McCall touts increase in ‘effective gross production tax rate’
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Published: 02-Nov-2017

OKLAHOMA CITY – Oklahoma Speaker of the House Charles McCall said Wednesday (November 1) he was pleased the House of Representatives voted to increase the gross production tax rate on over 6,600 oil and gas wells.

A press release from McCall’s office said the measure would provide “much needed funding to help fill the budget hole and increase teacher pay.” 
The measure, House Bill 1085X, garnered 64 votes for limiting the time frame on certain reduced rates on wells. An emergency provision then cleared with a stronger 75 vote margin. The measure’s prospects in the state Senate are unclear.  
"With today's vote, the House of Representatives has increased the effective gross production tax rate by two percentage points in less than two years, providing over $400 million in new revenue for the state," said Speaker McCall, an Atoka Republican.
"This latest measure increases the gross production tax rate from 4 percent to 7 percent on over 6,600 additional wells, providing us with $50 million this fiscal year alone. That's money we will use to fill the budget hole right away so we can act responsibly to prevent devastating cuts to our health care and mental health services."

McCall said the measure would result in $100 million in new revenue for next fiscal year, which can be used to fund the first $1,000 of the House Republicans’ “1-2-3”, $6,000 phased-in teacher pay raise plan.
McCall encouraged the Senate to act quickly to approve this measure along with the bills appropriating money from carryover and Rainy Day funds to health agencies that passed the House on Monday. 

William Savage III, writing for the NonDoc website, reported early Thursday the measure “would bring in more immediate money to fill the state’s current budget hole for health services, but its net impact would last only a year and a half because affected wells are set to reach 7 percent GPT on July 1, 2019.” (https://nondoc.com/2017/11/02/legacy-wells-band-aid/). 

It is not clear if the Senate, which supports a broader tax hike on oil and gas wells, will advance the House measure. Oil and gas advocacy groups are divided on the proposal.
Savage’s NonDoc story reflected that reality: “Oklahoma oil and gas companies are good at fracturing rock to procure petroleum, but the enormous pressure of an ongoing special session has exposed fissures in the industry’s advocacy efforts.”

According to the press release from Speaker McCall’s staff, if House Bill 1085X is approved by the Senate and Governor, the effective GPT rate will have been increased by 2 full percentage points since 2016, yielding $412.5 million in new revenue.


* November 2017: HB1085X moves all 4 percent legacy wells to 7 percent, yielding $50M in FY’18 and $100.5M in FY’19

* May 2017: The Legislature ended all Gross Production Tax rebates, yielding $46.3 million

* May 2017: The Legislature moved 1 percent legacy wells to 4 percent, yielding $95 million

* 2016: The Legislature placed a cap on the economically at-risk well rebate, yielding $120 million

* In 2016, Oklahoma’s effective gross production tax rate was 3.2 percent. Increasing the rate again on roughly 6,642 legacy wells changes the effective gross production tax rate to 5.3 percent, according to the Oklahoma Tax Commission. 

(NOTE: An effective GPT rate of 5.3 percent is above the regional average.)

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