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Oklahoma Business

These nice energy execs don’t like paying taxes…

hamm nichols lawler

Over the weekend, the mega-wealthy CEOs of our big three energy companies – Harold Hamm (Continental Resources), Larry Nichols (Devon Energy), and Doug Lawler (Chesapeake Energy) – partnered with the The Oklahoman to pitch a new, totally reasonable tax plan on horizontal drilling production.


Executives from three of Oklahoma’s largest oil and natural gas companies have proposed a new plan for the state’s tax on oil and natural gas production.

The proposal is the latest offering in the ongoing struggle at the Capitol to address the current tax plan, which is set to expire next year.

The newest proposal would change the gross production tax rate to 2 percent for both horizontal and vertical wells for the first four years of production. The rate would then rise to 7 percent. The proposal has earned the backing of Larry Nichols, executive chairman at Devon Energy Corp.; Harold Hamm, CEO of Continental Resources Inc.; and Chesapeake Energy Corp. CEO Doug Lawler.

“We’ve come up with a proposal that makes the tax simpler, makes it permanent, treats everyone in the industry the same way so it’s totally fair for everyone in the industry,” Nichols said. “It has a modest tax increase to it and continues the economic activity, which benefits everybody.”

Boy, we sure are lucky to have a trio of nice businessman available to come up with a "simpler," "permanent" and "totally fair" taxation plan for their own industry. Obviously, these guys and their for-profit companies that have earned billions of dollars in revenue by draining Oklahoma resources know the best way they should be taxed. It's why we let car dealers determine motor vehicle excise taxes, give bars the power to set liquor taxes, and let rich Republicans lower the top income tax rate.

Of course, I have to ask. Why do we need this new reasonable plan?

The state historically has assessed a 7 percent tax on most oil and natural gas production. In 1994, the Legislature created an incentive for horizontal drilling. The incentive initially lowered the tax rate to 1 percent for the first two years or until costs were recovered. In 2002, the incentive was extended to up to four years.

The incentive program is set to expire next year in a move that would return the tax rate to 7 percent. Industry leaders have said the tax credit should be extended because it has been successful in boosting drilling throughout the state, and that higher taxes would leave less money available for drilling.

Critics, however, say the tax credit has served its purpose and is no longer necessary. They point out that the lower rate was put in place when horizontal drilling was new and risky, but that it now represents about 90 percent of the drilling activity in the state.

Oh, well that's interesting. Let's see what George Kaiser, one of the richest men in the world, and the owner of Tulsa-based Kaiser-Francis Oil Co. thinks about the fair deal these energy execs and their well-compensated lobbyists have worked out for us:

The plan has drawn swift criticism from others in the state, including fellow oilman George Kaiser, who said he is concerned the state regularly is among the lowest in the country in teacher pay and health care.

“I have lived here for more than two-thirds of the life of the state. I see what’s happening to the state,” said Kaiser, owner of Tulsa-based Kaiser-Francis Oil Co. “Something has to give. I’m prepared to pay my fair share to the state of Oklahoma.”

Kaiser said he would like to see oil and gas companies — including his — pay 7 percent in gross production taxes.

Wait a second? He thinks the tax on horizontal drilling should jump from 1% to 7%? WTF, the guy knows he's Oklahoma energy exec, right? Lower taxes for him and his companies means the wealth will trickle down to the rest of us...right?

Obviously, the differing views of rich, powerful Oklahoman energy execs puts our pandering politicians in a tough spot. Whose side do they take? The publicly traded energy companies that donate to campaigns, employ thousands of Oklahomans, and want what is best for out-of-state shareholders, or the billionaire philanthropist who donates to campaigns, employs thousands of Oklahomans, and wants what's best for Oklahomans?

Gov. Mary Fallin’s office indicated a willingness to discuss the 2 percent proposal.

“The governor is inclined to support the concept and thanks the industry and Legislature for collaborating in the review process we recommended last summer,” Secretary of Finance Preston L. Doerflinger said.

Shocking, huh?

Even though they're obviously in the Devon / Continental / Chesapeake corner, The Oklahoman actually does a decent job reporting on both sides of this issue. Granted, this is probably because they don't want to piss off Kaiser, whose other company, Bank of Oklahoma, advertises in the paper, but progress is progress. Hell, they even included a weasely pick of Harold Hamm trying to swindle someone:

harold hamm

For what it's worth, I'm Team Kaiser on this debate. For one, the guy's not Mary Fallin. Two, he's a successful billionaire who seems to know what's right. Three, he seems to want what's best for Oklahoma and not shareholders. Plus, he's the chairman of Bank of Oklahoma. Maybe they'll advertise on this site.

Seriously, why should horizontal drilling be treated any differently? The 1% deal was created as an incentive to lure business, the incentive worked, and now we should tax horizontal drilling just like we do everything else. The state shouldn't play favorites. Also, I don't believe the threat that a higher tax will decrease local energy production. That's just the energy execs playing chicken. If history has taught us anything, it's that energy companies will suck out oil anywhere they can find it. If we have it, they'll get it, and we should be fairly compensated for it. Seems fair and reasonable, right?

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