Restore Oklahoma Now, Inc

Restore Oklahoma Now, Inc.

 

Press release

Oct. 26, 2017

 

Contact: Mickey Thompson

Executive Director

Restore Oklahoma Now, Inc.

(405) 640-2555

 

Small oil producers, state educators push for

Gross Production Tax ballot initiative

 Measure would call for 7 percent GPT, teacher pay increase

 

OKLAHOMA CITY – An organization representing small independent oil producers, educators and concerned Oklahomans is drafting language for a state ballot initiative with the dual purpose of restoring the state gross production tax to a flat rate of 7 percent and addressing the state’s teacher crisis.

 

Restore Oklahoma Now, Inc., is a newly formed nonprofit that has engaged a law firm and is working to raise $3 million with the goal of getting a state question on the general election ballot in November 2018. Organizers of the group have hired Mickey Thompson, former president of the Oklahoma Independent Petroleum Association (OIPA) and long-time oil industry spokesperson, to head up the campaign.

 

The focus of the initiative petition will be two-fold, said Mike Cantrell, chairman of the Oklahoma Energy Producers Alliance (OEPA), a group of small, independent oil producers who have advocated for a restoration of the gross production tax for more than a year and one of the organizational leaders of the new coalition.

 

“We think it’s a matter of fairness to Oklahomans that all oil and natural gas production be taxed at a flat and competitive – with other states – rate that helps sustain essential state services, especially addressing our teacher crisis and teacher pay. Our petition will restore the historical 7 percent GPT immediately on all wells, in other words repealing all the current tiers of state oil and natural gas production tax,” Cantrell, an Ada oilman, said.

 

“Further, we will lock-box the additional proceeds from this restoration for teacher pay and for rehiring thousands of teachers to address the ongoing shortage of qualified teachers.”

 

Thompson said the current discussions at the ongoing legislative special session are a mere bandage on the state’s budget crisis.

 

“The idea this legislature would hike the GPT only on new wells from 2 percent to 4 percent will generate less than $20 million a year to the state,” he said. “It doesn’t scratch the surface of the need to address the education crisis. Our petition will repeal all the special GPT tiers immediately. Our petition will truly level the playing field, 7 percent on all production, period.”

 

Thompson said the Oklahoma Tax Commission has stated that a flat, 7 percent GPT last year would have generated about $725 million for the state, which is $440 million more than was collected under the four-tiered system now in place.

 

“It’s a shame that concerned citizens must go to the people to address the state’s various crises,” Thompson said. “Our legislature has failed to take appropriate action. We feel there is no other option.”

 

Cantrell said response to early fundraising for Restore Oklahoma Now, Inc., has been encouraging.

 

“We have commitments of $700,000 after one week. We think as other groups and individuals join our coalition, we will reach our goal. Obviously, with this much money at stake, we expect strong opposition from those companies who have enjoyed this special tax break for several years,” he said.

OEPA Oil and Gas Tax Benchmark Analysis

OEPA Oil and Gas Tax Benchmark Analysis

The following PowerPoint presentation illustrates research findings conducted by WPA Intelligence in a statewide study among 2018 likely voters in Oklahoma regarding the oil and natural gas industry. Specifically, this research demonstrates strong support for the restoration of the Gross Production Tax to 7% on all oil wells, preferred areas for the funds from the tax to be spent, and the impact the oil and natural gas industry has on Oklahoma.

 

PowerPoint Presentation:

<OEPA Oil and Gas Tax Benchmark Analysis>

 

 

Top 10 reasons Oklahoma should restore 2% gross production tax rate to 7%. 

Correction:

Representative Jon Echols replied that our last sentence in our top 10 reasons to raise GPT  letter was in need of correction.  We always intend to be accurate and we missed one here.  We said:  “It’s disingenuous to call the negotiation which resulted in the 1% rate going to a 4% rate a tax increase. It was sunsetting and would have gone to 7%. So in practicality, it was a tax  decrease.”   

While there was no intent to mislead, it was a misstatement of the facts that we wish to correct. The negotiation that resulted in the 1% rate going to 4% was additional tax revenue and the 4% rate will still go to 7% after the original 48 months from the drilling of the wells. So the best case scenario is that a well drilled June 30, 2015, would still have a 4% rate for only 24 more months, at which time the rate would increase to 7%.  We stand by our position that this was a trade-off to protect the 2% rate without giving up much in reality.  

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1. Even at 7% GPT, Oklahoma’s effective rate on oil and gas production would still be the lowest overall tax rate of any major oil and gas state. Much of that is due to the fact that Oklahoma doesn’t levy ad valorem tax on oil and gas minerals in place. Almost all other major producing states do have property tax on minerals.

2. Oklahoma is home to two of the most prolific and economic world-class oil and gas players (Scoop and Stack). Public oil company presentations inform us that these Oklahoma plays have the lowest break-even cost (+/-$24.40/barrel). These oil and gas assets will be drilled regardless of a marginal increase in the tax rate.

3. Using companies own reporting numbers rate of returns are as high or higher than in North Dakota (May 2017) – and comparable to Texas; there is no need for a 2% tax rate.

First-year returns reported as:

  • ND Bakken – 40-50%
  • Okla Stack- 100%
  • Okla Scoop-70%

4. Changing the 2% rate to 7% would impact only a small number of taxpayers, most of whom are the same big oil companies that pay the higher rates everywhere else.

5. If having a 2% tax rate is so crucial to big oil company profitability, why aren’t these same companies threatening to pull out of North Dakota and Texas? Why aren’t these companies moving their headquarters or their major drilling operations to Oklahoma? Why aren’t the big oil lobbyists descending on the North Dakota and Texas capitals threatening them with leaving if they don’t lower their rate to 2%?

6. There is absolutely no correlation between tax rates and the rig count! You drill where the oil and gas is!

We get the same economic benefit from a 7% rate as a 2% rate.

7. This tax break for big oil producers vs small, vertical producers is 71.4% (the difference between 2% and 7% tax). Most of this massive tax subsidy goes to out-of-state stockholders, investors, foreign companies (partners) and even foreign governments. So Oklahoma really doesn’t get a significant bump from the multiplier effect of a low tax rate.

8. Horizontal frack jobs are destroying hundreds of marginal, but still profitable vertical wells which pay a 7% rate. (Damage to 451 wells has been documented in Kingfisher County alone!)

9. Horizontally fracked wells recover 60-80% of all the oil and gas within the three-year period of the 2% rate. With low oil prices, we are incentivizing the accelerated taking of a valuable but finite resource at low prices. Whatever happen to conservation and allowables?

10. Bottom line, this massive tax subsidy is a fairness issue. Why should operators of 2,000-6,000 barrel per day wells only pay 2% when low-volume stripper wells, most only marginally profitable at today’s prices, are just hanging on… and must pay 7%?

Speaking of fairness, horizontal drillers championed the repeal of several minor tax provisions which meant nothing to them just so they could claim that their taxes have been “dramatically” raised already. It’s disingenuous to call the negotiation which resulted in the 1% rate going to a 4% rate a tax increase. It was sunsetting and would have gone to 7%. So in practicality, it was a tax decrease.

Your call to action is:

  1. Call Governor Fallin at (405) 521-2342 and ask her to support restoring the 2% GPT to 7%.
  2. Contact your Legislators at  https://okpolicy.org/resources/find-your-legislator/ and tell them to put Oklahoma first and restore the GPT from 2% to 7%.

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