In The Know: Energy giants float proposal to extend gross production tax break

by and | May 6th, 2014 | Posted in Blog, In The Know | Comments (0)
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In The KnowIn The Know is a daily synopsis of Oklahoma policy-related news and blogs. Inclusion of a story does not necessarily mean endorsement by the Oklahoma Policy Institute. You can sign up here to receive In The Know by e-mail or subscribe to the podcast on iTunes, Stitcher, or RSS. The podcast theme music is by Zebre.

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Today you should know that executives from three of Oklahoma’s largest oil and natural gas companies have proposed a new plan that makes permanent a tax break for oil and natural gas production. The plan has the tentative support of the governor and Senate leadership, but Tulsa oilman George Kaiser called for eliminating the tax break, which he said has little impact on drilling. OK Policy previously released a statement on why lawmakers should reject the proposal to extend the tax break.

With the state looking at the possibility of a revenue failure that would require across-the-board budget cuts this year, the OK Policy Blog explained how that could play out. State Treasurer Ken Miller said that a recent downgrade of the bond rating for Kansas should serve as a wake-up call for Oklahoma. The US Geological Survey warned that the rate of earthquakes in Oklahoma has increased by about 50 percent since October 2013, significantly increasing the chance for a large, damaging quake in central Oklahoma. The USGS reported that injection of oil and gas wastewater is a likely contributing factor to the earthquakes. 

Oklahoma House Speaker Jeff Hickman has solidified a new two-year term as the leader of the House. The state Transportation Board voted unanimously to sell a railroad line between Sapulpa and Midwest City to the existing lease holder for $75 million. The company as indicated it plans to offer passenger service. Encana Corp. will pay a $5 million fine in a settlement with Michigan prosecutors who had charged the Canadian natural gas producer of colluding with Chesapeake Energy Corp. to keep prices down in a 2010 land auction. Chesapeake said they will continue fighting the charges. Gov. Fallin declared a state of emergency for all counties in Oklahoma due to wildfires that spread across the state beginning Sunday.

The next death-row inmate scheduled for execution in Oklahoma asked a court for a six-month delay while the investigation of a botched lethal injection unfolds. A $13 million supplemental appropriation for the Department of Corrections passed in a House committee by just one vote. Opponents of the bill were critical of the Department’s recent moves to transfer prisoners from county jails to private prisons. The Tulsa World wrote that there is no simple solution to the prison system’s problems while Oklahoma continues to incarcerate a huge slice of the state’s population.

The Number of the Day is the number of earthquakes magnitude 3.0 or greater in Oklahoma from Oct 2013 through Apr 14, 2014. In today’s Policy Note, the New York Times reports that the death rate in Massachusetts dropped significantly after it adopted mandatory health care coverage in 2006, offering evidence that the model for Obamacare has saved lives.

In The News

Energy giants float gross production tax proposal

A new state gross production tax proposal pitched by Oklahoma City’s big three oil companies has the tentative support of the governor and Senate leadership, but is being criticized by a prominent Tulsa oilman and banker as being overly generous to the oil and gas industry at the expense of state services. Whether it ultimately will be approved by the Legislature remains in doubt. Leaders of Devon Energy, Chesapeake Energy Corp. and Continental Resources Inc. told The Oklahoman they have submitted a unified proposal to state negotiators. That proposal calls for permanently setting Oklahoma’s gross production tax break at 2 percent for the first 48 months on all new wells, regardless of whether they are horizontal or vertical.

Read more from NewsOK.

See also: STATEMENT: Lawmakers should reject deal to expand industry tax break from Oklahoma Policy Institute

Higher taxes have little impact on drilling, George Kaiser says

Tulsa oilman George Kaiser wants his industry to pay more taxes. The owner of Tulsa-based Kaiser-Francis Oil Co. is asking legislators to return the state’s gross production tax to 7 percent, challenging a plan proposed by fellow oil company executives who want to see the rate settle at 2 percent for the first four years of production. “We are making an impassioned appeal to raise our own taxes,” Kaiser said. Executives from Devon Energy Corp., Continental Resources Inc. and Chesapeake Energy Corp. told The Oklahoman last week that higher gross production tax rates would make many planned Oklahoma wells unable to compete with potential drilling locations in other areas. Kaiser, however, said tax rates have little influence on whether wells are drilled in a state.

Read more from NewsOK.

#revenuefail

In mid-April, State Finance Director Preston Doerflinger sent a letter to state agency directors alerting them to “the possibility of a revenue failure declaration for Fiscal Year 2014… following unusually weak General Revenue Fund (GRF) collections in February and March.” Agencies were put on notice that their budget allocations for the final months of FY 2014 could be cut if next month’s revenue collections don’t improve. Here are answers to the questions that have been keeping you awake nights about the when, why and hows of revenue failures.

Read more from the OK Policy blog.

Oklahoma treasurer: Kansas bond downgrade should serve as ‘wake-up call’ to Oklahoma

State Treasurer Ken Miller said Monday a recent downgrade of the bond rating for Kansas should “serve as a wake-up call for us here.” He said Oklahoma is on a more responsible fiscal track than Kansas, but some of the reasons Moody’s Investors Service slightly reduced the Kansas rating sound “eerily familiar” compared with practices or proposals in the Sooner State. One of the reasons for the Kansas downgrade was using money from one-time revenue to cover operating expenses. Another reason involved revenue reductions resulting from tax cuts. Finally, an underfunded retirement system in Kansas figured into the rating reduction there.

Read more from NewsOK.

USGS: Record Number Of OK Earthquakes Raises Concern

The rate of earthquakes in Oklahoma has increased by about 50 percent since October 2013, significantly increasing the chance for a damaging quake in central Oklahoma, according to a news release from the U.S. Geological Survey. According to a joint statement by the U.S. Geological Survey and Oklahoma Geological Survey, 183 earthquakes of magnitude 3.0 or greater occurred in Oklahoma from October 2013 through April 14, 2014. This compares with a long-term average from 1978 to 2008 of only two magnitude 3.0 or larger earthquakes per year. As a result of the increased number of small and moderate shocks, the likelihood of future, damaging earthquakes has increased for central and north-central Oklahoma, officials said.

Read more from NewsOn6.

Hickman Elected To Full Two-Year Term As Oklahoma House Speaker

Oklahoma House Speaker Jeff Hickman has solidified a new two-year term as the leader of the House and rebuffed a challenge from a four-term state representative from Guthrie. The 72-member House Republican caucus met behind closed doors on Monday and selected Hickman as the speaker-designate for the upcoming two-year legislative session that begins next year. The caucus will vote again for speaker in November after the general election, but that vote is typically a formality.

Read more from KGOU.

State board votes to sell Sooner Sub rail line to existing lease holder

The state Transportation Board voted unanimously today to sell a railroad line between Sapulpa and an Oklahoma City suburb to the existing lease holder for $75 million. The board voted 8-0 to sell the line to Watco Cos., which owns Stillwater Central Railroad Co. The company currently leases the rail line and has indicated it plans to work with another company to offer passenger service. The board heard a recommendation from Gov. Mary Fallin’s cabinet secretaries to sell the line, known as the Sooner Sub. The issue of the rail line’s sale had sparked controversy, with proponents of passenger rail calling on the state not to sale the line.

Read more from the Tulsa World.

Chesapeake to continue fighting antitrust charges despite Encana settlement

Encana Corp. on Monday reached a settlement with Michigan prosecutors who had charged the Canadian natural gas producer of colluding with Chesapeake Energy Corp. to keep prices down in a 2010 land auction. Encana agreed to a pay a $5 million civil fine. Chesapeake, meanwhile, vowed to continue fighting the charges. Chesapeake and Encana were charged March 4 with two misdemeanor counts of antitrust violations. The more serious charge carries up to a $1 million fine for corporations.

Read more from NewsOK.

Oklahoma Death Row Inmate Asks for Six-Month Lethal Injection Delay

The next death-row inmate scheduled for execution in Oklahoma asked a court Monday for a six-month delay while the investigation of a botched lethal injection unfolds. Charles Warner was supposed to be put to death April 29 for the rape and murder of an 11-month-old, but his execution was called off amid the chaos over fellow prisoner Clayton Lockett’s death hours earlier. “lt appears that Mr. Lockett was never fully sedated by the first drug in Oklahoma’s new protocol before the injection of the excruciatingly painful second and third drugs, vecuronium bromide and potassium chloride,” Warner’s lawyers wrote in a petition to the Oklahoma Court of Criminal Appeals.

Read more from NBC News.

DOC supplemental appropriation barely survives committee vote

A $13 million supplemental appropriation for the Department of Corrections survived a harrowing afternoon in a House of Representatives committee on Monday, passing by a single vote over the objections of legislators unhappy with recent DOC decisions. DOC says it needs the extra funds to get through the last two months of the budget year ending June 30. The real sticking point seemed to be Corrections Director Robert Patton’s recent decision to move prisoners from county jails to private prisons. SB 2126′s House sponsor, Rep. Scott Martin, R-Norman, said some of the $13 million will be used to pay for those private prison beds.

Read more from the Tulsa World.

No simple solutions to prison system’s problems

The Department of Corrections, notorious for leaving prison-bound inmates in county lock-ups as long as possible because of overcrowding in its own facilities, recently started picking up its prisoners quicker and in greater numbers. That’s cause for celebration at the overcrowded Tulsa Jail but rural sheriffs aren’t happy about the abrupt change, which is wreaking havoc with their budgets. Tulsa County Sheriff Stanley Glanz, relying on a 2007 court decision, sued the Department of Corrections last year to get DOC to take his inmates quicker. Glanz has long complained that the $27 a day that DOC pays for each inmate doesn’t begin to cover his expenses. An outside consultant set the cost at $55.81 a day. The lawsuit is pending. Rural sheriffs on the other hand seemed to be content with the $27-a-day inmate fee, and they don’t mind holding the prisoners for awhile to fill up their ordinarily sparsely populated lock-ups.

Read more from the Tulsa World.

Gov. Mary Fallin declares state of emergency for Oklahoma, issues burn ban order for 36 counties

Gov. Mary Fallin declared a state of emergency for all counties in Oklahoma and issued an executive proclamation Monday afternoon, which states nearly half of the state’s 77 counties are under a burn ban. The declarations are the result of wildfires that spread across the state beginning Sunday, which killed one person in Logan County and destroyed numerous homes and structures, Fallin said in a release. Fires were also reported near Keystone Lake and Jennings, as well as Stillwater and several cities in western and southwestern Oklahoma.

Read more from the Tulsa World.

Quote of the Day

“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 Co., responding to a proposal by Devon, Chesapeake, and Continental executives to make a large gross production tax break permanent (source: http://bit.ly/Rn1Tqk).

Number of the Day

183

Number of earthquakes magnitude 3.0 or greater in Oklahoma from Oct 2013 through Apr 14, 2014. From 1978-2008, Oklahoma averaged two 3.0 earthquakes per year.

Source: US Geological Survey and Oklahoma Geological Survey

See previous Numbers of the Day here.

Policy Note

Mortality Drop Seen to Follow ’06 Health Law

The death rate in Massachusetts dropped significantly after it adopted mandatory health care coverage in 2006, a study released Monday found, offering evidence that the country’s first experiment with universal coverage — and the model for crucial parts of President Obama’s health care law — has saved lives, health economists say. The study tallied deaths in Massachusetts from 2001 to 2010 and found that the mortality rate — the number of deaths per 100,000 people — fell by about 3 percent in the four years after the law went into effect. The decline was steepest in counties with the highest proportions of poor and previously uninsured people. In contrast, the mortality rate in a control group of counties similar to Massachusetts in other states was largely unchanged. A national 3 percent decline in mortality among adults under 65 would mean about 17,000 fewer deaths a year.

Read more from The New York Times.

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