State needs another look at energy industry tax credits
The chairman of a legislative committee created to examine state tax credits and other incentives said it is time for state leaders and Oklahoma-based oil and gas producers to work together to determine what fair tax incentives should be granted to energy producers.
“I share the concerns voiced this week by Secretary Preston Doerflinger,” said state Rep. David Dank, R-Oklahoma City. “As he noted, the gross production tax incentive is costing the state treasury more than $200 million per year, and it is time to examine that. What I would propose is that we work closely with energy companies that make their home in Oklahoma to determine what is fair for all, and most of all to assure that Oklahoma-based companies come first in any decisions we make.”
Dank said the tax break, which applies to oil and gas wells created by horizontal drilling, effectively exempts production from those wells from the 7 percent state gross production tax for four years.
“As with many tax incentives in the past, we charged ahead and passed this without carefully examining its fiscal impact,” he said. “It has certainly helped encourage more drilling, but unfortunately it has also brought a lot of out-of-state companies into Oklahoma to take advantage of it. In many cases they are simply taking the tax savings and heading south with it.”
Dank said it is time for a “meeting of the best minds” on state energy policy, including state leaders and representatives from Oklahoma-based energy companies like Devon, Chesapeake, Continental, Kaiser, SandRidge and others.
“We should have two goals; to make sure that these tax incentives are not being abused and to assure that we maintain a favorable climate for future production that keeps permanent, full time, high paying jobs here in Oklahoma,” Dank said.
Dank called for discussions that take a long-term approach to assure both steady gross production tax revenue for the state and continued growth and profitability for Oklahoma-based energy producers.
“Whatever we agree on needs to reward those companies that provide stable, high-paying long-term jobs here in Oklahoma,” Dank said. “We cannot and must not do anything that would cause another Oklahoma oil company to move to Houston.
“It is important to get both sides to the table and work this out for the benefit of all Oklahomans as soon as possible, preferably during the legislative interim. That means our top policymakers working with our senior oil and gas company executives sitting down for the benefit of everyone. Our energy resources are our biggest asset. We can’t just give them away.”