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Dr. Mark Snead and Fred Morgan

OIPA's Jeff Wilson talks with Jerry Bohnen

Study takes in-depth look at oil and gas tax policy in Oklahoma

January 14, 2014
An independent study released today by the State Chamber Research Foundation provides an in-depth examination of the oil and gas industry and how tax policy led to an amazing resurgence. The report by Dr. Mark Snead’s RegionTrack Inc. highlighted the economic impact of oil and natural gas tax policy and warned that even incremental increases in the state’s severance tax could “trigger a series of incremental negative outcomes within the industry and state economy.”
“This study shows that Oklahoma’s current tax structure for the oil and natural gas industry works,” OIPA President Mike Terry said. “Compared to our peer states identified by Dr. Snead, Oklahoma is the only state to see a continued increase in oil and natural gas production since 2010.”
Speaking to reporters at the release of the study, Snead said the state’s economy is closely tied to the oil and natural gas industry, and increased industry taxes would be felt throughout the state through decreased royalty payments, a decrease in property value, a reduction in in-state employment and a decrease in cash flow from existing wells that would reduce or delay investment in new wells.
“This study clearly shows the importance of the oil and gas industry to the state in a way everyone can understand,” said Fred Morgan, president and CEO of the State Chamber of Oklahoma. “The report does not make policy recommendations but instead is intended to serve as a benchmark research document to assist state policymakers in fully evaluating the economic role of the industry and any potential effects that changes in state tax policy may produce.”
Oklahoma’s provision for horizontal wells expires in 2015. With no extension before then, the reduced gross production tax rate of 1 percent producers pay for the first 48 months of a horizontal well’s life would be eliminated and horizontal production would be taxed at 7 percent. Some state leaders have said a change in the tax provisions for horizontal wells is necessary to offset declining revenue in the state’s general revenue fund.
“Efforts to increase taxes on Oklahoma’s most vibrant industry will do nothing but hamper our economy,” Terry said. “There is competition every day to keep drilling dollars here in Oklahoma. Maintaining a competitive business climate is essential, and we must have a tax structure in place that encourages the increased development of oil and natural gas in Oklahoma.”

Read the State Chamber study here:
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