Governor Mary Fallin and legislative leaders have announced some sort of budgetary compromise to help solve the state's budget crisis.

It appears the agreement includes a combination of changes to the Gross Production Tax and increases to the state motor fuel tax. The GPT changes appear to include a reduction from 36 months to 18 months in the time before a well is opened and taxed at the 7% rate over the more favorable 5% rate. Other details were not discussed.

Leaders indicate a vote on the package is apparently set for tomorrow (17 May).

I'm watching the press conference. Is there a link to actual bill anywhere?

I'm watching the press conference. Is there a link to actual bill anywhere?

Not that I've found. I wish they'd talk more details. Some lady at the press conference is more or less ranting at the conference speakers and not really helping information get out.

I get the impression there may also be a cigarette tax increase as well in this package.....

...and not one outlet has a link to a document or a bill or anything that I've found. GRRRR.

Not that I've found. I wish they'd talk more details. Some lady at the press conference is more or less ranting at the conference speakers and not really helping information get out.

I get the impression there may also be a cigarette tax increase as well in this package.....

...and not one outlet has a link to a document or a bill or anything that I've found. GRRRR.

Fallin (paraphrased from presser): Cigarette tax 215 million, 177 million gas tax, on top of 60 million on other small fixes.

That is only 400 again. So I don't really know where the other 400 is coming from?

These are numbers I'm typing in rapidly as I hear Fallin recite them, so forgive if they're wrong:

New expected revenue:
$124 M cigarette tax
$250 M fuel tax

These are numbers I'm typing in rapidly as I hear Fallin recite them, so forgive if they're wrong:

New expected revenue:
$124 M cigarette tax
$250 M fuel tax

Those might be better than my guesses. I couldn't understand her and she also said the wrong numbers three times.

Inman about to speak but News9 and KOCO cut the feed.

I assume we will know more tomorrow.

Talk about transparency.

From what I read, there's no deal. Even though it does include at least a partial increase in the GPT rate for new wells, Inman has said Dems won't support this. So unless some of them cross aisles, this is DOA.

Makes sense. The people who are going to hurt the most from this are low income Oklahomans if it passes. Why am I not surprised?

The GPT change is a good start I think.

What is the vote count needed to pass this budget? I thought the GOP had a super majority?

74 gop 26 dem

http://newsok.com/article/5549409?utm_source=NewsOK.com&utm_medium=Social&utm_campaign=NIC-Facebook

Link to more details

The GPT "compromise" that moves the time we tax 2% from 36 months to 18 months is a joke. A) it brings in nothing for this years budget. Zero. B) it's still shows that state republicans will try every gimmick, every other tax increase, nearly all of which are regressive, before they make oil companies pay a measly 5%.

Ask yourself, do you want to pay higher taxes at the pump, cig taxes, taxes on your cable, tax on transferring car to child all while no one will consider raising the biggest sweet heart GPT rate in the country?

The GPT "compromise" that moves the time we tax 2% from 36 months to 18 months is a joke. A) it brings in nothing for this years budget. Zero. B) it's still shows that state republicans will try every gimmick, every other tax increase, nearly all of which are regressive, before they make oil companies pay a measly 5%.

Ask yourself, do you want to pay higher taxes at the pump, cig taxes, taxes on your cable, tax on transferring car to child all while no one will consider raising the biggest sweet heart GPT rate in the country?

Let's temper the "screw the oil companies" rhetoric with the real-world knowledge that those evil oil companies employ real, live, actual human beings who buy groceries, pay rent, income taxes, and otherwise participate in the economy. If we tax them into an uncompetitive environment, and they leave, we can feel great about screwing the oil companies, but it won't be much solace to the folks who will be out of jobs.

I'm *not* saying oil taxes shouldn't be part of this solution, not saying ANY political ox shouldn't be on the table for goring. And I'm not interested in some protracted debate about the oil tax issue. I'm just pointing out that real, working people are on the other end of those oil taxes, regardless of your or their political affiliation. I wish the budget situation were that simple.

As far as I'm concerned, bad or good, at least *someone* put *something* out there to start discussing. It could have been a starting point. But it was beaten down by politics as usual, so now we're back to nowhere with a $900M budget hole, and now a special session to try and solve it.

The "worship them or they might leave" argument sounds really hollow when we're proposing to raise their rates, but those rates would still be well below what they pay to any other state. Plus, this ignores the HUGE elephant in the room...the oil's still here. They could pull up stakes and move to New Hampshire if they wanted, I hear New Hampshire is THE place to incorporate. But the wells there would be a touch dry.

Please, don't take my word for it. Take the oil industry's own words:

https://stateimpact.npr.org/oklahoma/2014/05/05/three-of-oklahomas-largest-oil-companies-plan-for-how-the-state-should-tax-them/

But at least one large, high-profile energy company — Tulsa’s Kaiser Francis Oil Company, helmed by billionaire George Kaiser — says taxes don’t play a major role in companies’ decisions to drill. In March 2014, Kaiser CFO Don Millican told StateImpact, “Severance tax rates never make a difference in that decision. They just don’t. People are drilling where the hydrocarbons are. Where the hydrocarbons are, in sufficient quantities, it makes sense to drill.”

Kaiser himself echoed the same sentiments to The Oklahoman in a separate story:

“In addition to the fact that I think it has desperate consequences to the state, which is already suffering an inability to fund state services, I am absolutely confident that the rate of gross production or ad valorem in a state within a reasonable range of 0 to 12 percent has no bearing whatsoever in the economic activity in a state,” Kaiser said.

I do agree, the rhetoric needs to be tempered, but the only one I see saying "screw the oil companies" and calling them "evil" is your post. The other posts are simply asking we tax them at a reasonable rate, a rate that again is way less than other states, a rate that would almost single-handedly fill the budget hole. So yes, please, I completely agree, let's not have that here, let's discuss the actual topic.

The GPT "compromise" that moves the time we tax 2% from 36 months to 18 months is a joke. A) it brings in nothing for this years budget. Zero. B) it's still shows that state republicans will try every gimmick, every other tax increase, nearly all of which are regressive, before they make oil companies pay a measly 5%.

Ask yourself, do you want to pay higher taxes at the pump, cig taxes, taxes on your cable, tax on transferring car to child all while no one will consider raising the biggest sweet heart GPT rate in the country?
Just because you aren't getting your way doesn't mean it's a joke. Cutting the timeframe in half is still a tax increase. At 19months the tax rate is now 7% instead of 2%.

I'm reading a lot of these last minute measures to get revenue in will most likely not hold up in court since they did not go through the committee process and contain more than one item.

Our legislature can't even introduce bills right.

Our legislature hasn't been able to stick to the "one subject" rule since it was implemented.

Let's temper the "screw the oil companies" rhetoric with the real-world knowledge that those evil oil companies employ real, live, actual human beings who buy groceries, pay rent, income taxes, and otherwise participate in the economy. If we tax them into an uncompetitive environment, and they leave, we can feel great about screwing the oil companies, but it won't be much solace to the folks who will be out of jobs.

I'm *not* saying oil taxes shouldn't be part of this solution, not saying ANY political ox shouldn't be on the table for goring. And I'm not interested in some protracted debate about the oil tax issue. I'm just pointing out that real, working people are on the other end of those oil taxes, regardless of your or their political affiliation. I wish the budget situation were that simple.

As far as I'm concerned, bad or good, at least *someone* put *something* out there to start discussing. It could have been a starting point. But it was beaten down by politics as usual, so now we're back to nowhere with a $900M budget hole, and now a special session to try and solve it.
I didn't say screw the oil companies, I said have them pay 5%, that's 2% less than Texas. Still a great deal, plus Oklahoma doeasnt add ad valorem taxes on rigs like Texas does. If 5% in Oklahoma is screwing them, then it's highway robbery in Texas.

Just because you aren't getting your way doesn't mean it's a joke. Cutting the timeframe in half is still a tax increase. At 19months the tax rate is now 7% instead of 2%.
This deal does nothing for this years current billion dollar deficit. Also, it still allows a huge portion of the wells total output to not get taxed at a standard rate (most oil comes out very early in a wells life, then tapers off quickly). If we want to close the deficit, we need to tax the oil at a decent rate from day one. And by decent rate, I mean 5-7%, still below every other state that has oil under them.

I didn't say screw the oil companies, I said have them pay 5%, that's 2% less than Texas. Still a great deal, plus Oklahoma doeasnt add ad valorem taxes on rigs like Texas does. If 5% in Oklahoma is screwing them, then it's highway robbery in Texas.

Exactly. I'm missing where 5% tax screws the O&G companies.

This proposal would be similar to a restaurant charging 20 cents for the first beverage and 50 cents for refills. It would seem to this tax payer that the proposal is backwards. Good fiscal policy would be to encourage the continuation of an existing well by provideing a lower tax rate to continue the operation on the back end, not up front.

This proposal would be similar to a restaurant charging 20 cents for the first beverage and 50 cents for refills. It would seem to this tax payer that the proposal is backwards. Good fiscal policy would be to encourage the continuation of an existing well by provideing a lower tax rate to continue the operation on the back end, not up front.

The huge majority of costs on a well come up front in the drilling and set up. The idea is for the company's to be able to recoup their cost as quickly as possible so that they can drill again. There is not bunch cost to keep a well operating.

The huge majority of costs on a well come up front in the drilling and set up.

Then it serves to reason that is when the tax should be levied so the state benefits from having those resources extracted.

Then it serves to reason that is when the tax should be levied so the state benefits from having those resources extracted.



No, Nick. It is like when you buy a TV or a lawn mower. Most of those costs are up front so they let you skate on the 8% sales tax for a few years so you can save up for your next purchase. Oh wait...

No, Nick. It is like when you buy a TV or a lawn mower. Most of those costs are up front so they let you skate on the 8% sales tax for a few years so you can save up for your next purchase. Oh wait...

HA, exactly!

No, Nick. It is like when you buy a TV or a lawn mower. Most of those costs are up front so they let you skate on the 8% sales tax for a few years so you can save up for your next purchase. Oh wait...

Not at all 1. Drilling doesn't have a sales tax (buying the equipment does). And 2 it would be like buying a lawn mower or a tv. If every time you then mowed your yard or watches tv. You then had to pay the state forever

I didn't say screw the oil companies, I said have them pay 5%, that's 2% less than Texas. Still a great deal, plus Oklahoma doeasnt add ad valorem taxes on rigs like Texas does. If 5% in Oklahoma is screwing them, then it's highway robbery in Texas.

I was speaking in broad terms about what seems a general theme of villifying the oil companies in the midst of all this, not that this or that particular proposal was being cast in such a light. There's no magic bullet from any perspective that's going to solve a billion-dollar shortfall without a lot of proverbial oxes being gored.

I'm no oil expert by any means, but knowing some folks through our church who very much are involved, I know that "oil industry" doesn't always imply some rich fat-cat kicking back and smoking a cigar and drinking brandy in some form of mogul stereotype. "Oil industry" also means working people, too, and I think that gets overlooked, that's all.

Not at all 1. Drilling doesn't have a sales tax (buying the equipment does). And 2 it would be like buying a lawn mower or a tv. If every time you then mowed your yard or watches tv. You then had to pay the state forever


Oh, so similar to the tax for the gas for your mower and all of the state fees tacked onto your cable bill? Are those more or less than 2%? Do you get 18-36 months of a lower rate before it goes up?

Once again, perfect is the enemy of good. While reducing the exemption time doesn't directly provide an immediate benefit, the compromise and being willing to increase other taxes does.

I was speaking in broad terms about what seems a general theme of villifying the oil companies in the midst of all this, not that this or that particular proposal was being cast in such a light. There's no magic bullet from any perspective that's going to solve a billion-dollar shortfall without a lot of proverbial oxes being gored.

I'm no oil expert by any means, but knowing some folks through our church who very much are involved, I know that "oil industry" doesn't always imply some rich fat-cat kicking back and smoking a cigar and drinking brandy in some form of mogul stereotype. "Oil industry" also means working people, too, and I think that gets overlooked, that's all.

That is a very good point Dave. There just seems to be some very preferential for their industry.

Once again, perfect is the enemy of good. While reducing the exemption time doesn't directly provide an immediate benefit, the compromise and being willing to increase other taxes does.

It's not even good. We can talk more compromise once the proposal gets to good.

I was speaking in broad terms about what seems a general theme of villifying the oil companies in the midst of all this, not that this or that particular proposal was being cast in such a light. There's no magic bullet from any perspective that's going to solve a billion-dollar shortfall without a lot of proverbial oxes being gored.

I'm no oil expert by any means, but knowing some folks through our church who very much are involved, I know that "oil industry" doesn't always imply some rich fat-cat kicking back and smoking a cigar and drinking brandy in some form of mogul stereotype. "Oil industry" also means working people, too, and I think that gets overlooked, that's all.

But do you think that raising the GPT on the "oil industry" would really affect the "working people"? Is it enough of a burden that oil companies would start cutting back on hiring/laying people off/stop (or slow down) drilling? Personally, I (and many others) don't think so, but I'm not totally educated on the matter...

Mr. Sinclair who is in the afore mentioned oil business responds to what the ramifications would be to return the rate to 7%.
Restoring the new well gross production tax from 2 percent to Oklahoma’s previous level of 7 percent would reduce a well’s revenue by only about 2 percent to 3 percent, not enough to affect any drilling decision, since pre-drilling estimates of reserves, costs and prices can each vary by more than 50 percent. We drill where God put the hydrocarbons, not where the tax rate is lowest.

It's not even good. We can talk more compromise once the proposal gets to good.

Really? Compromise is about both sides not getting everything they want. Cutting some of the GPT exemptions is something. It's not everything. But it's not nothing. But hey, because it's not everything let's just do nothing. That's progress.

But do you think that raising the GPT tax on the "oil industry" would really affect the "working people"? Is it enough of a burden that oil companies would start cutting back on hiring/laying people off/stop (or slow down) drilling? Personally, I (and many others) don't think so, but I'm not totally educated on the matter...

I have no idea. Again, i wasn't talking about the specifics of raising the GPT; I was cautioning against a general herd mentality against oil companies because of a perception they're all just rich folks, that's all. If a change to the GPT makes sense and doesn't materially affect a company's decision to drill here, and then affect jobs, then that's a reasonable alternative to consider and probably why it was put out there.

Someone has to get started somewhere talking about something.

Really? Compromise is about both sides not getting everything they want. Cutting some of the GPT exemptions is something. It's not everything. But it's not nothing. But hey, because it's not everything let's just do nothing. That's progress.

When the situation dictates more immediate help, I think there needs to be more compromise on the GPT rate and we can address it again when we aren't a billion dollars in the hole.

I was speaking in broad terms about what seems a general theme of villifying the oil companies in the midst of all this, not that this or that particular proposal was being cast in such a light. There's no magic bullet from any perspective that's going to solve a billion-dollar shortfall without a lot of proverbial oxes being gored.

I'm no oil expert by any means, but knowing some folks through our church who very much are involved, I know that "oil industry" doesn't always imply some rich fat-cat kicking back and smoking a cigar and drinking brandy in some form of mogul stereotype. "Oil industry" also means working people, too, and I think that gets overlooked, that's all.

You make a good point about the working people in this industry, but raising the tax to the regional average will not impact these folks. As noted earlier the drilling companies will not go to New Hampshire cause the rate is lower. While not a church goer, I see teachers who are subsidizing the state by providing supplies out of their pocket. I see DOC and other state workers being impacted with no raises for the last nine years. I see little kids impacted because the school is running on a 4 day week. Schools on the OK- Texas border closing due to lack of teachers who now work in Texas. These people have already been forgotten by current leadership.

When the situation dictates more immediate help, I think there needs to be more compromise on the GPT rate and we can address it again when we aren't a billion dollars in the hole.

So we'll do nothing instead? I'd rather close 400 million than nothing but hey it's not perfect. So we'll get zero. That's so much better.

Well there is no way they are not having a special session now with the vote going down 51 YEA and 46 NO last night.

It was such a bad plan that not even one party could agree on it. I just get this feeling they should have started on this issue earlier in session?

I just get this feeling they should have started on this issue earlier in session?

I think there's no question on that. Even Fallon called them out for that.

I just get this feeling they should have started on this issue earlier in session?

Without a doubt.

I think there's no question on that. Even Fallon called them out for that.

I understand the legislature has to pass other bills besides revenue but it looks like again this year they just put it off.

I really hope people will vote all these people out next election. Or have that nice Austraila rule that if a budget isn't passed all members of the chamber are immediately up in a new election.

Or have that nice Austraila rule that if a budget isn't passed all members of the chamber are immediately up in a new election.

That's an interesting rule.

KOSU wrote an interesting article on how the democrat faction is actually on the same side as the conservative faction in this debate:

Republican John Bennett from Sallisaw represents the conservative Republican faction. They invoked the Republican Party Platform saying the way to close the budget gap is to shrink government.

"We need to be cutting the waste in state agencies, cut and protect is what we should do. Cut the waste and protect the vulnerable."

The House Democrats led by Scott Inman represent faction number two, even he was surprised he was on the same side as the conservative Republicans like John Bennett.

The Democrats main argument? They want it to be fair.

"Your solution, your courageous solution is to raise $400 million on the backs of middle income families and not ask the oil and gas industry this next year to offer one red cent to the bottom line."

And the last faction, the people who brought the bill. Republican Leslie Osborn says hypocrisy goes both ways. She said Republicans made a mistake, they cut too much money from the state budget to do the things that are right.

"We’re 49th in everything in this state. Obesity, smoking, educational outcomes. Are you proud of that? All you want to do is tread water. Let’s talk about it being a spending problem. Let’s listen to our conservative think tanks. Let’s go the way of Kansas and Sam Brownback. How’s that working for you?"

Osborn and Inman have it right, Bennett's an idiot. Do these "cut government spending" dumbasses have any kind of grasp on reality and how badly that's worked out pretty much everywhere?

Exactly. I'm missing where 5% tax screws the O&G companies.

We have good rock Texas has great rock.

Really? Compromise is about both sides not getting everything they want. Cutting some of the GPT exemptions is something. It's not everything. But it's not nothing. But hey, because it's not everything let's just do nothing. That's progress.

It's something, yes, but the actual net benefit of cutting the exemption period to is quite close to nil, all things considered. For the vast, vast majority of horizontally drilled wells, peak production occurs within the first few months after the well is completed, and then falls off drastically - by as much as 70% at the end of the first year. To illustrate, here's a graph of average oil well productivity in the Eagle Ford play:

13853
(Source: https://www.eia.gov/todayinenergy/detail.php?id=18171)

Horizontal wells in the STACK and SCOOP plays here in OK follow a similar trendline. As you can see, by the 18 month mark, production has mostly leveled off from it's peak, and therefore we've missed all of the gains that eliminating the GPT exemption would bring us. That's why the current "compromise" is a joke.

This deal does nothing for this years current billion dollar deficit. Also, it still allows a huge portion of the wells total output to not get taxed at a standard rate (most oil comes out very early in a wells life, then tapers off quickly). If we want to close the deficit, we need to tax the oil at a decent rate from day one. And by decent rate, I mean 5-7%, still below every other state that has oil under them.

They used to taper off quickly, the stuff getting drilling today has a less steep decline curve.

And you can piss and moan all you want but calling a jump in taxes from 2% to 7% isn't a "joke". Stop being so hyperbolic.

Looked at a house in Lawrence KS 2 yrs ago, and asked the realtor about Brownback and taxes. She said as a small business she paid no state income taxes, and then went to say no new jobs had been created. And lately the republicans tried to pass a tax increase, and while having a substantial majority vote, they couldn't overturn Brownback's veto. Imagine republicans raising taxes, in red Kansas!

Yea, Kansas's tax treatment of LLCs has become a complete joke. Apparently Bill Self formed an LLC so he pays no Kansas income tax on his $4M+ salary. Sort of surprising that they would allow a state employee to incorporate like that.

They used to taper off quickly, the stuff getting drilling today has a less steep decline curve.

And you can piss and moan all you want but calling a jump in taxes from 2% to 7% isn't a "joke". Stop being so hyperbolic.

You appear to be refuting the graph in post # 48 with the above comment, could you provide a source that supports this assertion.
For the second time in this thread you incorrectly label those who have disagreement with the proposal as attempting to marginalize them by claiming they call it a "joke". Check the hyperpole please.

You appear to be refuting the graph in post # 48 with the above comment, could you provide a source that supports this assertion.
For the second time in this thread you incorrectly label those who have disagreement with the proposal as attempting to marginalize them by claiming they call it a "joke". Check the hyperpole please.

*cough*


That's why the current "compromise" is a joke.

Post 48. The same one you reference.

And post 13.


The GPT "compromise" that moves the time we tax 2% from 36 months to 18 months is a joke.

They used to taper off quickly, the stuff getting drilling today has a less steep decline curve.

And you can piss and moan all you want but calling a jump in taxes from 2% to 7% isn't a "joke". Stop being so hyperbolic.

We're well aware you'll do anything defend the O&G industry, but it would merely be returning the GPT to the level where it was.

*cough*



Post 48. The same one you reference.

And post 13.

I stand corrected. Now if we could see some data on the first sentence of my post.

I stand corrected. Now if we could see some data on the first sentence of my post.

Can't help there. I don't know enough about the O&G industry.

It's something, yes, but the actual net benefit of cutting the exemption period to is quite close to nil, all things considered. For the vast, vast majority of horizontally drilled wells, peak production occurs within the first few months after the well is completed, and then falls off drastically - by as much as 70% at the end of the first year. To illustrate, here's a graph of average oil well productivity in the Eagle Ford play:

13853
(Source: https://www.eia.gov/todayinenergy/detail.php?id=18171)

Horizontal wells in the STACK and SCOOP plays here in OK follow a similar trendline. As you can see, by the 18 month mark, production has mostly leveled off from it's peak, and therefore we've missed all of the gains that eliminating the GPT exemption would bring us. That's why the current "compromise" is a joke.

This graph is on the Eagle Ford play in south central Texas. This is several years old. Newer technology has production better for longer. I have an interest in some horizontal wells and have been told by the geologist they should produce for 30 to 35 years. Fingers crossed he's right.

This graph is on the Eagle Ford play in south central Texas. This is several years old. Newer technology has production better for longer. I have an interest in some horizontal wells and have been told by the geologist they should produce for 30 to 35 years. Fingers crossed he's right.

You are correct, that graph is for the Eagle Ford play, as I mentioned in my post. I could not find one specifically for one of the various plays in Oklahoma, but practically all horizontal shale wells follow a similar trend. You are also correct that newer drilling techniques smooth that curve a little (as evidenced here: http://www.ogfj.com/articles/print/volume-13/issue-8/features/mixed-evidence-from-shale-well-decline-rates.html) but the fact is that initial production is still substantially higher than long-term production. Using Figure 1 on that page, for the best performing play depicted - the Permian Midland - initial production for an average well is around 750 barrels per day in the first 30 days. Over the rest of it's 30-year lifespan, that well will produce around 600,000 barrels of oil - but if you calculate that out, that comes to roughly 53 barrels per day. Now, my calculations do not precisely follow the decline profile of a shale well, but they do serve to illustrate the significant difference between initial production and average lifetime production after the steep decline. Again, that site doesn't cover Oklahoma-specific formations, but enough data is provided to be generally representative of the industry as a whole. If we don't tax exemption the initial production period at the same rate as the rest of the well's lifespan, we're leaving a *LOT* of potential revenue on the table. Simply shortening the 2% tax window is not enough to right this ship.

Dale Denwalt‏
@denwalt

"House Democrats are telling me there is a "pending" deal on revenue. If it's true, today could be a big day up here."

The huge majority of costs on a well come up front in the drilling and set up. The idea is for the company's to be able to recoup their cost as quickly as possible so that they can drill again. There is not bunch cost to keep a well operating.

Then why do they drill in any other state?