Posted on 06/15/2014 9:04:06 PM PDT by ckilmer
Oklahoma is poised to cash in from the ongoing U.S. oil boom, according to one of the nation’s foremost experts on the topic.
Continental Resources Inc. CEO Harold Hamm said tax incentives meant to encourage horizontal drilling have done their job, as Oklahoma’s oil production is steadily increasing.
Oklahoma produced 388,000 barrels of oil a day in March, marking its highest output in 25 years, according to the U.S. Energy Information Administration
That is up 17 percent over March of last year, 49 percent over March 2012 and 80 percent over March 2010.
“That’s the whole horizontal drilling story right there,” said Warren Henry, Continental’s vice president of research and policy.
Hamm said it took some time for drillers to learn the best techniques for horizontal drilling in Oklahoma, but they now are applying those methods in more than a dozen different resources plays around the state. He estimated that many more remain to be explored.
He said he is pleased state lawmakers adopted a gross production tax proposal little changed from the plan put forth by Hamm and two other Oklahoma City energy leaders, Devon Energy Corp. Executive Chairman Larry Nichols and Chesapeake Energy Corp. CEO Doug Lawler.
They suggested a 2 percent tax on the first 48 months of production from all wells drilled in Oklahoma, while opponents wanted a return to 7 percent. The Legislature approved and Gov. Mary Fallin last week signed into law a rate of 2 percent for the first 36 months of production. It will go into effect next summer, replacing an expiring incentive program.
The state historically has assessed a 7 percent gross production tax, but lawmakers created an incentive for horizontal drilling in 1994. The incentive initially lowered the tax rate to 1 percent for the first two years or until costs were recovered. It was extended to up to four years in 2002.
“It worked out like everybody hoped,” Hamm said. “We’re drilling very expensive wells, but overall we’re seeing a nice increase in production for Oklahoma.”
He said the new tax program will not hinder Oklahoma’s participation in the nation’s ongoing “oil and gas renaissance.”
Oklahoma currently is the nation’s No. 5 oil producer, according to Energy Information Administration numbers, but Continental officials predict the state could leapfrog California and Alaska in the next year of so. That would leave it behind only oil titans Texas and North Dakota.
“We’re so lucky that Oklahoma is an oil and gas state,” Hamm said, a day after state officials announced tax collections on oil and natural gas production in May rose almost 28 percent over last year.
He said producers are finding oil in plays that are spread across Oklahoma.
“It’s not just one play like the Bakken (Shale in North Dakota),” Hamm said.
Oklahoma is nearing production of 400,000 barrels of oil a day, a threshhold not seen since June 1986.
How’s it look in the past 20 years.
When you said “in” I thought you meant present day and not old history. This article is about relatively recent changes.
Oh come on, this is delusional.
When Alaska is down from 2+ million bpd to 500K and then nudges up 50K or 100K, that’s not a celebration event and cause to punch the air in optimistic glee.
That’s just noise.
Nudging up is hardly a sharp decline.
By the way, Alaska is one of the few real producers not even nudging up. They only recently fixed their horrible ACES profit-taxing plan and the companies are back to some better investments now for future production.
So will the state lower taxes or will the (Dem) parasites consume the surplus?
Quick, cut taxes before the parasites smell a surplus.
Oklahoma Legislature Passes Controversial Tax Incentive for New Oil and Gas Wells
http://stateimpact.npr.org/oklahoma/2014/05/23/oklahoma-legislature-passes-controversial-tax-incentive-for-new-oil-and-gas-wells/
House Bill 2562 replaces a tax incentive for horizontal drilling with one for both horizontal and traditional, vertical drilling.
The incentive reduced state taxes on oil and gas production, set at 7 percent, to 1 percent for the first four years of production. Horizontal drilling is now common practice and employed in most new wells drilled in Oklahoma.
The incentive expires in 2015...
It will be at least two years before we hit a surplus. But the likelihood is that Obama will go out in 2016 with a budget that is nearly balanced. The democrats will have had nothing to do with that balanced budget. They will have fought tooth and nail to prevent that from happening. But they will claim credit for it.
Same thing happened with Clinton. He fought Newt tooth and nail to prevent a balanced budget and then took credit for the balanced budget once it was achieved.
Why the need for subsidies/crony capitalism?
Wasn’t that a Palin tax?
Reducing a tax that is only applied to one industry is considered a subsidy? How about all the other industries that don’t pay this tax at all?
Yep. It took years to even begin to undo the damage while most of the oil producing states grew in production.
I was just curious. This is an industry specific tax that they simply reduced? Why is the petroleum industry targeted for special/unique taxes?
Be careful. If someone catches you pointing out the clay feet of the Goddess...
This is an industry specific tax that they simply reduced?
Yes, this is called the gross production tax which is in addition to royalties and income and property taxes. To my limited knowledge, no other industry pays taxes on gross volume, only profits after costs.
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Why is the petroleum industry targeted for special/unique taxes?
Because big oil has lots of money and can afford it, don’t ya know. That’s why grandma has the oil company stock, because she can afford to pay more taxes.
Extra taxes on oil/gas are the normal in most locations. In Alaska, only oil/gas property pays property tax to the State. All other property is only taxed by the local municipality, which oil/gas pays as well. They never quit squeezing the golden goose.
I always find claims of government subsidy to oil/gas companies laughable. In reality, oil companies subsidies government; typical government take is 2~4 times the profit kept by oil/gas companies.
It wouldn’t be the first time. I was working the industry in Alaska at the time the tax was started, and put in retroactively. New work was shut down; my team fell to 1/3 its size. It helped motivate me to return to Texas.
I suspected that and had heard about it, but you know about “hearing” about things. I like it straight from the horse. Thanks and I appreciate your postings as always.
ExxonMobil for example,
profit kept from total revenue = 7.7%
taxes paid from total revenue = 21.7%
Government makes 3 times the money than this company does from the sales.
http://www.sec.gov/Archives/edgar/data/34088/000003408814000012/xom10k2013.htm
Ref page 36 & 53
Wow, we’ve really been snookered as a people. Imagine if those taxes were plowed back into energy development or used in the productive sector?
I had always thought of Alaska as a conservative, frontier-like place of laissez-faire, only to find out it’s a welfare queen.
I had always thought of Alaska as a conservative, frontier-like place of laissez-faire, only to find out it’s a welfare queen.
A previous FReeper described it to me as "Redneck Socialist". I lived there for 4 years. A beautiful place, but his description had a little too much truth in it.
Conservatism usually respects and embraces normal and natural phenomena. It’s frequently astonishing to me how it often doesn’t respect and embrace the normal and natural inexorable decline of net oil joules.
Downward is inexorable and inescapable reality, and it’s normal and natural for US oil — especially when faced with the utter explosion of Chinese consumption. These progressive notions that tax policy can change the reality of a glass that is being drained eventually goes empty are frankly shameful, and they are the sort of notions that lead to refusal to burn up everyone elses oil first and eventually have complete global dominance.
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