To Comfort The Afflicted
And Afflict The Comfortable

To Comfort The Afflicted And Afflict The Comfortable

Thursday, February 25, 2021

Observercast

The Emperor’s New Clothes

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BY DAVID PERRYMAN

The Emperor’s New Clothes is a short story written by Danish author Hans Christian Andersen about two weavers who promise a vain emperor a new suit of clothes sewn from a fabric that they say is invisible to those who are unfit for their positions, hopelessly stupid, or otherwise incompetent. The emperor’s ministers cannot see the clothes themselves, but pretend that they can for fear of appearing unfit for their positions, and the emperor does the same.

When the emperor parades before his subjects in his new clothes, no one dares to say that they don’t see any suit of clothes on him for fear that they also will be seen as hopelessly stupid.

Attempts to mislead the public are not limited to fables and literary morals.

For 43 years, Oklahoma’s gross production tax [GPT] on oil and gas had been fixed at 7%. In 1994, during the experimental era of horizontally drilled wells, the Legislature enacted a temporary tax break to set the rate at 1% for horizontal wells. In 2014, the 1% rate became 2%, which was still well below the national average for petroleum producing states.

That tax break was extended several times as horizontal drilling matured from an exotic and expensive technology to a routine practice in well over 75% of the wells drilled in Oklahoma. That fact coupled with other technological advances such as 3-D seismology has been met with amazing success and no developmental dry hole for Continental since 2014, according to its U.S. Securities and Exchange Commission Form 10-K filing.

That same SEC filing shows that Continental’s production costs in Oklahoma [$1 to $1.13] costs less than 25% of the cost of its production costs in North Dakota [$4.59] even before North Dakota’s 10% gross production tax is taken into account.

Oklahoma’s lucrative tax breaks to the industry costs upwards of $300 million per year. It would seem therefore that Oklahoma’s generosity would guarantee that the industry would spend its operations budget here. However, according to page 66 of Continental’s SEC filing, it will be increasing operations in North Dakota and decreasing its operations in Oklahoma in 2017, formally debunking the fallacy that a low GPT will guaranty economic prosperity for Oklahoma.

The story of the Emperor and his new clothes ends when at long last a child in the crowd who is watching the parade and is too young to understand the social pressure of keeping up the pretense blurts out, “But he isn’t wearing anything at all!”

That is exactly what the citizens of the state of Oklahoma are feeling as they realize that they were tricked into believing that the gross production tax needs to be 2% instead of the historical rate of 7% before GPT was cut to the bone by elected state leaders who were wined, dined and donated to by an industry whose insatiable desire for obscene profits deprives Oklahoma’s children of an education, leaves our roads in a dangerous state of disrepair and tragically creates recurring fiscal failures that keep educators and public employees at subsistence wages.

David Perryman, a Chickasha Democrat, represents District 56 in the Oklahoma House

David Perryman
David Perryman
David Perryman has deep roots in Oklahoma and District 56. His great-grandparents settled in western Caddo County in 1902 as they saw Oklahoma as a place of opportunity for themselves and for their children. David graduated from Kinta High School then earned degrees from Eastern Oklahoma State College, Oklahoma State University, and the University of Oklahoma College of Law where he earned his Juris Doctorate. He has been a partner in a local law firm since 1987 and has represented corporations, small businesses, medical facilities, rural water districts, cities, towns, public trusts authorities and non-profit entities for more than 29 years. – David Perryman, a Chickasha Democrat, represents District 56 in the Oklahoma House