Wednesday, May 28, 2014
OKLAHOMA CITY – Governor Mary Fallin today signed into law a permanent, lowered tax rate that will continue a drilling incentive program for oil and natural gas companies operating in Oklahoma.
House Bill 2562 provides an incentive on oil and natural gas production from all new wells drilled after July 1, 2015. Under that incentive, all production from all new wells will be taxed at 2 percent for 36 months. After the first 36 months, a gross production tax rate of 7 percent applies. The initially lower rate is designed to encourage increased drilling and energy production in Oklahoma.
The Oklahoma Department of Commerce estimates that 25% of all Oklahoma jobs are supported directly or indirectly by the energy industry.
“The energy industry is the leading driver of economic growth and job creation in Oklahoma,” said Fallin. “Approximately one in four Oklahomans have a job and a salary because of our energy producers. They are part of the fabric of this state and we rely on them, not just for continued growth and prosperity, but to support everything from our charity organizations to our sports teams.”
HB 2562 will replace gross production tax incentives that are set to expire next year. Under the current program, the tax rate for horizontal wells is 1 percent for the first 48 months of production. That rate would have risen to 7 percent without the passage of HB 2562, representing a massive tax increase that would have eliminated Oklahoma jobs and driven investment out of the state.
“The new 2 percent tax rate is fair to the state and sends a clear message to energy producers worldwide: Oklahoma is the place for energy production and investment.” said Fallin. “We want to be a leader in this field not just today but for decades to come.”
“The new policy will also secure state revenue for priorities like education, while continuing to encourage drilling, investment and job creation in Oklahoma. My thanks go out to our lawmakers as well as the energy industry, who collaborated together successfully on this important piece of legislation.”
Oklahoma Secretary of Finance, Administration and Information Technology Preston L. Doerflinger said HB 2562 was the result of successful talks between the oil and gas industry, legislative leaders and the governor.
“The compromise we reached adequately addresses the revenue issues caused by the previous policy while still supporting oil and gas producers,” Doerflinger said. “It’s a win-win result for energy producers and the state, and I’m proud that industry and government were able to collaborate and agree on a deal that serves everyone well.”