Falling natural gas prices concern Okla. leaders
OKLAHOMA CITY (AP) — Plunging natural gas prices are prompting some concern from state leaders as lawmakers continue discussions on cutting the state's income tax and developing a budget for the upcoming fiscal year that begins July 1.
State lawmakers are projected to have an estimated $6.6 billion to spend on the fiscal year 2013 budget, but that estimate was calculated with a projected price of natural gas of $3.64 per 1,000 cubic feet. The price of natural gas closed Friday at $2.19 per 1,000 cubic feet on the New York Mercantile Exchange.
"All of us that are discussing and negotiating an income tax are very concerned about the drop in the price of natural gas," said Rep. Earl Sears, R-Bartlesville, the chairman of the powerful House Appropriations Committee and a key negotiator on plans to cut the state's income tax. "However, even with the continued drop, we feel it's important to continue developing and reforming the income tax plan.
"There's no question if the price continues to drop, it will have an impact on our discussions."
While pinpointing exactly how much of an impact the declining natural gas price will have on next year's budget is impossible to predict, State Treasurer Ken Miller said if the price remains an average of $1 below the estimate for the entire fiscal year, it would result in a $70 million reduction to the state's general revenue fund.
Lawmakers also are concerned about a price trigger that could reduce the tax rate on natural gas production. If the monthly average of natural gas falls below $2.10 per 1,000 cubic feet, the gross production rate falls from 7 percent to 4 percent. If the average price dips below $1.75, the tax rate falls further from 4 percent to 1 percent.
Even more disconcerting to Miller is the ripple effect that sliding natural gas prices could have on other segments of the state's economy.
"If the natural gas prices stay as low as they are, then that can have an effect on the budget if you start looking at the spillover effects of a low-price environment for natural gas," Miller said. "At some point, if you slow down production because of the prices, then that could eventually have an effect on your employment, your income tax receipts, your sales tax receipts, in addition to your gross production receipts.
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