BY MARK Y.A. DAVIES
Harold Hamm and Larry Nichols are desperate to keep Oklahoma’s gross production tax on oil and gas at extremely low levels because they know that if they keep it low again this year, they will likely be able to keep it low for a number of years to come.
Here’s why: They know that the Saudis are cutting back on production to stabilize and increase global oil prices. They also know that the Oklahoma Legislature they own will likely pass lessened restrictions on long lateral horizontal drilling in non-shale formations. In other words, Hamm and Nichols know that a boom is likely on the horizon, and they want to enjoy that boom with the lowest GPT possible.
They also know that with a boom on the horizon there will be an increase in drilling and production and therefore an increase in revenue coming to the state from GPT even if there is not a restoration of a higher GPT. The increase in revenue will by no means cover the budget shortfall, but it will be an increase.
When this happens, Hamm and Nichols will say “See, the Oklahoma Legislature did the right thing by keeping the GPT low because it led to an increase in production and therefore an increase in revenue for the state, and they will create a bunch of fancy videos with the chamber of commerce and the Oklahoma Energy Resources Board touting the return of economic prosperity to OKC and Oklahoma and highlight oil and gas as the fuel for that prosperity.
What they won’t tell you is that the increase in drilling and production that will likely occur in the next couple of years will have almost nothing to do with a low GPT rate and will have almost everything to do with global oil and gas prices, and perhaps some to do with less strict environmental regulations that will endanger our health and the climate over the long run but make it cheaper to drill wells and transport oil and gas.
They also will not tell you that in the last boom we cut education more than any other state owing to all of the tax cuts we keep giving to the wealthy and the oil and gas companies.
The oil and gas companies will have so much extra money from the coming boom that they will be able to increase their charitable giving, which will still be a tiny fraction of what they should be paying in taxes, and they will use this tax deductible giving as free advertising to claim that they are responsible corporate citizens even though many of the agencies they donate to might not need to exist if they paid in taxes here what they have to pay in other states.
The problem is that enough people keep believing this charade of greed and will thank the oil and gas companies for leading the state from a more horrible state of hell to a less horrible state of hell, and our politicians and their oil and gas patrons will pat themselves on the back for keeping the GPT low, which will mean billions to the oil and gas companies in the years ahead while our schools, hospitals, mental healthcare, and other basic services continue to languish; and we gullible Oklahomans will likely continue to reward them for this charade.
This is why it is so critical to restore the 7% GPT now, so we can enjoy a reasonable recovery towards a more flourishing state in the years ahead. Will we have the political will to make these changes, or will it continue to be the same as it ever was?
Oh, and by the way, with higher global oil and gas prices and higher production, there will be more waste water produced; so unless we figure out a way to deal with that appropriately, get ready for some more shaking, and guess who gets to pay for the earthquake damage?!
– Mark Y.A. Davies is the Wimberly Professor of Social and Ecological Ethics and director of the World House Institute for Social and Ecological Responsibility at Oklahoma City University. Click here for more of his essays.