Oklahoma

Economy, Energy, Natural Resources: Policy to People

Joe Wertz

Joe Wertz is multi-platform reporter for StateImpact Oklahoma. He has previously served as Managing Editor of Urban Tulsa Weekly, as the Arts & Entertainment Editor at Oklahoma Gazette and worked as a Staff Writer for The Oklahoman. Joe was a weekly correspondent for KGOU from 2007-2010. He grew up in Bartlesville, Okla., lives in Oklahoma City, and studied journalism at the University of Central Oklahoma.

  • Email: joe@stateimpactoklahoma.org

Lawmakers Question Legality of ‘Creative’ Legislation to Squeeze More Revenue from Oil and Gas Taxes

Service companies parked oil-field trucks and other equipment at the state capitol in a public demonstration as legislators debated a measure that would effectively increase taxes some oil and gas producers pay.

Joe Wertz / StateImpact Oklahoma

Service companies parked oil-field trucks and other equipment at the state capitol in a public demonstration as legislators debated a measure that would effectively increase taxes some oil and gas producers pay.

Oklahoma lawmakers have struggled for months to agree on a formula to patch a nearly $900 million budget hole and sign off on a plan that funds state agencies. To help pay for the budget plan, lawmakers are considering ways to squeeze more from taxes on oil and gas production, an option that has divided politicians and one of the state’s biggest industries.

Throughout the legislative session, demonstrators and educators rallied to urge lawmakers to raise oil and gas taxes. The energy industry responded in force, parking oilfield trucks and other equipment in the Capitol parking lot as a visual reminder of the industry’s importance and influence. Companies bussed in hundreds of workers to push lawmakers away from additional taxes on oil and gas producers.

Drilling discounts

Oklahoma levies a 7 percent tax on oil and gas. Many producers aren’t paying that rate, however, because the state has various incentives and discounts on the books. Newly drilled wells are taxed at just 2 percent for the first 36 months of production, for example. Other incentives, which are set to expire in coming years, mean some wells pay discounted taxes of 4 percent or 1 percent.

Throughout the 2017 legislative session, Republicans and Democrats have suggested various ways to change the terms of those incentives and discounts without changing the actual gross production tax rate. By using this tactic, Republican lawmakers say gross production legislation isn’t “revenue-raising,” which means it can be approved with a simple majority rather than the three-quarters supermajority constitutionally required of measures that raise taxes. Hardline Republicans have opposed many revenue-raising efforts, which means supermajority approval is impossible without Democratic votes, but negotiations between the parties stalled on this and other measures.

House Republicans are rallying behind HB 2429, which is advancing and changes the gross production discount for wells currently taxed at 1 percent, increasing the rate to 4 percent for the first 48 months of production. About 5,700 wells would be affected, and it is likely to generate $95 million in revenue, $74 million of which would be directed to the General Revenue Fund, according to the bill’s fiscal analysis.

A demonstrator holds up seven fingers to send a message to a House committee that lawmakers should remove discounts and incentives so all oil and gas wells are taxed at 7 percent.

Joe Wertz / StateImpact Oklahoma

A demonstrator holds up seven fingers to send a message to a House committee that lawmakers should remove discounts and incentives so all oil and gas wells are taxed at 7 percent.

The hole picture

Whether or not HB 2429 is designated a “revenue-raising” measure, the legislation effectively increases revenues from gross production taxes. Democrats like House Minority Leader Scott Inman called the effort a “gimmick” and suggested a state court would deem the legislation unconstitutional.

“It will blow an enormous hole in an already difficult budget time, and force us back into a special session to waste more of the state’s taxpayer dollars to do what we should have done in the regular session,” Inman said at a press conference this week.

Some conservatives questioned the legislation’s constitutionality, too. “I’m just not sure,” said Jason Murphey, R-Guthrie. “It seems very likely that an oil company might file a lawsuit and fight this.”

Other evidence suggests the gross production legislation — among others considered this session — could draw a legal challenge. Legislators in 2014 employed a similar tactic to re-up and reconfigure sunsetting gross production tax discounts, eventually settling on a bill that increased the effective rate for many producers from 1 to 2 percent. A lawsuit challenging the constitutionality was filed and heard by the Oklahoma Supreme Court, but was ultimately withdrawn.

At a disjointed midnight committee hearing on budget legislation this week, Republican Leslie Osborn, chair of the powerful House Appropriations and Budget Committee, acknowledged discomfort with the tactic, but said her party was forced to find a workaround when negotiations with Democrats broke down.

“We’ve had to be rather creative and find new legal manners that we could run these bills,” she said.

With Pruitt Leading EPA, Oklahoma Oil Firm Gains Ground in Fight Against Regulation

Oklahoma Attorney General Scott Pruitt testifying at a Jan. 18 confirmation hearing on his nomination as administrator of the U.S. Environmental Protection Agency.

C-SPAN

Oklahoma Attorney General Scott Pruitt testifying at a Jan. 18 confirmation hearing on his nomination as administrator of the U.S. Environmental Protection Agency.

Shortly after taking over as head of the U.S. Environmental Protection Agency, former Oklahoma Attorney General Scott Pruitt started a roll-back of Obama-era environmental regulations, an effort that has provided big benefits to one of his home state’s largest independent oil and gas companies, the New York Times reports.

Pruitt has long maintained a close relationship with Devon Energy, which evolved from a minor political player to a major lobbying force during the Obama administration. With Pruitt leading EPA, Devon is making headway in its fight against federal environmental regulation, Hiroko Tabuchi and Eric Lipton report:

In a gas field here in Wyoming’s struggling energy corridor, nearly 2,000 miles from Washington, the Trump administration’s regulatory reversal is crowning an early champion.

Devon Energy, which runs the windswept site, had been prepared to install a sophisticated system to detect and reduce leaks of dangerous gases. It had also discussed paying a six-figure penalty to settle claims by the Obama administration that it was illegally emitting 80 tons each year of hazardous chemicals, like benzene, a known carcinogen. Continue Reading

Former Accountant Accused of Stealing $2.6 Million After Federal Probe of Oklahoma Beef Council

A long line of cattle are herded into a semi-trailer at Oklahoma National Stockyards in Oklahoma City.

Joe Wertz / StateImpact Oklahoma

A long line of cattle are herded into a semi-trailer at Oklahoma National Stockyards in Oklahoma City.

A former accountant and compliance officer for the Oklahoma Beef Council faces federal bank fraud and false tax return charges after an probe into suspected embezzlement of more than $2.6 million.

The Beef Council, which is funded by a mandatory $1-per-head “check-off” fee paid every time ranchers and producers sell an animal, filed a civil lawsuit in October 2016 against the former employee, Melissa Morton. The charges come after an investigation from Harvest Public Media and StateImpact, which obtained an internal audit detailing the alleged embezzlement. Continue Reading

Group Defending Vertical Wells Digs In As Major Oil Groups Reach Deal to Expand Horizontal Drilling

Pete Brown of Kingfisher oil company Brown & Borelli and former Tulsa mayor Dewey Bartlett of Keener Oil and Gas speak out against legislation to expand horizontal drilling at a Oklahoma Energy Producers Alliance media event.

Joe Wertz / StateImpact Oklahoma

Pete Brown of Kingfisher oil company Brown & Borelli and former Tulsa mayor Dewey Bartlett of Keener Oil and Gas speak out against legislation to expand horizontal drilling at a Oklahoma Energy Producers Alliance media event.

Oklahoma oil executives have argued for years over a new law that would let companies drill and frack longer horizontal wells in new areas.

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EPA Considers Shutting Down Oil Sites Months After Leak and Dead Wildlife Found in Osage County

The U.S. Environmental Protection Agency may ask three oil and gas companies to shut down disposal wells as investigators look for the source of a saltwater leak that has plagued the area for nine months.

Local ranchers and inspectors toured the Bird Creek contamination site on the Chapman Ranch last week, the Tulsa World‘s Kelly Bostian reports:

The EPA will ask producers for daily production reports and may temporarily shut down operations, Coleman said. The EPA is planning dye tests and also is bringing in remote samplers to closely monitor the stream, he said. Continue Reading

New Law Plows Funding Path for Locally Grown Food to Fill Urban Grocery Gaps

Sherry Laskey stands near land she bought in a north Tulsa neighborhood. Laskey is hoping to turn the empty lot into a profitable community garden that provides healthy food for the area.

Logan Layden / StateImpact Oklahoma

Sherry Laskey stands near land she bought in a north Tulsa neighborhood. Laskey is hoping to turn the empty lot into a profitable community garden that provides healthy food for the area.

Low-income areas of rural Oklahoma are blotched with food deserts, where fresh, healthy food options are scarce. It’s a problem in cities, too, but entrepreneurs, educators and legislators say newly signed legislation could help fill grocery gaps with community gardens.

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Legislature Approves ‘Critical Infrastructure’ Bill Critics Say Could Curb Public Protest

A bill that adds steep criminal penalties for trespassing on sites containing “critical infrastructure” cleared its final legislative hurdle Wednesday and now awaits Gov. Mary Fallin’s signature.

For more on House Bill 1123, here’s our story from March 2017.

Oklahoma Bill To Protect ‘Critical Infrastructure’ Could Curb Public Protest, Critics Say

Oklahoma legislators are advancing a bill that outlaws trespassing on sites containing “critical infrastructure.” Supporters say the measure will help prevent damage and disruption of energy markets, electric grids and water services, but environmental activists and civil rights groups say the bill’s real purpose is to block political protests of pipelines and similar projects. Continue Reading

‘Mad Scientists’ at Oklahoma March Urge Lawmakers to Stop Underfunding and Undermining Research

Oklahomans joined thousands of people in more than 600 cities on Saturday in a march for scientific freedom organized to send a message to state and national lawmakers. Continue Reading

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