Chairman of task force scrutinizing state tax credits, exemptions says those for Oklahoma's oil, natural gas industry unlikely to be scaled back because they support jobs; state paid US$150M in gross production tax refunds in fiscal year ended June 30

Rachel Carter

OKLAHOMA CITY , September 29, 2011 (Associated Press) – Okla. task force studies tax credits and incentives for home offices, oil and gas production

State tax credits awarded to Oklahoma's oil and gas industry help support thousands of jobs across the state and are unlikely to be scaled back, the chairman of a task force that is scrutinizing some of the state's estimated $5 billion in tax credits and exemptions said Wednesday.

Oil and gas industry executives appeared before the House Task Force on State Tax Credits and Economic Incentives to discuss the benefits of tax credits for deep oil and gas production wells, wells drilled horizontally and other expensive, high-risk ventures they said help support about 300,000 jobs in the exploration and production fields and their support industries.

"There are tens of thousands of people working at good-paying jobs in our state who would simply not be there without the oil and gas industry," said the task force's chairman, Rep. Dave Dank, R-Oklahoma City. Dank told reporters following the meeting he expects no changes in the tax credit package for oil and gas producers.

"Job creation has always been a recognized benefit of incentivizing a business," Dank said. "I can't say enough good things about the oil and gas industry."

Harold Hamm, the founder and CEO of Enid-based Continental Resources, Inc., said his company currently employs 600 people and plans to add another 461 employees in the next seven years. But he said expansion plans at his company and others in the industry might be abandoned if state tax incentives were eliminated.

"It's very important," Hamm said.

Lawmakers are studying the economic impact of state tax incentives to determine if some can be eliminated to help support a state budget that has experienced hundreds of millions of dollars in revenue shortfalls in recent years.

At previous meetings, lawmakers have studied tax credits for building energy-efficient homes and a five-year exemption from local property taxes for qualifying manufacturing facilities.

Dank, a longtime critic of state tax breaks, said he believes tax incentives for the state's oil and gas producers are some of the most effective job-producing incentives the state offers.

"When you hire people, they pay taxes. And it benefits everybody," Dank said. Taxes paid by oil field workers and executives support public schools, roads and bridges and other vital state services, he said.

The state provides exemptions for horizontal drilling, deep wells and enhanced recovery methods totaling six-sevenths of the 7-percent gross-production tax paid on oil and gas production.

The state paid out $150 million in gross production tax refunds in the fiscal year that ended June 30, but Dank said oil and gas production is the third largest source of state revenue and provided $817 million in gross production taxes last year.

"The bottom line on oil and gas incentives is that this industry really is our whole state's bottom line," Dank 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."

Dank also said he expects few changes in another tax credit offered by the state, the so-called Home Office Tax Credit that provides insurance premium tax credits to insurance companies that maintain home offices in the state.

Officials from the Oklahoma Insurance Department told task force members that the tax credit, which returned $15.7 million to insurance companies in the previous fiscal year, is an important tool in marketing the state as a good location for an insurance company's headquarters. The total premium tax collected was $172 million.

"If we can get companies to locate here, that's going to create jobs," said Keith Kelley, director of marketing for the agency.

"It does bring jobs and capital to our state," Kelley said.

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