OKLAHOMA CITY -- Lawmakers have taken the first step toward increasing taxes on existing horizontal oil and gas wells, which would raise revenue for the state.
The House passed a bill Tuesday morning that is expected to bring in nearly $74 million in revenue next year, by increasing the so-called “Gross Production Tax” from one percent to four percent on wells created between July 1, 2011 and July 1, 2015.
After four years, the wells would begin paying the standard seven percent gross production tax.
"You try to figure out: how can you balance the budget, how can you have efficiencies, cuts, bring in some revenue and actually grow the economy?" said Rep. Kevin Wallace who presented the bill. "That is what this bill is designed to do."
The bill passed 54-44, despite strong opposition from Democrats, who called it a one-time fix that would not solve the long-term budget issues.
Though the measure would bring in $74 million the first year, revenues would decline the following year. The specified wells would no longer be eligible for the incentive the third year.
"What this bill does is farce," said Democratic Rep. Mickey Dollens. "It brings in money for the first couple years and then it’s not recurring and it’s not going to get us out of this fiscal mess we’re in right now."
Minority Leader Scott Inman told his colleagues the public is on his side pushing for a larger and more all-encompassing gross production tax.
"We’ve gotta get off this crazy budget merry-go-round and find recurring revenue," he said. "And if you don’t do it this way you will be here for years and years and years to come."
Wallace responded that this bill was "reality" and retorted the left "finally had an opportunity to make oil and gas pay."
Democrats also argued passing such a bill was unconstitutional in the last week of session. By law, revenue-raising bills cannot be passed in the last five days of the legislative year and must receive a three-fourths supermajority vote.
"We’ve heard time and time again that this is going to raise revenue," said Rep. Emily Virgin. "It doesn’t take a legal scholar to figure out that this is a revenue bill."
Republicans countered by arguing the bill was not increasing taxes, but merely adjusting a tax incentive.
"We’re trying to follow both the spirit and the letter of the law," said Rep. Jon Echols, the majority floor leader. "If we’re taking away an exemption or just putting it to the regular tax rate, that’s not [raising revenue]."
Echols also said raising revenue was an effect of the bill but not the cause.
He pointed to measures like the REAL ID legislation, which required fees for implementation, but was not revenue-generating in nature.
Democrats didn't buy that argument.
"You can call it what you want," said Rep. Colin Walke. "If it walks like a duck, talks like a duck, it’s a duck. And this is a revenue-raising measure."
Leadership contends the courts have set precedent that will help their cause if any bills are challenged in court. If the court ruled against the bill, lawmakers would have to reconvene to find a new way to find the money. Depending on when the court made its ruling, it could require a special session.
The Oklahoma Council on Public Affairs has already threatened to take action against other measures that it feels should have been declared revenue bills.
The bill now heads to the senate for consideration.