A new infographic from Together Oklahoma, a coalition which includes Oklahoma Policy Institute, shows why Oklahoma needs to reign in a tax break for horizontal drilling.
What It Means for Oklahoma Schools
The cost of Oklahoma’s tax break for horizontal drilling has skyrocketed, and it is draining funding from Oklahoma schools.
By allowing the tax break to expire, more than $250 million could be made available to Oklahoma schools, enough to restore funding that was cut during the recession. Revenue from eliminating the tax break could boost school funding by as much as $370 per pupil this year.
Oklahoma has traditionally taxed oil and gas production at 7 percent, but horizontal wells are currently taxed at just 1 percent for the first 4 years of production. The tax break for horizontal wells was created in the 1990s when this technology was experimental and risky. Now a large majority of new wells in Oklahoma are drilled horizontally, and as the result, the cost of the tax break has grown from $36 million in 2008 to $252 million this year. The tax break increased by $216 million over the same period that Oklahoma’s school funding formula was slashed by $213 million.
The tax break is scheduled to phase out next year, but executives for three of the largest oil companies in Oklahoma are pushing to make the tax break permanent at 2% for both horizontal and vertical wells.
Together Oklahoma has also made available a video summarizing the issue.