OKLAHOMA CITY (AP) — A bill to adjust a tax incentive for oil and gas production in Oklahoma is headed to the governor's desk after the House and Senate both approved it on Thursday, one day before the Legislature is expected to adjourn the session.
The bill, pushed hard by oil and gas industry lobbyists, increases the 1 percent tax rate for horizontally drilled oil and gas wells to 2 percent for the first three years of a well's production. After that, the rate would increase to the standard production rate of 7 percent. The tax rate on production from traditional vertical wells would drop from 7 percent to 2 percent for three years and then return to 7 percent.
Had legislators taken no action, the subsidy would have expired in July 2015 and the rate for all oil and gas production would have returned to 7 percent. Industry officials argued that rate could prompt many companies to move their drilling operations to other states.
"This isn't just about some big oil company in downtown Tulsa or Oklahoma City. You're talking about small, mom-and-pop businesses," said House Speaker Jeff Hickman, R-Fairview, who authored the bill in the House. "It's important that these wells are drilled in Oklahoma. It's important that these jobs be created in Oklahoma."
But critics say the subsidy is no longer needed, since oil and gas production is already a profitable activity.
The bill also eliminates three separate tax credits offered for certain other types of drilling activity.
The Oklahoma Tax Commission projects the bill will be revenue-neutral for the next two years, but beyond that cannot calculate how much it will cost the state because of fluctuations in commodity prices and drilling activity, said Tony Mastin, the commission's executive director.