OKLAHOMA CITY (AP) — All of Oklahoma's oil wells would be taxed at a standard 2 percent rate for the first three years of production under a measure Gov. Mary Fallin signed Wednesday that had been sought by the oil and gas industry.
The bill would apply the new rate to all wells drilled after July 1, 2015. After three years at the incentivized rate of 2 percent, the tax would return to the standard tax rate of 7 percent. The length of the reduced rate is significant because wells produce considerably more oil and gas in the first few years of production.
Currently, horizontally drilled oil and gas wells, which now account for about 70 percent of all wells in Oklahoma, are taxed at 1 percent for the first four years of production, but that incentive is set to expire next year. If lawmakers took no action, the rate would return to 7 percent, which is the current rate for traditional vertical wells.
Industry officials argued that without the incentive, drilling companies could decide to leave Oklahoma and search for oil and gas in other states.
Fallin said oil and natural gas production is a critical economic engine in Oklahoma that is driving job growth and that extending the incentive sends a message to the industry worldwide that they are welcome in Oklahoma.
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