American Oil and Gas Reporter - July 2018 - 32

OIPA Unable To Stem Tax Floodwaters
OKLAHOMA CITY-Sometimes there
simply aren't enough fingers to plug all
the holes in the dike.
That could be said of the Oklahoma Independent Petroleum Association's attempts
to protect the state's new-well tax incentive
in the face of demand for additional revenues
during this year's state legislative session-
even though OIPA agreed to relinquish a
portion of that incentive as part of a broader
industry coalition.
But the waters came rushing through,
notes OIPA Vice President of Legislative
Affairs Hollye Hunt, on March 29 when
Governor Mary Fallin signed HB 1010,
raising the state's initial 36-month gross
production tax rate on oil and natural gas
from 2 to 5 percent.
It was the most recent blow in a battle
OIPA has been fighting since 2014, observed association Secretary Blu Hulsey,
vice president of government and regulatory affairs for Continental Resources,
during the association's annual convention,
June 8-10 in Las Colinas, Tx.
That was the year state lawmakers
raised prospectively the GPT incentive
rates for a broad category of wells from
1 percent for the first 48 months to 2 percent for 36 months. Then last year, in
successive steps during their regular and
a trailing special budgetary session, respectively, legislators raised the old 1

percent rate for approximately 5,000 wells
drilled prior to 2014-and thus still eligible-to 4 percent, and then to 7 percent
(AOGR, December 2017, pg. 31).
Throughout that period, Hunt says,
OIPA tried to educate lawmakers on the
importance of attracting capital that could
flow as easily to drilling projects in other
states. "We felt we were making some
headway, but then the teacher strike came,
she relates. "When 10,000 teachers walked
out of schools for two weeks, I think it
overcame too many members."
Indeed it did, agreed state Representative Tim Downing, R-Purcell, during a
legislative panel at OIPA's annual convention. "Picture a (lawmaker) who has
no context on your industry," he encouraged association members. "He is under
a ton of pressure: thousands of e-mails a
day, a teacher walkout, people screaming
at him. Then you give him a lever and
say, "Pull this and it all goes away.'"
Nor was it mere coincidence that the
scenario played out as it did, insisted
Hulsey. "It was all orchestrated, and it
wasn't only Oklahoma," he declared.
"The Democratic National Committee
saw this as an opportunity to go after red
states: Oklahoma, West Virginia, Kentucky,
Tennessee, Arizona."
"They were planning this for more
than a year," agreed state Representative

Oklahoma legislators who participated in a panel discussion at the Oklahoma Independent
Petroleum Association's annual meeting were, from left, Representative Kevin Calvey, RDel City; Senator Mark Allen, R-Spiro; Senator Julie Daniels, R-Bartlesville; and Representative Tim Downing, R-Purcell. Representative Calvey was named OIPA's 2018
Legislator of the Year as "one of the industry's most vocal defenders during the course
of two special legislative sessions and the 2018 regular session." OIPA convention
coverage begins on page 113.

32 THE AMERICAN OIL & GAS REPORTER

Kevin Calvey, R-Del City. "It was an organized, left-wing movement that has
been sweeping through the country."
Further, the people protesting at the
Oklahoma Capitol weren't all teachers,
Hulsey maintained. Noting that Continental
Resources had a front row seat during
the Dakota Access Pipeline protests in
North Dakota, Hulsey said, "There were
a lot of similarities in this movement and
that one. A lot of those folks protesting
were professional protestors."
He added, "We as an industry have
supported and will support public education. But this was an attack on our industry.
We need to recognize it and be vigilant
going forward."
Step Up Oklahoma
Particularly frustrating for OIPA, Hunt
offers, is that the oil and gas industry had
gone to the legislature with a revenueraising and government reform plan called
Step Up Oklahoma, which ultimately
was rejected in favor of HB 1010.
Step Up Oklahoma, Hunt relates, included raising the first-36-month GPT rate
from 2 to 4 percent, but it also included
taxes on other industries, including a $1.00
a megawatt-hour renewables generation
tax, and ending transferable and refundable
income tax credits for coal, wind and railroads, as well as additional taxes on casinos,
individual income tax changes, raising the
cigarette tax by $1.50 a pack, and increasing
the motor fuel tax on diesel and gasoline
by 6 cents a gallon.
But in passing HB 1010, Hunt points
out, legislators increased the 36-month
GPT rate to 5 percent while raising motor
fuel taxes only 3 cents and the cigarette
tax by only $1.00. And no taxes were
levied on renewables.
"I think that frustrated us most," Hunt
allows. "Oil and gas was the only industry
involved in Step Up whose taxes went
up more than proposed in the plan. We
felt we were coming to the table and
others weren't-especially wind-and were
taxed even more."
Again, the issue was politics, according
to the annual meeting legislative panel.
"For the minority party in the House,
there are districts that, if they took a vote
today, would ban drilling activity outright,"
observed Representative Downing.
Representative Calvey added, "I am
told that hating the oil and gas industry
polls higher among Democrats in Oklahoma than being pro-life on abortion
polls for Republicans. It is the number
one issue for Democrats."
Hating fossil fuels tends to converge

American Oil and Gas Reporter - July 2018

Table of Contents for the Digital Edition of American Oil and Gas Reporter - July 2018