Oklahoma Oilman Wants Higher Energy Taxes Back to Blog
Oklahoma oil man George Kaiser is breaking with fellow energy executives in asking the state to raise taxes on oil companies, including his own. “Oklahoma is in desperate financial circumstances,” says Kaiser, who controls closely held Kaiser-Francis Oil Co. A higher tax on oil-and-gas production could help the state pay for education and much needed infrastructure improvements, he says in a prepared statement. Raising the production tax “doesn’t move the needle in the decision to drill.” Several of Mr. Kaiser’s peers in the industry disagree with his analysis. Energy companies say that lower tax rates for the costliest oil and gas wells are necessary to continue drilling at a pace that has stimulated economic activity and created other sources of revenue. The Oklahoma Chamber of Commerce backs a proposal by Continental Resources Inc., Devon Energy Corp. and Chesapeake Energy Corp. that would replace an expiring low tax rate with only a slightly higher one. Energy companies in Oklahoma currently pay a 7% tax on oil and gas revenue. But to encourage drilling with more costly shale wells, which burrow down and then turn horizontally, the tax rate is 1% for the first four years. Continental, Devon and Chesapeake propose a permanent 2% tax rate for the first four years of oil and gas production from all new wells, whether vertical or horizontal. Most new wells are horizontal. Mr. Kaiser proposes that the rate for new wells rise to 7% but says a reasonable compromise would be 3.5% for the first two years of a well’s life. Will drilling permits decline if higher taxes are imposed? Time will tell, but Mr. Kaiser will have few friends to support his proposal.