DALLAS – A “meeting of the best minds” is needed to ensure Oklahoma’s financial incentives for energy production are fair and effective, said the chairman of a legislative committee created to examine state tax credits.
The state is losing more than $200 million a year from the tax incentive that exempts horizontally drilled oil and gas wells from the state’s 7% production tax for four years, said Rep. David Dank, R-Oklahoma City.
“I would propose is that we work closely with energy companies that make their home in Oklahoma to determine what is fair for all, and most of all to assure that Oklahoma-based companies come first in any decisions we make,” he said.
Dank endorsed the call by Finance Secretary Preston Doerflinger earlier this month for a thorough review of the drilling incentive before the 2014 Legislature decides whether to renew the exemption.
“It is important to get both sides to the table and work this out for the benefit of all Oklahomans as soon as possible, preferably during the legislative interim,” Dank said.
“Our energy resources are our biggest asset,” he said. “We can’t just give them away.”
The production tax credit and other energy industry exemptions cut state revenue by more than $320 million in fiscal 2013, Doerflinger said.
Dank said a compromise is needed that will keep Oklahoma-based oil and gas companies working in the state.
“Whatever we agree on needs to reward those companies that provide stable, high-paying long-term jobs here in Oklahoma,” Dank said. “We cannot and must not do anything that would cause another Oklahoma oil company to move to Houston.”
The tax incentive was adopted by the Legislature in 2010 without a good look at its long-term implications, Dank said.
“As with many tax incentives in the past, we charged ahead and passed this without carefully examining its fiscal impact,” he said.
“It has certainly helped encourage more drilling, but unfortunately it has also brought a lot of out-of-state companies into Oklahoma to take advantage of it,” Dank said. “In many cases they are simply taking the tax savings and heading south with it.”