Oklahoma Expected to Boost Oil, Gas Tax Exemptions
In what state officials say would be a boon to the oil and gas
industry in Oklahoma, oil and gas drillers are expected to add to
their tax exemptions for certain types of activities under
legislation now awaiting Gov. Frank Keating's signature. As of
Friday afternoon, Keating had taken no action on the bill, but he
has until June 10 to sign or veto it.
Senate Bill 1048 provides drillers with certain exemptions from
the state's gross production tax (GPT) for enhanced recovery
projects, horizontally drilled wells, re-establishing inactive
wells, production enhancement from re-completions and workovers,
drilling at 12,500 feet or deeper and new discovery wells. Oklahoma
Sen. Kevin Easley (D-Broken Arrow) and Rep. Larry Rice (D-Pryor)
authored the legislation, and the current tax exemptions would be
extended through June 30, 2003.
"This is an important step to help restore drilling activity in
the state," said Bruce M. Bell, chairman of the Mid-Continent Oil
and Gas Association of Oklahoma. "We cannot stress too highly the
value of these two authors and the legislative leadership in
getting vital tax incentives extended."
The extended exemptions do not apply when the average price of
crude oil exceeds $30 a barrel of oil and $3.50 per MMbtu for gas
calculated on an annual calendar basis. Previously, the cut-off
level was $25 for oil and $3 for gas.
Keating is more than likely to sign the legislation because some
of the exemptions, which are currently on the books, will expire
July 1. Bell said that if they don't continue, it will be a
"terrible blow" to the industry and the state. "The types of
projects included in these exemptions play a key role in continued
industry involvement in Oklahoma and help maintain well servicing
and supply operations, and thereby continued high paid employment."
Michael H. Bernard, president of the Mid-Continent Oil and Gas
Association, said "It's not likely that he won't sign it. "We're
very pleased with the legislation, and the governor has gotten
signals from the business community that the state needs this
Most promising in the legislation, said Bernard, is a new
exemption for wells drilled within the boundaries of a
three-dimensional seismic shoot, and wells that are drilled based
on the 3-D technology. The new advanced seismic technology is
expensive, but has had remarkable success in finding producing
formations, Bell said. Under the proposal, tax exemptions would be
allowed for 18 months if the 3-D was shot before July 1, 2000. For
shoots done after July 1, 2000, the proposed legislation would
provide for a 28-month exemption.
Bell said that besides the work by the lawmakers, "another
crucial factor" was the "unity within the industry. It is an
excellent example of what can be accomplished when we work
together." He said that the mutual cooperation between
Mid-Continent and the Oklahoma Independent Petroleum Association
"displays the true concern for the entire oil and gas producing
industry in this state."
If you are interested in the status of Keating's decision on the
proposed legislation, contact Dan Mahoney in the governor's office
at (405) 523-4219.
Carolyn Davis, Houston