With crude oil prices soaring and state budgets still tight, some policymakers and industry observers are questioning whether the oil and gas industry should continue to receive some of the tax incentives it has enjoyed.
The Oklahoma Policy Institute, a nonprofit group that analyzes state government spending, on Wednesday called for the Legislature to consider reducing, capping or eliminating a tax incentive for producers who use horizontal drilling techniques.
“There was a time when horizontal drilling was a new technique that required new equipment,” said Oklahoma Policy Institute Director David Blatt. “But now most of the drilling in Oklahoma is horizontal drilling. The companies have invested in this technology. The procedures are established. It is much less risky than it was before, and at least on the oil side, producers are making record profits.”
Oil and natural gas producers, however, say the tax incentives are still necessary.
“These tax provisions are designed to create jobs,” said Cody Bannister, spokesman for the Oklahoma Independent Petroleum Association.” They're doing that, and that benefits all of Oklahoma.”
Blatt suggests the Legislature either set the incentive to kick in only when commodity prices drop below a certain level or that the state should cap the tax incentive each year.
“Given the scarce resources and the real competing demand for tax dollars, I think we need to think about how expensive these tax breaks could get,” Blatt said. “I think you could have productive conversations about what the cap should be and how you would allocate the credits. But they should not be unlimited like they are now.”
When you talk about creating jobs and creating tax dollars, the oil and gas industry is doing its part. Eliminating and cutting tax incentives that encourage job growth in Oklahoma is not in the best interest of the state.”