Stillwater News Press

Letters to the Editor

June 6, 2014

LETTERS TO THE EDITOR: Huge tax break for drilling irresponsible

STILLWATER, Okla. — Bill Simma


To the editor:

House Bill 2562 was signed by Gov. Mary Fallin on Wednesday, May 28. This now makes permanent a huge tax break for oil and gas production by taxing all drilling at just 2 percent for the first three years of production.

The state historically assessed a 7 percent tax. In 1994, the legislature created an incentive for horizontal drilling. The incentive initially lowered the tax rate to 1 percent for the first two years or until costs were recovered. In 2002, the incentive was extended to up to four years. The incentive was set to expire next year in 2015, which would have returned the tax rate to 7 percent, which is comparable to that of neighboring states.

With a 2015 expiration, there was no need to take action on this in the current legislative session. However, the legislature seemed to determine there was an urgency to act NOW and quickly dealt with this during the LAST WEEK of the four month session. Was this really necessary? No, it wasn’t.

I sat across the desk from both Representatives Lee Denney (Cushing) and Jason Smalley (Stroud) several times this spring and heard both of them say on at least one occasion that they supported letting the current incentive expire and letting the rate go to 7 percent. I checked their vote on the final pass and discovered with some surprise that they both were yes votes to this new plan. Sen. Jim Halligan voted no. Congressional Senate candidate T. J. Shannon was also a yes vote. You should remember that Shannon’s original position was that the current incentive be made permanent.

Mike Terry, president of the Oklahoma Independent Petroleum Association, said the new tax rate will allow Oklahoma oil and natural gas companies to continue drilling wells in our state. Really? Someone must think that a fair, comparable tax rate on drilling is going to make all of the oil under the ground in Oklahoma to disappear. It seems to me the oil isn’t going anywhere. I daresay that we would see no change in drilling activity with a 7 percent tax rate.

Oklahoma Secretary of Finance, Administration, and Information Technology Preston Doerflinger said that HB 2562 was the result of successful talks between the oil and gas industry, legislative leaders, and the governor. Yes, I would say that it was. Of course, it must have been success easily achieved since they were all on the same side. Do you think the meeting might have been late at night behind locked doors?

Gov. Fallin tweeted following the vote, and I quote, “Signed a bill that modifies energy production incentives. The new 2 percent tax rate is fair to OK & our energy producers.” I beg to differ with you, Gov. Fallin, and with you, Reps. Denney, Smalley, and your 59 colleagues that supported HB 2562. At a time when our state faces a $180 million budget shortfall and state agencies are facing yet another year of budget cuts, I don’t think this action is fair to Oklahoma, the energy producers, or any of our state’s residents.

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