April 18th, 2017
Oklahoma is set to enact deep budget cuts that will harm our communities and economy and put the lives of vulnerable children, veterans, and seniors at stake – unless we are willing to take sensible steps to end unaffordable and unnecessary tax breaks. Oklahoma’s longstanding tax rate on oil and gas drilling is 7 percent, but a special tax break gives the industry a 2 percent rate for the first 3 years of any new well. Tax breaks on oil and gas are projected to cost the state over $500 million in lost revenue next year – that’s about half the state’s budget shortfall.
What You Can Do
To save our state, everyone must contribute their fair share. Contact your legislator today and urge them to restore the historical 7 percent tax rate for oil and gas.
Call your House member at 405-521-2711 and your Senator at 405-524-0126. You can also look up contact info for your legislators here.
You can also sign up to be part of the Save Our State coalition supporting a sensible, comprehensive plan – the Blueprint for a Better Budget – that puts our budget on a sustainable path, averts further budget cuts, and invests in key priorities in education, health care, and public safety.
- Oklahoma’s tax rate on oil and gas is the lowest of any major oil and gas producing state (see chart).
- Energy groups representing the largest oil companies claim that ending the tax break for oil and gas drilling will drive investment out of Oklahoma, resulting in the loss of high-paying jobs and state tax revenue. But state tax rates and tax breaks are of very minor significance in determining companies’ decisions on where and when to drill, and are rarely decisive for the profitability of drilling. A survey of Oklahoma oil and gas companies found tax incentives to be the least important factor affecting drilling decisions.
- Oklahoma will remain an attractive location to drill due to our ample reserves, existing levels of production, skilled workforce, and established infrastructure. Even if some companies give up their claims here, others will be ready and eager to step in.
“For most of our adult lives, we have owned working interests in Oklahoma and Texas wells. The severance tax rates have never made a difference to us or our partners when we selected the best prospect.” – Peter Henry, Tulsa World, April 14, 2017
“We believe the oil industry should stand up and agree that returning the oil and gas production tax to its historical level demonstrates our commitment to help solve this serious state budget crisis.” – Dewey Bartlett, Jr., former Tulsa mayor, president of Keener Oil and Gas
“After working in oil and gas prospect generation for years, I can tell you that we never gave any thought to the severance tax rate. If the product price and geology was good, the project was a go.” – Jamie Myers, Tulsa World, April 14, 2017
“My years in the industry give me a unique perspective. I’ve overseen the budgeting process of drilling more than 10,000 wells. In each process there were many factors that we considered. However the implication of the gross production tax has never had a material effect on whether to drill or not to drill.” – Tom Ward, CEO, Tapstone Enegy, former CEO, Sandridge Energy
“In addition to the fact that I think it has desperate consequences to the state, which is already suffering an inability to fund state services, I am absolutely confident that the rate of gross production or ad valorem in a state within a reasonable range of 0 to 12 percent has no bearing whatsoever in the economic activity in a state… The net effect of this tax reduction is a subsidy by the taxpayers of Oklahoma and the education system to predominately out-of-state shareholders of Oklahoma companies.” – George Kaiser, owner of Kaiser-Francis Oil Company.
“Any fiscally responsible policymaker needs to seriously consider at what level government should incentivize something that is now standard practice. It’s not responsible for government to give money away as an incentive if no incentive is needed.” – Finance Secretary, Preston Doerflinger
“The tax break was given over a period of time so they could experiment with horizontal drilling, and it worked. It has done a great job, but the period of experimentation is over. … The companies are coming to Oklahoma because the oil is in the ground.” – Rep. Pat Ownbey (R-Ardmore)