{"id":26379,"date":"2016-03-31T13:30:00","date_gmt":"2016-03-31T18:30:00","guid":{"rendered":"http:\/\/stateimpact.npr.org\/oklahoma\/?p=26379"},"modified":"2016-03-31T11:17:35","modified_gmt":"2016-03-31T16:17:35","slug":"tax-break-for-unprofitable-oil-wells-swells-amid-slumping-crude-prices","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/oklahoma\/2016\/03\/31\/tax-break-for-unprofitable-oil-wells-swells-amid-slumping-crude-prices\/","title":{"rendered":"Tax Break for Unprofitable Oil Wells Swells Amid Slumping Crude Prices"},"content":{"rendered":"
\"An<\/p>\n

Joe Wertz \/ StateImpact Oklahoma<\/p>\n

An American Energy Woodford well near Perkins, Okla.<\/p>\n<\/div>

As crude prices limp along<\/a>, a tax rebate for “economically at-risk” wells is poised to grow into one of the state’s biggest tax breaks for business and industry.<\/p>

Two years ago, when Oklahoma crude was selling for about $100 a barrel, the rebates totaled just $11 million, Oklahoma Watch\u2019s Warren Vieth reports<\/a>:<\/p>

During the current fiscal year, the at-risk rebate reduced the amount of money available to finance state government by an estimated $41 million. The cost is expected to nearly quadruple to $158 million next year, contributing to the state\u2019s $1.3 billion budget shortfall<\/a>. The expected rebates already have been incorporated into official revenue estimates presented to lawmakers.<\/p>

\u201cThis is by far the biggest impact that the price of oil has had,\u201d said Tax Commission Executive Director Tony Mastin. \u201cBecause of the price decline we\u2019re getting less gross revenue, and also because of the price decline this rebate has come into effect. So it\u2019s kind of a double hit.\u201d<\/p>

The economically at-risk tax rebate was created in 2005. Here\u2019s how it works:<\/p>

The economically at-risk rebate refunds 6\/7ths of oil and gas production taxes collected on any 7-percent well that generates less revenue in a year than the combined cost of royalty payouts, operating costs, overhead expenses and production taxes. In effect, it reduces the tax rate from 7 percent to 1 percent, retroactively.<\/p>

About 40 percent of Oklahoma oil production comes from older vertical wells whose operators the tax break was designed to help, Vieth reports.<\/p>

\u201cThe majority of Oklahoma\u2019s oil and natural gas producers are small mom-and-pop companies,\u201d [Cody] Bannister [with the Oklahoma Independent Petroleum Association] said. \u201cThey don\u2019t drill a lot of wells. They manage some historic properties. Those are the people that this helps most of all.\u201d<\/p>

Senate Finance Committee Chairman Mike Mazzei, R-Tulsa, a frequent critic of state tax breaks, credits and incentives, introduced a bill<\/a> to suspend the at-risk rebate, but the measure has failed to advance, Vieth reports. Still, the state\u2019s $1.3 billion budget hole means no potential remedy is off limits:<\/p>

\u201cWhen you\u2019re in a $1.3 billion budget shortfall, anything and everything\u2019s going to be on the table,\u201d said Chad Warmington, president of the Oklahoma Oil and Gas Association. \u201cSo yeah, we\u2019re keeping an eye on it.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

As crude prices limp along, a tax rebate for “economically at-risk” wells is poised to grow into one of the state’s biggest tax breaks for business and industry.<\/p>\n","protected":false},"author":36,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[490],"tags":[662,155,238,31],"acf":[],"_links":{"self":[{"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/posts\/26379"}],"collection":[{"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/users\/36"}],"replies":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/comments?post=26379"}],"version-history":[{"count":3,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/posts\/26379\/revisions"}],"predecessor-version":[{"id":26383,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/posts\/26379\/revisions\/26383"}],"wp:attachment":[{"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/media?parent=26379"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/categories?post=26379"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/oklahoma\/wp-json\/wp\/v2\/tags?post=26379"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}