Keating Seeks to Curb Impact of Energy Prices
Price, Marie, THE JOURNAL RECORD
Gov. Frank Keating on Wednesday appointed an emergency team to consider what can be done to protect the state and the thousands of Oklahoma oil producers from the impact of the continuing decline in oil prices.
The team, to be headed by Oklahoma Corporation Commissioner Denise Bode and Mike Smith, state energy secretary, has been asked to look at the cost side of the oil-producing ledger to see what steps can be taken to give producers some fiscal breathing room. The governor mentioned utility costs -- a key concern for smaller producers -- and tax policy as two issues due for review.
"We know there is nothing we can do about the price of oil," said Keating. "What we can do is provide whatever relief possible to lessen the impact on Oklahoma's producers." The panel will also include producers, royalty owners and others involved in the oil and gas industry. It has a 30-day time line to produce an action plan. Utilities that serve oil and gas companies and the Interstate Oil and Gas Compact Commission have also been asked to participate. Recently, spot oil prices have plummeted to about $12 per barrel, which officials say is about break-even level for the 70,000 marginal wells in Oklahoma. These wells represent a vast majority of Oklahoma wells and create jobs for about 50,000 state residents. "We need a regulatory policy to keep these wells alive," Keating said. Without some assistance, Keating said, the price reduction could prove a crippling blow to the wells that make up most of Oklahoma's 90,000-well industry. "There are immediate steps that can and will be taken and I want this team to look at other options to give these producers a safety net as the oil prices plummet," the governor said. Oklahoma's annual gross production tax revenues decline by about $5.6 million for each drop of $1 per barrel in oil prices. Oil and gas taxes represent about 8 percent of state revenues. "It's not just an energy issue but an issue crucial to Oklahoma's economy," Keating said. The state must take steps to address the impact of dropping prices, he added. "It appears the low prices are a trend and we need to get an early jump on the problem," the governor said. However, Keating said he believes the price fluctuations are temporary and do not signal a need to revamp his state budget proposal, which includes several tax reduction measures. Although gross production tax revenues are down about 18 percent from last year, other revenues are up, finance officials point out, producing thus far a cushion of about $40 million additional dollars above 1997. …