Tax Rebate Program for At-Risk Oil Wells Cut with Governor’s Signature

 

rebate

The measure cutting Oklahoma’s tax credit for at-risk oil wells to $12,500,000 a year was signed into law Monday by Gov. Mary Fallin.

Senate Bill 1577 was sent to her last week after the legislature debated its merits. The cost-cutting move came after experts decided that falling energy prices might increase the credit to even more than it currently is.

Under the original tax credit bill, an “economically at-risk oil or gas lease” was one that had one or more producing wells with an average production volume per well of ten barrels of oil or sixty MCF of natural gas a day or less operated at a net loss or at a net profit less than the total gross production tax remitted for the lease. It also gives the Oklahoma Tax Commission the sole authority in determining if an oil or gas lease qualifies for certification as an economically at-risk oil or gas lease.

The State House originally amended SB 1577 with a $25 million annual cap on the tax rebate but a second amendment reduced it to $12.5 million for the calendar years 2015-2020. The move to cut the rebate came about as the State government’s budget hole soared to $1.3 billion and the rebate program swelled to $130 million in the economic downturn.

SB 1577 was co-authored by Senate Pro Tempore Brian Bingman and House Speaker Jeff Hickman. It wasn’t filed until May 2 and during debate, Oklahoma City State Sen. Ralph Shortey argued against cutting the rebate, saying, “The smallest of the smallest are going to be hurt dramatically.”

In the end, the Senate passed the House amendments on a vote of 45.2.