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OIPA: Budget discussions must include multiple industries

February 26, 2018
Following the failure of the broad-based revenue and reform Step Up Oklahoma proposal in the state legislature, Oklahoma Independent Petroleum Association (OIPA) President Tim Wigley said the state’s oil and natural gas industry remains committed to helping state lawmakers find solutions to the state’s budget woes.
 
“The men and women who make up Oklahoma’s oil and natural gas industry are Oklahomans first,” Wigley said. “They want the state to fund education at appropriate levels. They want teachers to be paid better. They want to ensure core government services are funded adequately. But they can’t be the only ones asked to shoulder the load.”
 
In 1994, Oklahoma lawmakers created an incentive in the gross production tax for horizontally drilled oil and natural gas wells, offering producers a tax rate of 1 percent for 48 months in an effort to encourage continued drilling in the state. Similar tax provisions were offered for deep wells and ultra-deep wells. In 2014, the reductions were rolled into one piece of legislation covering all new wells drilled in Oklahoma and the tax rate was increased to 2 percent for 36 months.
 
The state’s two-tiered gross production tax has become a point of contention at the Capitol, with continued efforts to increase the initial rate since 2016.
 
Wigley said the OIPA opposed legislation that would increase the initial gross production tax rate during the 2017 legislative session and during the following special session because oil and natural gas producers had been the only industry included in proposed revenue measures. The trade association supported Step Up Oklahoma, which included an increase in the initial rate to 4 percent, because other industries were included in the proposal, primarily the wind industry and tribal gaming.
 
“The oil and natural gas industry accounts for roughly 25 percent of the state’s tax revenue,” Wigley said. “We don’t have a revenue problem because oil and natural gas producers don’t pay enough taxes, we have a revenue problem because the taxes we pay are tied to a volatile commodity that saw a historic decline two years ago. Increasing taxes on the oil and natural gas industry and only the oil and natural gas industry will only make the state more dependent on volatile oil and natural gas prices.”
 
Wigley said the oil and natural gas industry has proven to be the state’s strongest supporter in times of budget difficulties, shouldering tax increases and the removal of long-standing tax rebates.
 
In the 2017 legislative session, wells drilled under the now-defunct 1 percent gross production tax program were increased to 4 percent for the remainder of their 48 months and were then increased to 7 percent in a following special session. Lawmakers that year also repealed all remaining oil and natural gas tax provisions put in place in the 1990s.
 
In 2016, the Legislature passed legislation to place a cap on the oil and natural gas rebate for economically at-risk wells, raising an additional $110 million in revenue from the oil and natural gas industry to help balance the budget. In 2010, when the state faced an almost 20 percent budget shortfall, the industry agreed to defer payments for the existing tax provisions for 24 months, giving lawmakers an additional $150 million to allocate to state agencies.
 
“Oklahoma oil and natural gas producers take great pride in serving as this state’s economic backbone,” Wigley said. “The oil and natural gas industry has set the standard. All other industries in the state of Oklahoma should be asked to meet it.”
 
Founded in 1955, the OIPA is the state’s largest oil and gas advocacy group, representing more than 2,000 members in the crude oil and natural gas exploration/production industry or affiliated businesses.
 
 
 
 
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