Oil and gas incentives have regularly received wide bipartisan support because they ultimately benefit the state, the chairman of the Task Force on State Tax Credits and Economic Incentives said today.
Rep. David Dank said oil and gas is the backbone of Oklahoma’s economy.
“I think anyone who studies Oklahoma history or looks at our current economic situation knows that, without the oil and gas industry, Oklahoma’s economy would resemble that of a Third World country,” Dank (R-Oklahoma City) said.
“Not only has the oil and gas industry been the backbone of our economy for most of our history, but the proven reserves still in the ground and the new technologies for extracting them will continue to keep it in place for decades to come.”
The gross production tax exemptions for horizontal drilling, deep wells and enhanced recovery methods give oil and gas businesses a rebate of six-sevenths of the 7-percent gross-production tax paid on oil and gas produced from certified products. The cost to the state is more than $100 million annually, but supports an industry that contributes almost one billion dollars to the state budget in some years, Dank said.
“This is a high-risk industry with potential high rewards and that is one reason the tax incentives we grant it make sense,” Dank said. “Oklahoma gets an enormous return from this industry. Gross production taxes are the third biggest contributor to our state budget.”
Dank also discussed insurance premium tax credits given to insurance companies that maintain home offices in the state.
“You not only have to create a job to qualify for the credit, you also have to keep that person working long term,” Dank said. “That’s good, but there are some areas I think we need to examine for the future. Certainly, we should not renege on any existing agreements, but we need to take a look at creating an end-game provision to establish a time limit on these tax credits. As they currently operate, a company can receive an annual tax credit on a perpetual basis and that is an open-ended commitment I think we need to look at.”