Gross production tax fight intensifies

One week into the legislative session, debate is intensifying on one of the most contentious issues facing the state’s oil and gas industry: deciding what to do with the gross production tax on oil and natural gas.
Oklahoman Modified: February 6, 2014 at 9:03 pm •  Published: February 6, 2014
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One week into the legislative session, debate is intensifying on one of the most contentious issues facing the state’s oil and gas industry: deciding what to do with the gross production tax on oil and natural gas.

Rep. David Dank, R-Oklahoma City, on Thursday unveiled a plan that would set the gross production tax rate at 2 to 6 percent, depending on the number of Oklahomans each company employs.

“Chesapeake and Devon and Continental have buildings here in Oklahoma City that are full of their employees who are contributing to our economy,” Dank said. “When they drill and take oil and gas out of the ground, they’re contributing to Oklahoma by hiring our neighbors.”

The state historically has assessed a 7 percent tax on most production. In the late 1990s, the Legislature created a tax program rebating all but 1 percent to the tax paid on horizontal wells for the first 48 months of production. In 2010, the rebate was changed to an up-front tax credit. The current tax system is scheduled to expire next year.

Industry leaders have said the tax credit should be extended because it has been successful.

Critics, however, say the tax credit has served its purpose and is no longer necessary.

Under Dank’s plan, companies with more than 750 Oklahoma residents as fulltime employees would pay a 2 percent tax rate on all oil and natural gas production in the state.

“It may not be the only solution. I’m sure it will be massaged as we go along,” Dank said. “But I think 1 percent is totally and unequivocally ridiculous.”

Dank pointed out that the production tax rate is 6 percent in Texas and 11 percent in North Dakota.


by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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