American Oil and Gas Reporter - July 2017 - 110

ConventionCoverage: Oklahoma Independent Petroleum Association

State Legislators Defend
Oil, Gas Industry
By Dan Holder

LAS COLINAS, TX.-As Oklahoma's
legislators scrambled for revenues during
the last weeks of May to close the state's
$878 million budget gap, the oil and natural industry moved on and off the Statehouse radar. Several Democratic lawmakers argued the industry was not doing
its fair share to solve the problem, a contention refuted during a legislative round
table presented during the Oklahoma Independent Petroleum Association's annual
convention.
Oklahoma legislators participating at
the meeting, held June 2-5 at the Four
Seasons Resort in Las Colinas, were state
senators Bryce Marlatt, R-Woodward, and
Greg McCortney, R-Ada, and representatives Mark McBride, R-Moore, and Ryan
Martinez, R-Edmond. OIPA Vice President
of Legislative Affairs Hollye Hunt served
as moderator and Program Chairman Ethan
House introduced the panel.
Martinez told OIPA oil and gas industry
representatives had agreed during budget
discussions to give up $53 million in tax
incentives. "This idea in the Capitol that
oil and gas is not willing to do its part is
crazy," he said. "Twenty-five percent or

even higher, of every tax dollar in Oklahoma is from oil and gas. Is not that
more than your fair share? And to come
back over here and say that we need a
little bit more-you are an ATM."
Oklahoma may be one of the unfriendliest states in which to drill, McBride
suggested, pointing out state tax rates are
constantly shifting and usually increasing.
He noted it was difficult to develop a
business model under such uncertainties.
Governor Mary Fallin signed a bill at
the end of May to increase tax rates for
oil and gas produced in horizontal wells.
According to the legislative website, HB
2429, introduced by Representative Leslie
Osborn, R-Mustang, increases the initial
tax rate for wells drilled between 2011
and 2015 from 1 percent to 4 percent.
Those wells then move to 7 percent after
their first 48 months of production. The
Oklahoma Tax Commission estimated
the measure would bring $95 million
into state coffers.
Political leaders opened the 2017 session with no plans to revise Oklahoma's
gross production tax structure, but Marlatt
reported the political climate shifted so
much that the Senate and House were
discussing it by May.

Participating in a legislative panel at the Oklahoma Independent Petroleum Association's
annual convention are, from left, OIPA Program Chairman Ethan House, who introduced
the panel; State Representative Ryan Martinez, R-Edmond; State Senator Greg McCortney,
R-Ada; Representative Mark McBride, R-Moore; and Senator Bryce Marlatt, R-Woodward.

110 THE AMERICAN OIL & GAS REPORTER

The result of those conversations was
HB 2377, also introduced by Osborn. The
legislative website says the bill, signed by
the governor, moves the sunset date for
several tax incentives to July 1, 2017. The
legislation affects incremental production
from secondary and tertiary recovery projects, re-established production from an
inactive well, production from wells between 12,500 and 14,999 feet deep, discovery wells, and production coming
through the use of 3-D seismic. State projections put the fiscal impact at $46 million.

Drilling Plans
According to Marlatt, groups that supported the GPT changes successfully argued such revisions would not affect any
company's plans to drill in the state.
"They don't quite understand that there
is tremendous competition from the Permian Basin, the Delaware Basin and the
Bakken Shale," he said. "While there
probably always will be activity here,
we shouldn't be finding out what the
magic number is of how high can you
raise production taxes before they start
impacting Oklahoma."
Although Governor Fallin signed the
budget bill, after the OIPA meeting ended,
McCortney predicted legislators would
have to return to Oklahoma City for a
special session. He noted that the approved
package was $215 million short of balancing the budget.
"If we do end up in the special session,
the reason is because we will be $215
million short of having a balanced budget,"
he indicated. "The cry all year was gross
production could raise $500 million. We
all know that is not true, but that rallying
cry will be there. There is a perception
that if we could run the GPT through,
every problem would be solved and we
would only be up there for 30 minutes."
The 2017 session had 32 freshmen
legislators, Martinez pointed out, and
those rookies had trouble discerning between Statehouse noise and relevant matters. He noted those advocating for the
GPT increase were good at creating a
perception that its benefits outweighed
any possible drawbacks.

American Oil and Gas Reporter - July 2017

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