist

It is “very unlikely” that Cunningham Energy will be able to meet Thursday’s deadline for making lease bonus payments to Athens County landowners, but the company is seeking a time extension, according to an attorney who has negotiated oil and gas leases for hundreds of local property owners.

Attorney John Lavelle sent his clients a letter Friday updating them on the situation. Contacted Saturday by The Messenger, Lavelle declined to comment. However, The Messenger obtained a copy of the letter from a landowner.

Lavelle has said previously that he has negotiated about 500 leases with Cunningham for local property owners that include signing bonuses of $2,500 per acre for drill leases and $1,250 per acre for non-drill leases. Lavelle has said the bonuses for his clients total more than $100 million. Payment of the bonuses by this Thursday was required in order for the leases to take effect. The leases also call for payment of a 16 percent royalty.

“It is very unlikely the leases will be funded by March 15, 2012. The agreements will therefore expire by their own terms,” Lavelle writes in the Friday letter.

However, Lavelle also writes that Cunningham has presented the lease package to more than 130 “of the largest companies in the world” and is currently in “intense negotiations” with a joint venture partner which are expected to result in a purchase and sale agreement within the next seven to 10 days, with a closing within 45-60 days thereafter.

At a lease signing event last November at the Athens County Fairgrounds, Cunningham land manager Joseph Blackhurst said his company has only conducted vertical drilling in the past and that a joint venture partner working with Cunningham would be the one doing any horizontal drilling.

At the time, Blackhurst would not disclose the name of the joint venture partner, but said it is a well-known publicly traded company.

Lavelle’s letter, though, indicates that an agreement has not yet been reached with a partner.

Lavelle says in the letter that he was approached about extending all the lease agreements to May 18.

“I explained it would be a daunting task to secure the consent of over 500 lessors in a short time frame, but we would do everything possible to extend this opportunity to those who desire to participate,” Lavelle writes.

In exchange for the time extension, Cunningham has agreed to increase the 16 percent royalty to 16.5 percent, according to the letter.

Lavelle also provided his client with an amendment, developed by a Cunningham attorney, to extend Thursday’s deadline to May 18. The letter instructs the clients to return the signed document by Thursday in order to continue to be part of the lease proposal.

According to an affidavit that Blackhurst filed in the Athens County Recorder’s Office last December, Lavelle has a lease agreement with Cunningham for 362 acres of his own property.

“My wife and I plan to sign the amendment concerning our own acreage,” Lavelle says in Friday’s letter. “We play to stay with it until the conclusion.”

Link to Original Article: http://www.athensohiotoday.com/news/article_163c4ff4-6bc5-11e1-bfa8-001871e3ce6c.html

Oil and Gas Lunch and Learn at Ohio University January 19th

January 19th, 2012 11:00 a.m. – 1:00 p.m.*

Ohio University Innovation Center
340 West State Street, Room 103
Athens, OH 45701

*Pizza Provided

Register Today: Free
Contact Trenia Twyman to register by
12:00 p.m. on Tuesday, January 17th
email: twyman@ohio.edu
call: (740) 597-1460

The region is experiencing rapid development in oil and gas exploration that could shortly approach wild west or boom town proportions. In Oil and Gas Development – We Have the Answers, It’s the Questions We Don’t Know Yet,

Dale Arnold, Director of Energy Services for the Ohio Farm Bureau Federation since 1995, will explore series of questions energy developers, legal counsels and landowner associations need to address as local leaders and residents make business and planning decisions impacting their farms, homes and community.
Dale represents farm, small business and residential energy consumers on utility advisory boards focusing on demand side management/energy efficiency. He has served on local, state and national working groups focusing on technical evaluation, education/outreach, and community planning, all dealing with energy. He has served on task forces leading to creation of Ohio’s Advanced Energy Initiative as detailed in SB 221, and utility scale wind farm siting guidelines

Lunch and Learn Details – PDF

State Natural Resources Director Reaches Agreement to Halt Operation of Youngstown Area Injection Well

Injection Well Locations in Ohio

COLUMBUS, OH—Ohio Department of Natural Resources Director James Zehringer today announced a halt to operations at a Youngstown Township fluid injection well. The area surrounding the well has experienced a series of low-level seismic events over the past eight months. While conclusive evidence cannot link the seismic activity to the well, Zehringer has adopted an approach requiring prudence and caution regarding the site.

“Our top priority is the health and safety of the public and the protection of Ohio’s natural resources,” said Zehringer. “We are going to make sure this process is done right and won’t hesitate to stop operation of disposal sites if we have concerns. And while our research doesn’t point to a clear and direct correlation to drilling at this site and seismic activity, we will never gamble when safety is a factor.”

The class two injection well is owned and permitted by Northstar Disposal Services, LLC of Youngstown.

Following a series of low-level seismic events this year in the area surrounding the Youngstown Township injection well, ODNR invited Columbia University’s Lamont-Doherty Earth Observatory to position four seismometers in the area to capture more detailed information about seismic activity.

“Information freshly obtained from the Columbia University scientists, and further analyzed by ODNR geological experts, indicates that an earthquake occurred on December 24 approximately two miles below and within a mile of the injection site,” said Zehringer. “As a precautionary measure we’ve reached agreement with the well’s owner to halt injections until we are able to further assess and determine any potential links with recent seismic events.”

So far this year ODNR’s seismic monitoring network has documented 10 seismic events occurring in 2011 within two miles of this injection well. Each of these events registered at 2.7 magnitude or lower. Generally, only earthquakes that register above 4 magnitude are known to cause surface damage. As a relative measure, a 4 magnitude event would release approximately 40 times the energy of a 2.7 magnitude event.

There are 177 class 2 deep well injection sites operating in Ohio.

The ODNR ensures a balance between wise use and protection of our natural resources for the benefit of all. Visit the ODNR Web site at ohiodnr.com.

Credentialed media seeking further information should contact:
Andy Ware, ODNR
614-265-6860