Benge, Anderson, Sparks propose energy stabilization fund
By Patrick B. McGuigan
A bipartisan trio of legislators today (Tuesday, February 23) outlined plans to create a state energy stabilization fund. Object of the effort would be to ameliorate the effects of energy price volatility in the state revenue collection process.
House Speaker Chris Benge, a Tulsa Republican, told reporters, “We look at this as a smoothing mechanism. Part of the idea is to use money from interest and invest that in energy research. We’re trying to think long term.”
The proposed measure is House Bill 3032, and is slated for consideration in the House Appropriations and Budget Committee on Wednesday (February 24).
In material prepared for distribution at a Capitol Press Room event, the Speaker’s office described the plan this way: “The plan calls for an automatic collection of any gross production taxes above a simple three-year average for deposit into the fund. In years when gross production taxes collected fall below the three-year average, the fund will automatically deposit the difference into the state’s general revenue fund to help mitigate budget shortfalls. The automatic deposits and collections will help minimize the impact of the constant fluctuations in energy prices, which often heavily influence revenue collections and the state budget.”
Further, the statement explained the measure eventually to emerge “would set aside the interest collected off the principal of the fund for enhanced energy recovery research. Recent technology, including enhanced oil recovery using carbon dioxide and hydraulic fracturing for natural gas, has helped to expand America’s domestic energy supply.”
CapitolBeatOK asked Speaker Benge what the time frame might be for putting a new idea like this into place. He replied, “We hope we can take some of the steps this session. Getting the whole thing done this session might be hard, but we hope to make a start.” He told reporters that a constitutional approach might be required, but that organizers of the effort plan to take initial steps through statutes, and then discern whether constitutional changes might be needed.
A House staff fiscal analysis estimated the $576 million would have been deposited in the anticipated account and available for use in the current fiscal downtown, had the plan already been in place.
Senator Patrick Anderson of Enid, a Republican member of the Senate Appropriations Committee, joined in announcing the effort. Anderson said he has been concerned with declines in natural gas and oil production over recent years, and that volatility in revenue collections has been a detriment to the planning process. Despite challenges facing the state energy business, “the resources are still there. I’m glad that the speaker has acted, stepped forward and will work to make the stabilization fund a reality.”
Commenting on Anderson’s focus on production, and the need for research, Speaker Benge said, “The belief is that there is as much oil and gas in the ground as has been recovered since statehood, but that what’s there will be difficult to recover.” The Speaker said, “We figured out these were complementary ideas. “
Senator John Sparks, a Norman Democrat, rounded out the three elected officials making the announcement. Sparks told reporters the new effort was “the next step in a long-term project. We’ve looked at what others states are doing and tried to learn from them.” Similar stabilization funds exist in Wyoming, New Mexico, Alaska, and in Alberta, Canada, he said.
In his prepared statement, Sparks elaborated, “I think we can all agree that our state could have definitely used those funds to help us weather this economic downturn. Passage of this legislation will help prevent depressed natural gas prices from having such a dramatic impact on Oklahoma’s budget.”
Benge said the work ahead would include consideration of a statutory versus a constitutional approach. He agreed with one reporter that a constitutional approach might assure more stability, saying that if the idea were implemented simply as a statute, “A future legislature might want to tap the money in a hurry rather than allow the stabilization process to work.
In other comments, Benge said, “The general feeling has been that GR was a good hedge for everything, a way to smooth things out, but this recent experience has sensitized us all to volatility. It’s clear the energy climate has changed. China and India are consuming a lot of energy and that keeps demand up, still problems with volatility and unpredictability. “Over the years, many has discussed the need to reduce the state’s exposure to the incredible volatility and smooth things out.”
CapitolBeatOK also asked if the new stabilization fund might be considered part of a “holistic” approach to budget and revenue challenges in the forecasting area. He replied, “‘Holistic’ might not be the right word. I can say we are certainly trying to take this portion of the budget that is most volatile and make it smoother.”