Tulsa oilman George Kaiser wants his industry to pay more taxes.
The owner of Tulsa-based Kaiser-Francis Oil Co. is asking legislators to return the state’s gross production tax to 7 percent, challenging a plan proposed by fellow oil company executives who want to see the rate settle at 2 percent for the first four years of production.
“We are making an impassioned appeal to raise our own taxes,” Kaiser said.
Executives from Devon Energy Corp., Continental Resources Inc. and Chesapeake Energy Corp. told The Oklahoman last week that higher gross production tax rates would make many planned Oklahoma wells unable to compete with potential drilling locations in other areas.
Kaiser, however, said tax rates have little influence on whether wells are drilled in a state.
“In addition to the fact that I think it has desperate consequences to the state, which is already suffering an inability to fund state services, I am absolutely confident that the rate of gross production or ad valorem in a state within a reasonable range of 0 to 12 percent has no bearing whatsoever in the economic activity in a state,” Kaiser said.
When companies decide to drill a well, they make their best guesses on how much it will cost to drill the well, how much the well will produce and what the commodity price will be. All of those estimates can vary widely, Kaiser said.
“With ad valorem taxes, the difference among states is 2 or 3 or 4 percent,” Kaiser said. “The other factors can vary by 50 or 100 percent.”
Compared with those other factors, Kaiser said the tax rate is incidental.
“It’s a rounding error,” he said.
Kaiser said a lower gross production tax could hold down state tax revenue below the level that would trigger broader income tax reductions.
“The net effect of this tax reduction is a subsidy by the taxpayers of Oklahoma and the education system to predominately out-of-state shareholders of Oklahoma companies,” he said.