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With U.S. midterm elections just days away, one Republican state governor is coasting to re-election despite promising to aggressively push for higher taxes on the oil and gas industry.

Gov. John Kasich of Ohio has overseen a rapid expansion of drilling in his state, with oil and gas production quickly rising. Drillers have been targeting the Marcellus Shale in Ohio, and increasingly, the deeper Utica Shale. The same geology that has made Pennsylvania a major energy producer stretches across the border into Ohio. In fact, Ohio tends to hold a greater preponderance of petroleum liquids instead of dry gas, which can provide a much better return for drillers.

The Utica holds an estimated 38 trillion cubic feet of natural gas and 940 million barrels of oil, according to an assessment from the U.S.听. ()

Gov. Kasich has supported the development of oil and gas in his state, and rigs have multiplied in the eastern counties of Ohio near the border with Pennsylvania under his watch. The听, a group following the oil and gas industry, has produced an excellent and detailed map of the drilling footprint in eastern Ohio, which can be found听.听 听

While Kasich supports oil and gas development, he has clashed with his fellow Republicans on taxing the industry. He听听the current tax regime, a 20-cent per barrel severance tax, 鈥渁 total and complete rip-off to the people of this state. It鈥檚 outrageous.鈥�

Kasich has tried to raise taxes on the industry before, but in the spring of 2014, the state house听听of a 2.75 percent severance tax on the industry down to 2.5 percent. The bill passed but is now stalled in the senate.

Kasich argues that without a sizable tax on oil and gas production, all the benefits just accrue to the drilling companies, many of which are not from Ohio. 鈥淎nd then they take our stuff and they go back and they cut their taxes, and they have our wealth in their state and they don鈥檛 pay for it. We need to stop this,鈥� he听.

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Kasich will almost certainly win a second term on Nov. 4 by a comfortable margin. In an average of polls from RealClearPolitics at the end of October, he was听听by 22.7 points.

That has emboldened his call for higher industry taxes. He says he wants at least a 2.75 percent tax, and has at times听. Democrats earlier this year听听a 5 percent tax.

But with all the听听from the oil and gas industry going to Republican legislators, Kasich has failed to get his way thus far. Republicans in the GOP-controlled state legislature say increasing taxes on the oil and gas industry will deter investment and force many producers to leave the state.

But a report from Headwaters Economics, a non-profit research outfit, calls that logic into question. In a听, it concluded that 鈥渁cademic literature generally disagrees that tax competition is important to oil production.鈥� ()

As it stands, Ohio鈥檚 severance tax amounts to听. By way of comparison, Texas 鈥� the home of the听, which together account for about听听of the entire country鈥檚 oil production 鈥� has a severance tax of听.

Even if the Republican bill that calls for a 2.5 percent severance tax were to pass 鈥� a rate that Gov. Kasich has called 鈥減uny鈥� 鈥� Ohio would still have the lowest effective tax rate on the oil industry out the top producing states in the country, according to an听.

鈥淸W]e can鈥檛 let these companies take our valuable stuff out of this state and not pay for it. It鈥檚 鈥� I feel very passionately about this,鈥� Kasich said recently in an听. His plan is to use the tax revenue to reduce taxes on all Ohioans, a听听across the state and one of the biggest reasons he鈥檚 expected to remain in the governor鈥檚 mansion.

By Nick Cunningham of Oilprice.com

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