As the debate continues on how to fill the state’s $878 million budget hole, Continental Resources Inc. CEO Harold Hamm on Thursday warned that Legislators should avoid raising taxes on the state’s oil and natural gas industry.
“It would be a huge deterrent on activity in Oklahoma,” Hamm said in an interview after his company’s annual shareholder meeting Thursday morning. “To raise the gross production tax on the industry when prices are below $50 for oil and below $3 for natural gas, that’s unconscionable. That sends the wrong message. We can’t always go back to the trough of loading up on oil and gas every time the state needs revenue.”
Republicans in the Legislature so far have tried to address the shortfall with new taxes on cigarettes, gasoline and other goods and services. Democrats led by House Minority Leader Scott Inman have called the effort a regressive tax plan that would increase taxes on goods and services most disproportionately used by lower income Oklahomans while taxes on the oil and natural gas industry and the states’ income tax rate have declined in recent years.
The Legislature three years ago set the base gross production tax rate at 2 percent for the first three years of production before it increases to 7 percent. Previously, the rate was 7 percent, but horizontal drilling — which represents the vast majority of current drilling — was taxed at 1 percent for the first four years as an incentive that was set to expire 2015.
As a result, industry leaders say the initial gross production tax rate doubled from 1 percent to 2 percent, while others say the rate was lowered from 7 percent to 2 percent.
Both are correct, depending on the perspective. But the cumulative result is that the overall effective gross production tax rate — which includes all production taxes and incentives — declined to 3.2 percent in fiscal year 2016 from 6.25 percent in 2012, according to the Oklahoma tax…