Solution to Natural Gas Industry Woes Subject of Probe

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By Ronda Fears Journal Record Staff Reporter Aside from the philosophical aspects of natural gas as a major resource of Oklahoma, the Natural Gas Policy Commission will be examining possible solutions to problems of overproduction, high tax burdens and storage, among many more.

Numerous issues will be before the commission, spanning the natural gas industry from the wellhead to the burner tip, said commission Chairman Bob Alexander, but major topics will be proration, storage and taxes.

The Oklahoma Corporation Commission also has under way a notice of inquiry into the entire scope of the natural gas industry in Oklahoma, both isolated within the state and vis-a-vis the interstate market. Comments are due in that proceeding by Dec. 31.

The Natural Gas Policy Commission is aiming to make a report before the Legislature convenes in February. The meeting Monday was the group's second. Presentations from about 20 specific interests related to the natural gas industry, also ranging from the wellhead to the burner tip and all in between, are being scheduled for Dec. 2 and Dec. 13.

Several written comments already submitted to the group include philosophical statements about the importance of natural gas to Oklahoma as the third top producing state in the nation and the need to encourage additional use of the commodity.

But, perspectives from producers, pipelines, marketers, federal and state regulators are being sought to discover existing problems and explore solutions.

Proration is a controversial subject among the industry, but Oklahoma Energy Secretary Charles Nesbitt has drafted legislation for consideration when the Legislature convenes in February.

The oil and gas industry at every level is divided on the issue of proration.

A particular tax to be examined is the conservation excise tax that kicks in on gas that is priced below $1 per thousand cubic feet. At that point, the tax is levied at 7 cents per unit rather than 7 percent of the total price. However, the tax is not supposed to exceed one third of the total price.

Under some old gas contracts, Alexander said, the tax balloons to 34 percent of the total price.

Storage, an increasingly important tool for large end users of gas such as gas utilities, will also be probed by the policy commission, as well as issues such as storage capacity available and locations out of state.

On proration, some criticize that it is merely an attempt to bolster gas prices, which in July dipped to a record low of 95 cents per thousand cubic feet.

Ben Jackson, chief oil and gas attorney at the corporation commission, said the concerns about anti-trust violation with proration should not be an obstacle. In existing gas fields where production is regulated, or where field rules have been implemented, there is a certain amount of cooperation among several states. …