Barbara Hoberock
Tulsa World
A disagreement over how much taxes should be paid on horizontal wells has cost the incoming leader of the Senate minority party his job, sources said Tuesday.
Senate Democrats had tapped Sen. John Sparks, D-Norman, to be the minority leader to replace Sen. Sean Burrage, D-Claremore, who is not seeking re-election.
But they changed course following a guest column that Sparks penned in the March 21 Journal Record. The Senate Democratic Caucus then tapped Sen. Randy Bass, D-Lawton, as its new leader, according to sources.
Bass and Sparks on Tuesday declined to comment.
Currently, gross production taxes on horizontal wells are 1 percent for the first 48 months. After that, the rate jumps to 7 percent. The tax break is set to expire July 1, 2015, said Jeff Wilson, vice president of governmental relations for the Oklahoma Independent Petroleum Association.
State leaders have yet to reach a decision on whether the rate will stay at 1 percent, jump to 7 percent or be somewhere in between.
Meanwhile, measures to reduce the state’s top income tax rate are moving through the Legislature.
In the March 21 Journal Record article, Sparks said “it’s bewildering that some of Oklahoma’s most high-profile elected officials are trying to raise taxes on oil and gas under the pretense that the industry needs to pay its fair share.”
In the column, he suggested that eliminating the incentive had the potential to lower production, reduce royalty income and cause a loss of jobs to neighboring states.
The tax break costs the state $164 million last year and is projected to rise to $251 million this year, says the Oklahoma Policy Institute. The organization recently sponsored a poll that found that voters support eliminating the break to provide more funding for education, public safety, highways and other needs.
“Our industry pays well over $800 million in gross production taxes each year,” Wilson said. “I think the gross production tax rate reduction we receive encourages more oil and gas development in the state and is responsible for our activity, which equates to about 22 percent of current revenue the state spends in its budget each year.”
Meanwhile, the OIPA is sponsoring a “Rally for the Rigs” at the Capitol on Wednesday.
“Oil and natural gas production is the state’s most vibrant industry,” the organization stated. “Taxes from oil and gas production and its related businesses make up 25 percent of all taxes paid in the state. The rally is designed to give state lawmakers the chance to meet and hear from the men and women of the oil and gas industry whose livelihoods are impacted by legislative decisions impacting the industry.”
