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May 29, 2014

Fallin OKs drilling incentives expected to benefit local economy

OKLAHOMA CITY — Gov. Mary Fallin on Wednesday signed into law a bill that makes permanent a drilling incentive program for oil and natural gas companies operating in Oklahoma.

House Bill 2562  will affect all new wells drilled after July 1, 2015.  

Chris Deal, president of the Duncan Chamber of Commerce and Industry, welcomed the drilling incentives, saying they will create more jobs during the next several years in Stephens County and the surrounding region.

“We’re hoping it will bring in more investment,” Deal said. “The potential here is great.”

He noted the incentives will apply not only to larger companies that drill horizontal wells but to smaller companies that still drill vertical wells at shallower depths.

The new law calls for production from all new wells to 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.  

Opponents of the drilling incentives said it will cost the state hundreds of millions of dollars in potential revenue and that energy companies would continue drilling with or without the tax breaks.

HB 2562 will replace gross production tax incentives that are set to expire next year. That program has a 1 percent tax rate for horizontal wells  for the first 48 months of production. That rate would have risen to 7 percent without the passage of HB 2562.

“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.”

 

 

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