OKLAHOMA CITY – A group of small oil and natural gas producers in Oklahoma have formed an alliance and are asking the Legislature to increase the gross production tax back to 7 percent, saying the industry is committed to helping solve the state’s budget crisis.
The Oklahoma Energy Producers Alliance announced Monday it plans to ask lawmakers to get rid of a generous tax cut on oil and natural gas production that was approved by the Legislature in 2014. That bill dropped the tax rate from 7 percent to 2 percent for the first few years of production, when oil and gas wells are most profitable.
The Oklahoma Energy Producers Alliance (OEPA) is comprised entirely of small, privately-owned oil and natural gas producers from all corners of the state, according to co-chair Lee Levinson, Tulsa attorney and oilman.
“We are the traditional oil and natural gas producers. We are a new group, but not new to the industry or to Oklahoma,” Levinson said. “Our companies, owners, employees and vendors are spread out all across our state. We are Oklahomans first and many of us have been in business for several decades.”
Among those advocating for the increase is Republican oilman Dewey Bartlett, Jr., the former mayor of Tulsa and the owner of Keener Oil and Gas.
“Our new group supports restoring the gross production tax to 7% across-the-board,” Bartlett, owner of Keener Oil and Gas in Tulsa, said. “The fact that Oklahoma – a state with prolific oil and gas reserves and the nation’s best oil industry regulatory climate – already has the lowest tax rate in the nation at the historical 7% rate should be good enough. But letting horizontal drillers tap into oil we have found and upon which we pay 7% tax, and in many cases destroying those wells, replacing them with wells paying only 2% tax, makes no sense. We must face the stark reality that state government is bankrupt. We are staring at a second straight billion-dollar deficit in state funding. Our schools are in a funding crisis. Other state services are being decimated. 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.”
Bartlett said restoring the gross production tax from 2% to 7% on all oil and natural gas would generate an additional $200-250 million/year.
“Perhaps it’s ironic that this proposed tax restoration could cover the cost of the teacher pay raise. Or perhaps not,” he said.
Bartlett said he and many traditional producers have been in the oil business for generations.
“We don’t take it lightly that our industry, once the bulwark of the state economy and the state tax base, has been out here cutting special deals,” he said. “Our group will support what is best for all Oklahomans. We can be profitable with restoring a 7% gross production tax, even with relatively depressed oil prices.”
However, the Oklahoma Oil and Gas Association says it is not in agreement with the statements made by the Oklahoma Energy Producers Alliance.
“It’s disappointing to see well-respected Oklahomans use such misleading arguments to push for job-killing tax increases,” said Chad Warmington, president of OKOGA. “Those who formed OEPA are not drilling new wells, making new and significant capital investments in the state, or creating new jobs. In other words, they are not currently participating in the type of activity that will lead our state out of two years of a struggling economy. OKOGA member companies have largely contributed to the 2,800 jobs the energy sector created in Oklahoma in January and February. We are supporting policies at the state capitol that will allow this type of growth to continue so that we can close the budget gap and continue to be the top revenue stream for education, roads, and critical services in Oklahoma. For an industry that pays four times as much in taxes per employee as other Oklahoma industries, another tax hike on the state’s number one job creator is not the solution.”