American Oil and Gas Reporter - July 2016 - 28

State Legislative Reports

Marginal Wells Take Hit In Oklahoma
By Del Torkelson
OKLAHOMA CITY-Weak oil and
natural gas prices and the industry's
relative inactivity have taken a substantial
bite out of Oklahoma revenues. That
meant the state's lawmakers spent much
of the 2016 legislative session wrestling
with a fiscal crisis that was resolved only
with a $1.3 billion budget that identified
clear winners and losers, says Oklahoma
Independent Petroleum Association Vice
President of Legislative Affairs James
Roller. And, he asseses, oil and gas producers were among those who took a
direct hit.
According to Roller, Oklahoma's marginal well operators suffered their loss
when lawmakers passed SB 1577, sponsored by House Speaker Jeffrey Hickman,
R-Fairview, and Senate President Pro
Tempore Brian Bingman, R-Sapulpa.
The legislation caps at $12.5 million,
Oklahoma's tax exemption for economically at-risk oil and gas wells and limits
qualifying wells to an output of no more
than 10 barrels of oil a day, Roller says.
He adds the measure will cost the industry
$122 million in tax refunds.
Wind Wins
Oil and gas producers are not the final
budget's only losers, he observes. The
2017 legislature will have $200 million
less revenue for roads to work with, while
the state has $144 million less in its
Rainy Day Fund, higher education's allocations have been slashed by $154 million, and state agency revolving funds
were cut by $76 million.
However, Roller highlights, another
segment of Oklahoma's energy sector escaped reductions this session. "Winners
in this budget plan include the wind industry, which took zero cuts to incentive
programs or increased regulatory oversight," he describes.
Wind generators still hold $300 million
worth of incentives, and continue to avoid
a gross production tax and new regulatory
scrutiny, he points out.
Roller indicates OIPA actively promoted and worked on several bills seeking
to provide significant adjustments to wind
industry tax credits and ensuring the
sector had additional oversight. Those
efforts, which failed to find traction in
2016, included:
* SB 1162, sponsored by Senator AJ
Griffin, R-Guthrie, which would have
authorized the Oklahoma Corporation
28 THE AMERICAN OIL & GAS REPORTER

Commission to regulate the placement
of wind turbines;
* HB 2817, sponsored by Representative Lee Denney, R-Cushing, and Senator
Jason Smalley, R-Stroud, which sought
to end Oklahoma's zero emission tax
credit on Jan. 1, 2017;
* HB 2818, sponsored by Denney
and Senator Mike Mazzei, R-Tulsa, which
would have placed a 2 percent production
tax on wind and solar generation facilities
for their first 36 months of operation and
a 7 percent GPT thereafter;
* SB 883, sponsored by Denney,
Mazzei and Senator Marty Quinn, RClaremore, which sought to trim an industry tax credit from $0.005 a kilowatthour to $0.00375 a kwh for zero emission
facility electricity generation; and
* SB 1308, sponsored by Smalley,
which would have required electric power
companies to file monthly reports to the
Oklahoma Tax Commission specifying
the amount of electricity generated and
sold, as well as to whom they sold it and
at what price.
"As we look forward to the 2017 session, it will become important for our industry to not only rally together on these
reforms, but also to have a laser-focused
mission as we work with the legislature
in terms of what those revisions should
be," Roller reflects.
Some key indications suggest a possible
shift in 2017, he says. During a June 12
panel discussion at OIPA's annual 2016
convention, lawmakers poised to head
their respective chambers next year predicted the wind industry soon would be
expected to carry more weight (see story,
page 95).
But, in part because such moves were
postponed, Roller warns, few in the
Capitol expect the state's fiscal situation
to be much better next year. "To be determined is just how bad these quick
fixes and lack of reform will impact
future budgets," he says. "In early estimations, the state already may be facing
budget deficits heading into the 2017
session."
Other Matters
Roller points to a number of other developments in the 2016 session with relevance to OIPA, including the passage
of HB 2325, the State Motor Vehicles
Reform Act of 2016, which Representative
Mike Sanders, R-Kingfisher, and Senator
Mike Schulz, R-Altus, sponsored. According to Roller, HB 2325 exempts

Oklahoma intrastate truck drivers from
federal rules that require 30-minute breaks
during a 12-hour work shift.
"This bill will be a significant improvement and cost-saver to any of our
producers or service companies that operate Class 8 trucks," he relates. "This
exemption should lower the cost for truck
operators and, in turn, lower the costs of
service to producers."
Roller also points to a couple of successful bills in SB 1122, and HB 3158.
The former was introduced by Griffin
and Representative Kevin Calvey, R-Edmond. It contains recommendations offered by a produced water working group
under the state's Water for 2060 plan
created by the 2012 Oklahoma Legislature.
Roller says SB 1122 requires the Oklahoma Corporation Commission to work
with the secretary of energy and environment, the Oklahoma Water Resources
Board and the Department of Environmental Quality to implement the produced
water working group's recommendations.
Meanwhile, he continues, HB 3158 is
intended to address concerns about induced
seismicity. Crafted by Hickman and Senator Ron Justice, R-Chickasha, it authorizes
the OCC to take certain actions in emergency situations, and clarifies the commission's authority to act on environmental
or public safety issues without notice or
hearing.
Another bill that gained legislative
approval in 2016, Roller mentions, is HB
2996, sponsored by Representative Lewis
Moore, R-Arcadia, and Senator Bill
Brown, R-Broken Arrow. It lowers the
stop/loss retention percentage to a minimum of 110 percent for self-insured employers.
"This bill should provide some cost
relief for those who self-insure their
health care coverage," Roller predicts.
Positive Defeats
OIPA enjoyed victories when lawmakers failed to advance legislation to
which the association objected, Roller
reports.
He offers HB 2276 as one example.
An imminent domain bill by Denney and
Representative Jim Halligan, R-Stillwater,
it would have allowed property owners
who objected to a proposed right-of-way
location for a pipeline, utility line or
other transmission line to request a judicial
location exception with the court of the
same county as the property.
According to the Oklahoma legislative

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