American Oil and Gas Reporter - October 2016 - 89

remainder of 2016 will focus on how to
tackle 2017, McDougall continues. "We
are working on next year's budget and
drilling schedule, putting all our prospects
through the economic and geologic ringer
again to decide which ones move to the
front of the class," he describes. "All the
while, we are keeping a close eye on
prices. You can make money in this environment, but you have to have really
good prospects."
OIPA President Mike Terry suggests
many Oklahoma producers are feeling
better out of a conviction that the downturn's worst days have passed. Moreover,
he observes, the state contains two of the
country's livelier plays, dubbed the
SCOOP (South Central Oklahoma Oil
Province) and the STACK (Southern
Trend Anadarko Canadian Kingfisher).
"Oklahoma is fortunate to have a
couple really good areas where companies
are investing capital," he relates. "Both
plays are very young, so the technology
still is being developed, but we are seeing
some really nice initial production numbers
that allow companies to do well even at
$40 a barrel. That is really encouraging."
"I have heard those plays referred to
as the 'little Permian,'" McDougall says,
with a nod to the country's most active
drilling province. "There are SCOOP and
STACK wells with initial production rates
of 3,000 barrels of oil equivalent a day.
That is compelling."

Unfortunately, he observes, not all the
state's energy producers sacrificed.
"When they were trying to plug the
state budget hole, we thought legislators
were going to ask wind energy producers
to do something similar, but wind did
nothing," McDougall recounts. "We are
very adamant that in the next session,
the legislature needs to do something
about that long-term problem."
Unlike traditional energy sources, Oklahoma's renewable energy producers
pay no gross production taxes, and lawmakers made no serious efforts to revise
their production subsidies during the 2016
session. "Eliminating the tax credits, and

Tax Fairness
Oklahoma's drilling incentives are another point boosting SCOOP and STACK
wells over many prospects throughout
the country, but Terry acknowledges those
tax provisions are hardly safe when the
state is stuck in a budgetary crunch.
"Oklahoma has some of the country's
best drilling incentives," he reflects.
"Those can make such a big difference
for project economics, but we have to be
vigilant because there is no doubt legislators will scrutinize them again during
the 2017 session."
The provisions are especially pivotal
when commodity prices are slumping
and new federal regulations threaten to
raise costs, McDougall reflects. "We want
to maintain incentives for producers to
clear economic hurdles, and every bit
helps when it seems like we are being attacked from every direction," he remarks.
Even so, OIPA's firmness in principle
has not been rigidly uncompromising in
practice, McDougall recounts. When lawmakers were struggling to make ends
meet during the 2016 Oklahoma Legislature, he points out that OIPA conceded
more than $100 million worth of incentives
associated with marginal and at-risk wells.

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creating a wind and solar production tax
make sense," McDougall holds. "Transparency and reporting also are important.
Wind and solar ought to be regulated
just as oil and gas are. So far, they are
pretty unregulated."
During the legislative forum at OIPA's
2016 annual convention in June, House
Speaker-elect Charles McCall, R-Atoka,
and Senate President Pro Tempore-elect
Mike Schulz, R-Altus, concurred that
wind and solar companies needed to pull
more of their weight (AOGR, July 2016,
pg. 95).
"It sounds like they realize something
has to give this session," McDougall af-

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American Oil and Gas Reporter - October 2016

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