Stillwater News Press

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May 10, 2014

DENNIS CASEY: Drilling incentive dilemma

STILLWATER, Okla. — The legislative process is designed to be deliberative. State policy and budgeting should not be done without a great deal of thought and discussion.

That’s why state lawmakers want to be cautious with a new plan proposed by the oil and gas industry to replace current tax incentives for drilling.

In total there are nine incentives. Drillers can receive a reduced gross production tax rate of 1 percent for 48 months for any horizontally drilled well. They can receive other 28-month incentives for restarting production on a well, for production enhancement, or for a deep well (defined as from 12,500 to 14,999 feet deep). They receive a reduced rate of 4 percent for ultra-deep wells (15,000 feet and deeper). They can also receive a rebate for new discovery wells, 3-D seismic wells and for economically at-risk leases.

Many of these incentives will expire next year.

The new plan would replace the current incentive for horizontally drilled wells with a 2 percent rate for four years instead of a 1 percent rate. Industry leaders say it will be bad for business in the state allows the tax incentive to expire and return to the 7 percent rate.

On the other hand, one oilman, George Kaiser, says letting the incentive expire would not harm the oil and gas industry in Oklahoma. Proponents of letting the tax incentive expire say we need it in order to properly fund essential services, including schools.

The first-ever oil and gas industry rally took place at the Oklahoma State Capitol this year and was organized by the Oklahoma Independent Petroleum Association. Opponents of letting the tax incentive simply expire note that drilling is expensive and high-risk. It is perhaps more effective than most incentives for that reason.

I find the discussion of reviewing current incentives to be a healthy one. Most incentives are given a temporary life with the option of renewal, because we have to approach them cautiously. On the other hand, our responsibility to tax at a fair and reasonable level is also important. If we reduce that incentive, will there be more money, or will it reduce economic activity and ultimately lead to less revenue?

I welcome your thoughts. To contact my office, call 405-557-7344 or e-mail dennis.casey-@okhouse.gov.

Rep. Dennis Casey is a Republican from Morrison.

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