COLUMBUS — Gov. John Kasich vetoed legislation Dec. 27 pushing back renewable energy and efficiency mandates, requiring regular review of cabinet-level agencies and solidifying in state law sales tax breaks for pipeline and other equipment related to the oil and gas industry. It was the last day the governor could have rejected the legislation after the bills arrived at his desk.
The moves set up a potential showdown with lawmakers, who have time to reconvene to attempt to override the vetoes.
The Republican-controlled Ohio House and Senate have as-needed days yet this week, and neither chamber has officially adjourned the two-year general assembly.
The Republican leaders of the Ohio House and Senate also did not confirm Tuesday afternoon that additional sessions would take place, however.
According to Senate GOP spokesman John Fortney, “Our members are reviewing the governor’s messages and assessing their next steps.”
And Brad Miller, a spokesman for House Speaker Cliff Rosenberger (R-Clarksville) said a decision on reconvening would be made Wednesday.
Rosenberger added in a released statement, “In response to today's vetoes, I am disappointed that Gov. Kasich has expressed disagreement with the majority of his Republican colleagues in the legislature. Through today's actions, it is clear that serious differences of opinion exist between the House and the administration on issues such as energy policy and taxation. Make no mistake, many of these policies will continue to be priorities among our caucus as we head into the next general assembly, and I look forward to working with the administration on those issues.”
If lawmakers do come back, they could consider overriding the three vetoes handed down Tuesday and another one from earlier in the month — the Heartbeat Bill provisions banning abortion within weeks of conception that the governor struck from larger legislation.
Energy Bill Veto
The vetoes were not a surprise; Kasich had already publicly indicated his opposition to the proposed law changes.
He echoed those thoughts in his veto messages.
On HB 554, which would have made former energy mandates voluntary and softened annual energy efficiency targets, would hurt the state’s economy, the governor wrote, noting that a wide range of energy generation options was among the reasons businesses have chosen to expand in Ohio.
The legislation would take “away some of those energy generation options, particularly the very options most prized by the companies poised to create many jobs in Ohio in the coming years, such as high technology firms,” Kasich wrote. “The bill would also deal a setback to efforts that are succeeding in helping businesses and homeowners reduce their energy costs through increased efficiency.”
Kasich added, “The administration stands ready to work with the general assembly to advance strategies for helping ensure competitive energy costs. Ohio workers cannot afford to take a step backward from the economic gains that we have made in recent years, however, and arbitrarily limiting Ohio’s energy generation options amounts to self-inflicted damage to both our state’s near- and long-term economic competitiveness.”
Two years ago, state lawmakers passed and the governor signed legislation that froze renewable energy and efficiency mandates for two years pending review by a study committee.
That bill stemmed from earlier law changes requiring power companies to generate a certain percentage of their energy from renewable sources and to institute efficiency initiatives. The standards called for 25 percent of the energy to be created from advanced sources by 2024 and a reduction of electricity use by 22 percent by 2025.
Backers of the freeze said the standards were higher than those in place in other states and would lead to higher energy bills for businesses and consumers.
Opponents, however, said freezing the mandates would reverse course on green energy advancements that are needed to protect the environment and hurt manufacturers of wind turbines and solar panels and other related green industries.
The freeze required lawmaker action before the end of this year, or the former renewable energy and efficiency mandates would restart in the new year.
Environmental advocates lauded the governor’s veto Tuesday.
Jen Miller, director of the Ohio chapter of the Sierra Club, said in a released statement, “This is good news for Ohio, and we commend Gov. Kasich for vetoing the Ohio Legislature's foolhardy attempt to tie our state to outdated, dirty, and expensive energy sources. Renewable energy and energy efficiency are proven to lower energy costs, spur economic development, and reduce air pollution. We encourage Gov. Kasich to continue to set a forward-thinking energy policy for Ohio in 2017 — one that will create jobs and keep us globally competitive by prioritizing energy efficiency and clean renewable energy."
But Sen. Bill Seitz (R-Cincinnati), chairman of the Ohio Senate’s Public Utilities Committee, slammed the veto, saying in a released statement that it “disrespects the legislative process that Gov. Kasich himself endorsed when he signed our 2014 bill establishing a legislative study commission, whose recommendation was to indefinitely extend the freeze on Ohio’s expensive march up the Obama-Clinton-Strickland alternative energy mandate mountain.”
Seitz added, “More than that, it disrespects the legislature’s attempt in HB 554 to meet Gov. Kasich more than halfway by not extending the freeze, but rather, trying a goals-based approach for two years to prove that statist mandates are not necessary to achieve a cleaner energy future. It is apparent that Gov. Kasich cares more about appeasing his coastal elite friends in the renewable energy business than he does about the millions of Ohioans who decisively rejected this ideology when they voted for President-elect Trump.”
Kasich also vetoed SB 329, which would have required lawmakers to periodically review cabinet departments, including those that oversee state prisons, Medicaid, agriculture, public safety, education and transportation. Absent subsequent legislative action, those offices would have ceased to operate.
The governor wrote in his veto message that agencies already are required to justify their existence, via the state’s biennial budgeting process.
“This second, duplicative process would be a waste of both executive and legislative branch resources,” Kasich wrote. “Given that this bill creates a costly and burdensome mechanism that only duplicates the current budget process, which provides a thorough and complete review of each state agency and its funding, this bill is unnecessary and, therefore, this veto is in the public interest.”
Senate Democrats praised the veto Tuesday.
“I’m pleased Gov. Kasich agreed that SB 329 was dangerous legislation that threatened to undermine our government’s system of checks and balances,” Senate Minority Leader Joe Schiavoni (D-Boardman) said in a released statement. “The law would have put crucial government services at risk and created a constant state of uncertainty for our business community.”
Outgoing Senate President Keith Faber (R-Celina), a primary sponsor of SB 329, said he hoped the legislation would be reconsidered by the new general assembly.
"I disagree with Gov. Kasich, of course, but even a good governor can be wrong once in a while,” he said in a released statement. “My friend, the governor, is missing the fundamental point of the bill, which is to provide a thorough review of state government bureaucracy outside of the traditional budget process. The general assembly simply lacks the time and resources to assess the effectiveness of every department in a matter of weeks, which is the timeframe we currently have to consider a budget. This bill allows for a much broader and deeper level of review that isn’t confined to the demands of a budget calendar.”
Kasich also used his line-item veto power to strike several provisions from SB 235, including a sales tax break for oil and gas industry-related equipment.
In his veto message, the governor wrote that the language would have expanded an existing exemption in state law on production-related tangible personal property.
The vetoed provisions, he wrote, “would result in a situation where oil and gas companies would be exempt from sales tax on almost everything they purchase. This new broadened exemption from the sales tax would create future annual revenue losses to the state, counties and transit authorities in the tens of millions of dollars.”
The governor also wrote that the language would have put the state on the hook for $264 million in sales tax refunds from collections dating back to 2010.
Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, said the group sought the clarification because the Ohio Department of Taxation was using aggressive audit practices to force collections from producers.
Such production-related oil and gas equipment already is exempt from sales tax, he said.
And he countered the administration’s estimates on potential retroactive sales tax refunds, saying producers were exempt from such payments to begin with, so no payments were made.
“If they continue to move forward with these practices, there will be a legal challenge,” Bennett said.
The association added in a released statement, “The association commends the legislature for recognizing the mistreatment of our industry by the Department of Taxation and for pursuing a legislative remedy. They have demonstrated a greater understanding of the issue and recognize this was not a tax break but rather a clarification reaffirming normal business exemptions that have been afforded to the oil and gas industry for decades.
“There isn’t a business in the state that would be content with having tax provisions reinterpreted without its knowledge just so the state can add a few dollars to fill its coffers. We are calling on the Department of Taxation to follow the law; in the meantime the OOGA will continue to challenge their overreach and assess all options available to us.”
Marc Kovac is the Dix Capital Bureau Chief. Email him at email@example.com or on Twitter at OhioCapitalBlog.