Oklahoma gov mulls bill to tax wells

Thinking it over: Oklahoma governor Mary Fallin mulls tax bill

Oklahoma's governor is getting pressure from the left and the right to reject legislation that would incentivise oil and gas drilling in the US state.

House Bill 2562, which passed both the state Senate and House of Representatives, would set a 2% tax rate on new oil and gas wells - both unconventional and conventional - over the first three years of production. It would replace a current rate that taxes horizontal wells at 1% for the first four years of production.

Vertical wells are currently taxed at a rate of 7%. The incentive for horizontal wells was enacted in the 1990s and expires next year.

The left-leaning Oklahoma Policy Institute calls the bill an "unnecessary subsidy" that takes money away from state coffers.

At the other end of the political spectrum is Jerry Fent, an anti-tax crusader who has threatened to sue the state if Governor Mary Fallin signs the oil and gas bill into law, citing arcane constitutional requirements. Fent has successfully sued the state in the past.

Fallin has expressed support for the bill and a spokesman was quoted as saying that Fent's opinion will not weigh on the governor's decision on whether or not to sign the bill.

Major Oklahoma companies like Chesapeake Energy and Continental Resources are on record as supporting a gross production tax rate in the neighbourhood of 2%.

However, billionaire oilman George Kaiser, head of privately held Kaiser-Francis Oil, has implored the state to raise production taxes even higher in order to improve the state's finances.

User

Become an Upstream member!

Membership includes a subscription to our weekly newspaper providing in-depth news from the energy industry, plus full-access to this site and its archives. Still not convinced? Try our free trial.

Already a member?

Login