Pantagraph.com Weather forecast, local radar and more
NewsTuesday, April 15, 2008 4:18 PM CDT
Comments Comments (19) | E-mail this page E-mail this page | Print this page Print this page | Enlarge type Enlarge type | Reduce type Reduce type | Search archives Search archives | RSS RSS feeds | Add to My Yahoo! Add to My Yahoo!
State looks to boost tax on Illinois oil producers
By Kurt Erickson
kurt.erickson@lee.net
Advertisement

SPRINGFIELD -- Illinois oil producers could be tapped to help pull the state out of red ink. With world oil prices hovering at the $111 per barrel level and motorists facing hefty increases at gasoline pumps, Gov. Rod Blagojevich has proposed raising fees paid by companies producing oil and gas in Illinois.

The idea, which could raise between $26.7 million and $33 million, is opposed by the industry, as well as lawmakers who represent areas of the state where oil drilling has been on the upswing since prices began rising several years ago.

“I’m against it,” state Sen. Gary Forby, D-Benton, said Monday. “I’m going to keep following up on it.”

“They are saying the fee increase could be devastating to the industry,” added state Sen. John Jones, R-Mount Vernon.

The proposal is among a number of fee increases being considered as a way to operate the Illinois Department of Natural Resources without using general state funds.

It comes at a time when the state is running short of cash to pay its bills. The governor says the deficit is at least $750 million.

In addition to higher taxes for oil companies, Blagojevich has proposed raising fees for campers and hunters.

DNR spokesman Chris McCloud said higher fees for oil producers aren’t an attempt to take advantage of high oil or fuel prices in order to finance state government.

Rather, he said Illinois’ current fee for producers lags behind other states.

“We are one of very few if not the only state that doesn’t directly benefit from a fee of this kind,” McCloud said.

The fee, which needs legislative approval to go into effect, would rise from one-tenth of one percent for every barrel of oil produced to five percent per barrel.

Brad Richards, executive vice president of the Illinois Oil and Gas Association, said the fee could hamper production in Illinois, which is dominated by smaller drilling and production companies.

Unlike big oil producing states, most Illinois wells produce an average of about 1.25 barrels per day, which equates to about 10 million barrels of oil annually.

“It would be devastating to a lot of our smaller producers,” Richards said. “This is a very big deal for us.”

The rise in the price of oil has sparked a resurgence in Illinois’ oil industry. Drilling permits have been on the rise for the past several years.

However, Richards said production levels remain stagnant or are in decline.

“There’s a reason why the majors aren’t here anymore,” Richards said.

Rather than tax at a level seen in major oil producing states like Texas, Oklahoma and Louisiana, Richards said the state should look at Pennsylvania and Ohio, where wells that yield less oil are taxed less or nothing at all.

Jones also says the fee would hit independent producers who have only recently begun hiring people for higher paying oil exploration jobs.

“This isn’t the major oil companies,” Jones said. “These are small, independent drilling contractors.”

State officials disagree.

“There are many wells owned in Illinois made up of ownership groups including oil companies,” McCloud said.

Forby said it’s not uncommon to talk about budget cuts and fee hikes at this point of the spring legislative session. With six weeks to go before lawmakers are scheduled to adjourn for the summer, lawmakers and Blagojevich are still far apart on budget issues.

The state is operating at a deficit of an estimated $750 million and many state vendors, such as hospitals, pharmacists and nursing homes are not being paid for their services in a timely manner.

“I don’t know if the governor is just doing this as a threat,” Forby said. “We go through this every year.”

(Kurt Erickson can be reached at kurt.erickson@lee.net or 217-789-0865)

Video
Most commented stories
Browse online archives
Recent issues:
Reader comments on this story - 19 total

Note: All views and opinions expressed in reader comments are solely those of the individual submitting the comment, and not those of the Pantagraph or its staff.

DaveII wrote on Apr 16, 2008 10:04 AM:

" Well, why not jump on the stripper well producers. Not only don't the oil companies pay a competitive rate for this lower grade crude, but IL already taxes the brine removal and everytime anyone touches the wellhead another permit, tax or fee by the State or oil company is added. Yeah, let's jump on them some more. When these little people are squashed then onto someone or some other business. The only people that will be left in IL will be the politicians and the spendthrift educators who will be asking what happened to their income stream. "

Zeva wrote on Apr 15, 2008 9:38 PM:

" Aw why not? Run another industry out of the state so more workers can be out of work. I'm so proud of this stupid governor!!! Doesn't he know that Illinois is the highest taxed state in the U.S. ? I do and I'm fed up with it and so is the industry that is moving out in droves. Pretty soon we won't have any industry and then more people on the welfare roles. I say if your young and have children send dad somewhere else to find work out of Illinois and run. Other states aren't near as highly taxed as this state. Our policial groups don't care about the citizens if they work or live to survive, they just want more MONEY!!! "

FYI wrote on Apr 15, 2008 4:06 PM:

" Just reading the title, but IL wants to increase taxes on everyone and everything; not just oil. "

middle of the road wrote on Apr 15, 2008 12:00 PM:

" We do need one more tax. we need to tax legislators every time they pass a law that harms the state. lets start with 120 percent of their pay "

Poster Boy wrote on Apr 15, 2008 9:36 AM:

" This guy is such a goofball. He should just go ahead and grow a cheesy moustache and wear a long coat w/ tails, that says GOV on the back, to complete the look like Mel Brooks in Blazing Saddles. "

Meh wrote on Apr 15, 2008 8:53 AM:

" Pretty stupid. I guess it might be ok if Blago were going to invest the funds into alternative energy research, but that isn't going to happen. "

gc wrote on Apr 15, 2008 7:00 AM:

" Well it won’t matter to the big ones they will just raise it before it get to the pump. The smaller company’s will force to sell out to the bigger companies. This will create more unemployment in the state and else where. Wont matter much longer if Rod keeps it up there wont be a state of Illinois. They will have to divide it up between the bordering states. "

justme wrote on Apr 15, 2008 6:44 AM:

" This is only the start of his stupid ideas. What about his plan to possibly lay off thousands of IDOT workers for the whole summer?? What kind of road conditions are we gonna have then? I myself never voted for this loser in the first place! "

real american wrote on Apr 15, 2008 6:43 AM:

" $750 million dollar deficit? Didn't you people elect this clown to fix Illinois? No doubt Ryan was bad but this guy is worse. "

ktlin wrote on Apr 15, 2008 6:08 AM:

" I know oil companies are now making lots of money. But, if you want to be independent of foreign oil we need to encourage our oil companies to produce more not drive them out of business. And we need to cut spending even though people will holler. We need to get and keep our priorities straight. "

kcj81031 wrote on Apr 15, 2008 6:00 AM:

" This is an idiots plan to lower gas prices. "

temp wrote on Apr 14, 2008 11:46 PM:

" Stop raising taxes and start cutting spending. Rod has pet projects all over the place, including a health care program that he is running despite the legislature saying no - where did he get that money! Why not use that to balance the budget along with who knows how many other projects - a 5000% increase in taxes on any group is unbelievable - I don't care how little they pay now. "

Beowulf wrote on Apr 14, 2008 9:07 PM:

" If the government raises taxes and fees on the producers of oil and gas, these companies will simply raise their prices to make up for the shortfall. Who do think is going to pay for this in the end? Why don't they just raise our taxes and just get it over with - because, in the end, the results will be the same... Joe Taxpayer gets screwed, again. "

HUH wrote on Apr 14, 2008 8:54 PM:

" Start cutting not looking to raise taxes! "

What The Hey wrote on Apr 14, 2008 8:47 PM:

" I wonder, will the oil producers pass this tax.............oops, user fee............on to us via even higher fuel prices? Didja think about that Roddy? Can we possibly be strapped even further before you end up with Ryan?? "

Waffle of Justice wrote on Apr 14, 2008 8:07 PM:

" So the state is going to pull itself out of the red by indirectly taxing the consumer.. brilliant. The economy is in the toilet how can we boost consumer confidence and spending, hit 'em a little harder in the daily pocket book. Kudos Blago you are a credit to spoiled mayonnaise everywhere. Cut the BS governmental blank check program and trim the fat, reduce spending first, raising taxes should be last resort. "

Devil's Advocate wrote on Apr 14, 2008 7:41 PM:

" Hey Rod - Stop adding your own programs to the state budget that no one has voted on except you. Then you would probably have enough money to run the state. "

vox populi wrote on Apr 14, 2008 7:20 PM:

" How about this: QUIT SPENDING SO MUCH MONEY!! Our illustrious govenor sure knows how to buy votes. What does he care if downstate is mad about his programs, as long as he keeps Chicago happy! "

OGS wrote on Apr 14, 2008 6:37 PM:

" Not that I think Blago will do this but I would like the governor of my state to speak up for the people who live in his state regarding the devaluation of the dollar rather than to seek the continuous rise of fees and taxes to bail out state budget shortfalls. These (what should be independent) United States need to stand up and speak up to Washington D.C. for a monetary policy that is good for America rather than the current devastating policy that is elitist Washington. "
Add your own comments

Please read the rules before posting comments.

You must be logged in to leave comments.
If you don't have a member ID, please register.

*Member ID:
*Password:
Remember login?
(requires cookies)
  Forgot Your Password?
 
Lee Enterprises Customer Service | 301 W. Washington St., PO Box 2907, Bloomington, IL 61701-2907 | Ph. 309-829-9000 | 800-747-7323
Copyright © 2008, Pantagraph Publishing Co. and Lee Enterprises. All rights reserved. | Terms of Use | Privacy Policy