American Oil and Gas Reporter - June 2022 - 36

Oklahoma Revives Key GPT Incentives
State Legislative Report
By Del Torkelson
OKLAHOMA CITY-Sooner State
oil and gas advocates are cheering some
big victories after the 2022 Oklahoma
Legislature.
According to the Petroleum Alliance
of Oklahoma and the Oklahoma Energy
Producers Alliance, those wins include
a slate of familiar oil and gas incentives,
new funding for roads in areas with
significant oil and gas activity and pushback
against efforts to boycott oil and
gas investments.
The gross production tax rate incentives
are set to return to the tax code with the
passage of H.B. 3568, the Oklahoma
Emission Reduction Technology Incentive
Act. The associations say the bill provides
several tax rebates for oil and natural gas
producers, including:
· $10 million a year for implementing
qualified emission reduction projects;
· $10 million a year for economically
at-risk wells;
· $15 million a year for new secondary
and tertiary recovery projects; and
· $10 million a year for wells completed
using recycled water, for which the
refund will be proportional to the percentage
of the total amount of water used to complete
the well that is recycled water.
H.B. 3658 is " a significant legislative
victory, " describes Brook A Simmons,
Petroleum Alliance president. He notes
that the legislation restores two historic
tax provisions-for economically at-risk
wells as well as secondary and tertiary
recovery-and has created two new ones
for emission reductions and recycled
water use.
" We have asked Oklahoma lawmakers
to make our industry a priority, and that
effort is paying dividends, " Simmons says.
" As production increases, rig counts continue
to increase and capital expenditure
decisions are made in board rooms, we
are working to ensure Oklahoma remains
a viable part of the nation's oil and natural
gas industry for years to come. "
OEPA Legislative Chairman David
Guest indicates the group began working
toward that restoration well before the
2022 session, and recounts conversations
with legislators early last fall in which
OEPA leadership discussed draft language
to restore economic incentives for new
enhanced recovery projects and at-risk
marginal wells. Some of that language
was inserted into HB 3568 late in the
session, he notes. Shortly thereafter, the
legislation cleared the House of Representatives
70-6 and the Senate 43-0.
Governor Kevin Stitt has since signed
the bill.
" The incentives were deemed a priority
by OEPA for the 2022 regular session of
the legislature, " Guest relates.
The GPT incentive for new EOR projects
runs for 5 years and prevents any
entity from claiming more than 20% of
the GPT exemption, Guest details. " OEPA
was adamant that the bill include a 20%
limit so that no large company could
claim the majority of the total incentive, "
he reports.
Guest says the incentive for economically
at-risk leases, which exempts qualifying
wells from 80% of their GPT burden,
applies to leases with at least one
active well and low production. To qualify,
a lease's per-well production must not
exceed 10 barrels of oil or 60 Mcf of natural
gas a day, and the lease must be operated
at a net loss, or at a net profit less
than the total GPT remitted during the
previous calendar year. The incentive is
only available for years in which the
monthly average price of oil is less than
$50.00 a barrel and the gross value of
natural gas falls short of $3.50 an MMBtu,
Guest adds.
Other Bills
Simmons points to some other successful
bills that promote a healthy industry,
including H.B. 3037, which creates
the Municipal Road Drilling Activity Revolving
Fund to allocate money to municipalities
for road repairs in areas with
growing oil and gas activity.
" The legislation is the result of a
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36 THE AMERICAN OIL & GAS REPORTER
multiyear, collaborative effort between
the oil and natural gas industry, Oklahoma
municipalities, local elected officials
and state lawmakers, " he describes.
" A portion of the GPT on oil and natural
gas already is allocated to counties to
assist with road maintenance in areas
of increased oil field activity. Municipalities
are not included in that allocation,
and this legislation gives cities and
towns access to funding in areas of increased
economic activity. "
In his column for the group's Wellhead
magazine, Simmons says H.B. 3037 has
been three years in the making. " This
legislation is especially important for
producers in the Tri-City area of suburban
Oklahoma City that includes Blanchard,
Tuttle and Newcastle, " he relates. " Those
communities had taken a hardline stance
against the oil and gas industry, pressing

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