A bill to raise the gross production tax on around 11 percent of oil and gas wells in Oklahoma that passed committee late Monday night passed the House Tuesday morning.
House Bill 2429 increases the rate for horizontal wells started between 2011 and 2015 from 1 to 4 percent during a four-year incentive period. It would bring in an estimated $95 million a year for two years.
"As I hear about wanting to increase what big oil and gas pays, here is your opportunity," said Rep. Kevin Wallace. "You know, the industry employs 25 percent of our population, and I've had this discussion many times. [General revenue] is not balanced on [gross production taxes] — that's less than 5 percent of our [general revenue]. When our state does well is whenever the industry's strong, everybody's working, they're paying income tax, they're out spending money."
Rep. David Perryman said the bill does effectively nothing.
"After one year, production in horizontal wells have decreased by 75 percent, and after two years, 87 percent of the production is gone," Perryman said. "So, what's the last two years worth?"
Minority Leader Scott Inman said several other ideas to raise the gross production tax came up in budget negotiations.
"Setting the gross production tax on new wells at 4 or 3 or 5 [percent]. We talked about existing wells. We talked about all kinds of different — we talked about indexing the price of oil," Inman said. "You know one thing we never talked about? The governor, the speaker, the pro tem, myself, Leader Sparks, we never once said, 'Let's just do a year and a half gimmick fix.'"
HB2429 is being considered after the deadline for revenue-raising measures because the floor leader determined it isn’t one. Rep. Emily Virgin disagreed.
"It doesn't take a legal scholar to figure out that this is a revenue bill, clearly a revenue bill, under the terms of the state constitution," Virgin said.
Another potential legal issue is the bill could be construed as a retroactive tax increase. Either could lead to HB2429 being struck down if it becomes law.
The measure passed the House 54–44.
