A significant drop in gross production tax collections on Oklahoma’s oil and gas wells could have a major impact on the state’s well plugging activities.
It’s the caution given Oklahoma Corporation Commissioners Thursday by the agency’s Chief Financial Officer Holly George.
“Gross production tax, in July and August,both had significant drops. And by significant, I mean 52% for July and 60% for August,” she said in a financial update to the commissioners.
The State Treasurer reported last week that total August tax collections were down 9% from a year earlier and Gross Production Tax collections on oil and gas fell from $205.6 million to $82.3 million, a decline of $123.3 million or 60%.
“How that’s going to affect us as a commission is the well plugging fund because the commission receives 10% roughly, so that will affect our well plugging collections.”
George said for the immediate time, the Commission is “sitting in a good position” because of the Infrastructure Investment and Jobs Act and federal grants it received to plug abandoned or so-called orphaned wells.
“But we’re going to see a significant drop in the collections for the actual fund.”
Oklahoma received an initial grant of $25 million in August of 2022 from the Biden Administration’s Bipartisan Infrastructure Law to begin work to plug, cap and reclaim orphaned wells in the state.
The state of Oklahoma has indicated that it will utilize this funding to plug 1,196 documented orphaned wells with priority given to wells that pose the greatest threat to health and human safety, the environment and personal property.
She also expects other fees to be impact as the state sees a drop in oil and gas production.
“So when production goes down, there are certain oil and gas fees, like intents to drill, that we will see as well.”
George anticipates more of an impact later in the year.
She also informed commissioners that the August 15 update from State Treasurer Todd Russ regarding financial institutions banned from state business because of their boycotting the oil and gas industry could affect the Corporation Commission.
“That list is updated and there are still some very large banks on that list and two in particular that we do business with is JP Morgan and Bank of America.”
George explained her office is waiting for direction from the Treasurer’s office “on what they really means.”
She said, “right now, it is just a list and there has not been any other action taken.”