Share “Higher taxes have little impact on...”

Higher taxes have little impact on drilling, George Kaiser says

Tulsa oilman George Kaiser says the state’s gross production tax should return 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.
by Adam Wilmoth Modified: May 5, 2014 at 10:00 am •  Published: May 4, 2014

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.