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Mazzei legislation would kill tax exemptions for marginal wells

Brian Hardzinski | KGOU

When state lawmakers return in February, they’ll have to write a budget that’s already $900 million in the hole.

But one that could help the budget could also hurt energy producers.

For the past decade, oil and gas wells owing more taxes than they earn in profit could claim a tax exemption. The claim wipes away nearly all the amount owed to the Tax Commission.

Supporters told The Journal Record’s Dale Denwalt without it, their wells would lose money and shut down:

“That’s about the dumbest thing I’ve heard in a long time,” said Ada oilman Mike Cantrell, chairman of the National Stripper Well Association, after hearing about Senate Bill 1024. “Why would we sacrifice our resources just because the price is down for a while? Why would we ever let a tax plug out a resource?”

Historical data show there is little consistency with exemptions claimed on economically at-risk wells. An analysis by the Oklahoma Policy Institute noted that claims made between 2004 and 2008 totaled $1.4 million, almost exactly the value of claims in 2010 alone.

The at-risk wells can receive an exemption equal to six-sevenths of the levied tax. Most that qualify are marginal wells that produce only a few barrels a day. Full Story