IT'S the end of a leap year so we might as well note a leap of logic in the argument that declining gross production taxes make the case for ending a state tax credit for risky drilling ventures. In doing so, we're perhaps making a leap of our own. But here goes:
David Blatt, head of a progressive think tank, says tax breaks for horizontal drilling “have become unaffordable and unnecessary” and that state revenues from the gross production tax have effectively disappeared. This is disingenuous and illustrates a double standard that progressives have regarding energy policy.
Disingenuous: In November, the state's general fund got no money from the gross production tax. This doesn't mean the state didn't get any money from the tax. In fact, the tax from oil production goes to dedicated funds, not the general fund, until it surpasses $150 million. Those funds directly benefit public education.
Double standard: Hundreds of millions of federal dollars have been sucked into the vortex of alternative energy schemes such as Solyndra. This money could have gone instead to public education. Yet the progressives who oppose tax credits for drilling ventures support Solyndra-style schemes; some of them have benefitted from them financially.
Declines in gross production tax revenues are mostly due to depressed natural gas prices, since this is a natural gas state. In leaner times for the state, officials deferred tax rebates for risky drilling ventures. Now those deferrals are being paid back at a cost of $14.6 million in November alone, Blatt said.
Blatt isn't wrong to question the value of the drilling credit. All tax credits should be subject to review and continued justification. But this seems to be a case of selective outrage. It echoes the progressive line (from Barack Obama, among others) that governments should punish an industry that fuels America and reward an industry that may do so a hundred years from now. Or may not.
The Oklahoman has supported the state drilling credit, primarily for competitive reasons: Exploration companies will go to states with the best incentives. We've also supported the tax credit for wind energy. Progressives typically hate the one but love the other. That's a double standard.
In the case of Solyndra and other government grantees, Uncle Sam's largesse has extended not just to a general tax credit (for which all players can apply) but to specific companies. This can — and has — resulted in crony capitalism that put taxpayers on the hook for failed ventures.
Perhaps it's a leap to compare a state incentive to a federal giveaway scheme, but the principle competes on the same playing field. Oklahoma lawmakers determined years ago that staying competitive with Texas meant creating a modest tax credit for risky drilling. In another state, wind or solar power might have been the focus, but these commodities don't produce much government revenue: The sun and air can't be taxed in the way hydrocarbons are.
The oil and gas industry's contribution to Oklahoma can't be measured solely in terms of the gross production taxes it pays. In fact, that's the poorest measure. High-paying jobs in the industry contribute enormously to the sales tax and the state income tax. This is a heritage industry that “caught” a break with the tax credit for risky drilling ventures, a credit Blatt and his donors find to be “unaffordable and unnecessary.”
Which is exactly how we'd describe much of what the federal government does these days.