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State considers oil drilling tax

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SPRINGFIELD — Looking for revenue and short on sources, some Illinois lawmakers want to tax oil and gas drilling.

By Anthony Brino

SPRINGFIELD — Looking for revenue and short on sources, some Illinois lawmakers want to tax oil and gas drilling.

House Bill 4312 would levy a 12 percent tax on the value of oil and natural gas drilled in Illinois. Starting in January 2013, companies drilling in the state would pay based on volume, with the money generated going to the state's General Fund.

State Rep. Naomi Jakobsson, D-Urbana, and House Speaker Michael Madigan, D-Chicago, are the bill's sponsors.

"In these difficult economic times, it's one way to increase revenue," said Jakobsson.

Jakobsson said there are no estimates on how much the tax would raise, and the 12 percent figure is arbitrary.

The proposal, which is still in the House Rules Committee, comes amid burgeoning interest in Illinois' New Albany Shale, with dozens of companies securing the rights to drill across thousands of acres in southern Illinois.

Geologists and engineers know the roughly 4,500-foot-deep New Albany Shale — thought to be the source of all the shallow oil once extracted in southern Illinois — contains oil. But experts are split on how much can be extracted and whether it's worth the time and money to experiment.

A 12 percent severance tax probably would discourage companies from trying to find out, said Kim Oelze, president of the Illinois Oil and Gas Association, a trade group representing mostly small and medium-sized drilling companies.

"We think it's an unfair tax," Oezle said. "We'd like to give companies time to come in and see if their technology will work."

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