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Gas and oil production tax bill advances out of committee after late night meeting

Protesters attend a late night meeting of an Oklahoma House budget committee on May 22, 2017. (KFOR/Bill Miston)

OKLAHOMA CITY – A bill that would increase the rate of taxes on oil and gas production from horizontally drilled wells was advanced by a house committee late Monday night.

The bill, HB 2429, would change the incentive rate for wells that started producing between 7/1/2011-7/1/2015 from one percent to four percent, until the well’s incentive period expires after 48 months. After 48 months, the tax on the wells would increase to seven percent.

“As these wells fall off (the incentive window of 48 months) they will no longer be at four percent, they will be at seven percent,” said Rep. Kevin Wallace, R-Wellston, co-chair of the Joint Committee on Appropriations and Budget.

The Tax Commission estimates the 5,790 wells that would be affected by the change would bring in approximately $95.3 million in revenue.

“This doesn’t get us there, this doesn’t get us close,” said Rep. Jason Dunnington, D-Oklahoma City, who — along with other Democrats — have argued for increasing the Gross Production Tax (GPT) on past and current wells to seven percent.

Legislators are working on borrowed time to put together a fix to the state’s $878 million budget hole since the deadline to hear and pass revenue raising measures ended Sunday, after a weekend of work failed to bring about a solution.

Monday night’s house budget committee meeting started at around 10:45 p.m. after several postponements throughout the afternoon and evening.

Compared to previous budget committee meetings this session, Monday night’s was quite different. Several dozen protesters in favor of a seven percent GPT increase filled out the room.

Earlier in the evening, the same protesters had been escorted out of the house chamber hallways by state troopers, which led to the chambers being put on lock down by house sergeants.

The bill passed out of committee 17-9, with all committee Democrats and two Republicans, Rep. Dennis Casey, R-Morrison, and Rep. Jason Murphey, R-Guthrie, joining.

“The original incentive for horizontal wells that was given two decades ago was done for that factor, to incentivize drilling horizontal wells,” said Dunnington. “Well now 95-96 percent of the wells drilled are horizontal; the incentive has worked. It’s time to take the gross production tax from two percent back to seven percent where it should be.”

“This is a much more aggressive change in the incentives for the oil and gas industry,” said Wallace. “It also protects the drilling, keeping this state moving forward. As drilling increases, everybody is employed, paying income tax, out spending money and that’s actually what grows our general revenue.”

According to Wallace, the bill would not be considered a revenue raising measure requiring a super-majority of 76 house floor votes to pass, but just 51 votes, to which Democrats questioned the bill’s constitutionality.

“Anti-Swag” bill shot down

A bill that would have prohibited executive branch agencies from using funds for promotional or advertising items for three years — like purchasing magnets, pens or trophies — failed to get out of committee in a 5-21 vote.

A state fiscal analysis estimated $19.2 million is spent by higher education and non-higher education groups on advertising and promotional materials.