Newspaper article THE JOURNAL RECORD

Commentary: Fourth Reading: Oil Industry Isn't Going Away

Newspaper article THE JOURNAL RECORD

Commentary: Fourth Reading: Oil Industry Isn't Going Away

Article excerpt

If you accept the arguments from the State Chamber of Oklahoma, energy producers could soon face a 700-percent increase in their taxes.

The chamber (of which The Journal Record is a member) says a compromise plan to address the tax rate has been developed and is supported by industry leaders and elected officials. But, the chamber laments, it could be kicked down the road because it's an election year.

"How would your business react if there was a chance taxes would increase by 700-percent next year?" the chamber asks. "Oklahoma can't afford for these companies to reduce their investment in Oklahoma, which amounted to $11.7 billion in 2012 alone. Nonetheless, what else can we expect these businesses to do when faced with this level of uncertainty?"

If you buy that argument, the world is about to end for Oklahoma's oil and gas industry.

Not so fast.

Despite what the chamber wants you to think, there's a little bit more to the debate over the state's horizontal drilling tax. For example, that 700-percent increase isn't really an increase. For years, at least since 2010, a 7-percent figure has been on the books, and oil and gas companies have been paying taxes at that level on their older wells.

The incentive, a reduction from 7 to 1 percent for horizontally drilled wells, was designed to last just four years, then the higher tax rate applies. What the chamber and others aren't telling you is that more than 60 percent of Oklahoma's oil wells are now drilled horizontally.

Obviously, the incentive has worked, but does it remain necessary? Some in the industry say yes.

Others, such as Tulsa oilman George Kaiser, say no.

Still, the chamber continues to fret that oil and gas companies will reduce their investment in Oklahoma.

Chamber officials and oil industry executives say that Oklahoma's oil and gas reserves aren't as good as those in other areas of the country, and the artificially low incentive was necessary to keep them here. …

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