Why are Three Major Oil and Gas Producers Waiting Until Last Minute to Make 2% Tax Proposal?

Legislature has a few more weeks left yet oil/gas comes up with this proposal now -- no way to hold hearings as all bills have already passed out of committee.  What is the real reason behind this proposal because these three men are not stupid?  Special session of legislature to grant their wishes?

At least one person gets it in the Oklahoma gas and oil industry:

The plan has drawn swift criticism from others in the state, including fellow oilman George Kaiser, who said he is concerned the state regularly is among the lowest in the country in teacher pay and health care. 

“I have lived here for more than two-thirds of the life of the state. I see what’s happening to the state,” said Kaiser, owner of Tulsa-based Kaiser-Francis Oil Co. “Something has to give. I’m prepared to pay my fair share to the state of Oklahoma.” 

Kaiser said he would like to see oil and gas companies — including his — pay 7 percent in gross production taxes

This article by the Oklahoman shows that some oil and gas executives in Oklahoma could care less about education or infrastructure -- they are intersted in their bottom line.  They figure they can make a suggestion along with a threat and the GOP Governor Fallin and GOP Legislature will bow down to their proposal.  One slight problem is that the Legislature is in the last few weeks of session.  Does Fallin plan on calling a special session that costs the average taxpayer money so she can bow down to the wishes of the big guys of Oklahoma oil and gas?

Why do we have to wait four years to see the tax rise to 7% when it goes to 7% in 2015?  The initial lowering to 1% for horizontal drilling took place in 1994 for four years.  It is now 2014 and it is still 1%.  Kept getting renewed.  What started out as a good idea never ended when oil companies starting make huge profits again.  

Obvious to most people that these three oil company heads, Oklahoma energy company leaders Harold Hamm, Contingental Resources, Larry Nickols, Devon Energy, and Doug Lawler, Chesapeake Energy could care less about education and infrastructure as they continue to take full advantage of the tax breaks they keep getting for oil and gas.  Are they behing the tax on solar power if you install it yourself or opposing wind energy?  My guess would be yes.  

For those who don't know, Harold Hamm was the huge Romney supporter from Oklahoma.  Romney is currently under investigation by the Federal Government after one of his victims sued him in Federal Court along with several others for racketeering under RICO statute which has brought in the Feds to investigate. 

These oil companies have been skating for years in Oklahoma paying 1% for horizontal drilling and now are complaining because the 2% is a 100% increase when it should have gone back to 7% in 1998.  How dumb do they think the Oklahoma taxpayer is because we are not bought and paid for plus many of us still have a brain that functions.

This article from the Oklahoman also contains a veiled threat that if taxes go up to 7% in 2015, these companies are going to take their oil drilling elsewhere.  It gets better because they want to lower the production tax on vertical wells from 7% to 2% for four years when they are making record profits.  They are not stupid as they know as long as Republicans run Oklahoma that tax will not go to 7% in four years.  You could say they have their number.  It will stay at 2% indefinitely and cause even more of a financial crises in this state as long as GOP controls the Governor's office and legislature.  

Mary Fallin needs to recuse herself as her new husband is part of oil and gas as a lawyer.  (He is currently a practicing attorney, specializing in litigation, banking, agribusiness, real estate, oil and gas, and other commercial related matters according to RGA website) 

Energy Giants Float Production Tax Proposal for Oklahomaby Adam Wilmoth Modified: May 5, 2014 at 10:00 am •  Published: May 4, 2014 

Executives from three of Oklahoma’s largest oil and natural gas companies have proposed a new plan for the state’s tax on oil and natural gas production. 

The newest proposal would change the gross production tax rate to 2 percent for both horizontal and vertical wells for the first four years of production. The rate would then rise to 7 percent. The proposal has earned the backing of Larry Nichols, executive chairman at Devon Energy Corp.; Harold Hamm, CEO of Continental Resources Inc.; and Chesapeake Energy Corp. CEO Doug Lawler.

“We’ve come up with a proposal that makes the tax simpler, makes it permanent, treats everyone in the industry the same way so it’s totally fair for everyone in the industry,” Nichols said. “It has a modest tax increase to it and continues the economic activity, which benefits everybody.”

.... 

Gov. Mary Fallin’s office indicated a willingness to discuss the 2 percent proposal. 

“The governor is inclined to support the concept and thanks the industry and Legislature for collaborating in the review process we recommended last summer,” Secretary of Finance Preston L. Doerflinger said.

The issue 

The state historically has assessed a 7 percent tax on most oil and natural gas production. In 1994, the Legislature created an incentive for horizontal drilling. The incentive initially lowered the tax rate to 1 percent for the first two years or until costs were recovered. In 2002, the incentive was extended to up to four years. 

The incentive program is set to expire next year in a move that would return the tax rate to 7 percent. Industry leaders have said the tax credit should be extended because it has been successful in boosting drilling throughout the state, and that higher taxes would leave less money available for drilling. 

Critics, however, say the tax credit has served its purpose and is no longer necessary. They point out that the lower rate was put in place when horizontal drilling was new and risky, but that it now represents about 90 percent of the drilling activity in the state. 

Industry leaders say the low tax rate is needed to make Oklahoma competitive with drilling in other states, such as North Dakota and Texas. 

“While we have a lot of opportunity, Oklahoma does not have the best rock,” Lawler said. “We have good rock, but not the best rock.” 

“We are very focused on driving additional value and additional investment towards the opportunities in Oklahoma, but with an increased tax, a 100 percent tax increase is what we’re endorsing. But ... if we go beyond that, it will limit the amount of activity and reduce the investment in the state,” Lawler said.

....

Expiration is next year 

While the tax credit will not expire until the middle of next year, the issue needs to be addressed before the legislative session ends later this month. 

Like most companies, oil companies will set their 2015 budgets this fall. If the tax structure is not changed this session, they will assume that the rate will move to 7 percent next summer. 

“That will undoubtedly result in the budgets we prepare in the fall having less drilling in Oklahoma because we cannot get it all drilled before July 1,” Nichols said. 

Click Link to read more at The Daily Oklahoman

Once again the citizens of Oklahoman are finding out what it is like to live in a state that puts powerful oil and gas owners over ordinary citizens.  It just never stops.