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OIPA comments on Democratic budget proposal to increase oil and gas taxes

March 24, 2017
Oklahoma Independent Petroleum Association Vice President of Governmental Affairs Tim Wigley released the following statement regarding the Oklahoma House Democrats’ budget proposal that would increase taxes on oil and natural gas production:

The oil and natural gas industry accounts for one-third of our state’s gross domestic product, generates more than 25 percent of all taxes paid in the state and employs half of the state’s non-farm workers. This industry defines Oklahoma and does more than its fair share to spur our economy forward.

Democratic House leaders claim they are helping Oklahoma’s working class, but working Oklahomans are working in the oilfield. By eliminating tax provisions that encourage the development of new oil and natural gas wells, revenue that would be used to put more Oklahomans to work is taken away.

Taxes paid by the oil and natural gas industry account for $1 out of every $4 our state receives, and the role of economic stimulator is one the industry is proud to play. It is a role unmatched by any other energy producer in Oklahoma.

In 2010, when the state faced an almost 20 percent budget shortfall, oil and natural gas industry leaders agreed to defer payments for existing tax provisions for 24 months, giving lawmakers an additional $150 million to allocate to state agencies. In 2014, the industry agreed to double the gross production tax on oil and natural gas produced from horizontal wells, providing additional dollars for government services while still ensuring the development of Oklahoma’s oil and natural gas reserves will be encouraged for decades to come. In 2016, the oil and natural gas industry came to the aid of the state again by accepting a proposal from legislative leadership to cap the state’s tax provision for economically at-risk oil and natural gas wells, giving state lawmakers roughly $120 million to help shore up an onerous budget shortfall.

While House Democrats call for increasing taxes on the oil and natural gas industry, they have not done the same for the wind industry. The excessive, overgenerous tax subsidies paid to wind farm developers is on par with the amount the budget proposal hopes to squeeze out of oil and natural gas producers. The difference is the oil and natural gas industry already pay taxes on the oil and natural gas produced in the state while there is no production tax on wind energy.

Reduced tax rates to encourage oil and natural gas production were put in place by Democratic legislative leaders more than two decades ago, and they keep Oklahoma drilling rigs working. When commodity prices plummeted, drilling activity here fell by 53 percent. But in Texas, the nation’s leading oil producer, 66 percent of its rig activity was lost. In North Dakota, drilling fell by 75 percent. California saw a 70 percent decline, and Colorado and New Mexico lost 74 and 68 percent of their drilling rigs, respectively.

That means among states with traditional oil and gas production, the Sooner State has been the most resilient in the nation at weathering the downturn in oil prices. It is safe to say job losses and tax revenue shortfalls would be much worse without the tax rates that keep Oklahoma oil and natural gas companies producing for Oklahoma.
Founded in 1955, the OIPA is the state’s largest oil and gas advocacy group, representing more than 2,400 members in the crude oil and natural gas exploration/production industry or affiliated businesses.

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