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The Almighty Buck Politics

Oil Man Proposes Increase In Oklahoma Oil-and-Gas Tax 182

Posted by Unknown Lamer from the we're-passing-it-downstream-anyway dept.
Hugh Pickens DOT Com (2995471) writes "Daniel Gilbert reports at the WSJ that Oklahoma oil man George Kaiser is breaking with fellow energy executives in asking the state to raise taxes on oil companies, including his own. 'Oklahoma is in desperate financial circumstances,' says the billionaire who controls Kaiser-Francis Oil Co. Kaiser says a higher tax on oil-and-gas production could help the state pay for education and much needed infrastructure improvements, and is asking legislators to return the state's gross production tax to 7 percent, challenging a plan proposed by fellow oil company executives who want to see the rate settle at 2 percent for the first four years of production.

Several energy companies and the State Chamber of Oklahoma say that lower tax rates for the costliest oil and gas wells are necessary to continue drilling at a pace that has stimulated economic activity and created other sources of revenue. Berry Mullennix, CEO at Tulsa-based Panther Energy, credits the tax program for helping his company grow to more than 90 employees, up from 18 a few years ago. 'I would argue the tax incentive is a direct reason we have so much horizontal drilling in the state today,' Mullennix says ... When companies decide to drill a well, they make their best guesses on how much it will cost to drill the well, how much the well will produce and what the commodity price will be. All of those estimates can vary widely, Kaiser says. 'With ad valorem taxes, the difference among states is 2 or 3 or 4 percent. The other factors can vary by 50 or 100 percent.' Compared with those other factors, Kaiser says the tax rate is incidental. 'It's a rounding error.'"
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Oil Man Proposes Increase In Oklahoma Oil-and-Gas Tax More

Oil Man Proposes Increase In Oklahoma Oil-and-Gas Tax

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  • Everyone prepare for Armageddon! (Score:4, Funny)

    by killfixx ( 148785 ) * on Tuesday May 13, 2014 @08:23AM (#46988297) Journal

    An oil tycoon wants to give more of his money away, on purpose! Truly this is the first sign of the end of days!

    Good for him... He thinks he doesn't pay enough taxes... That's mind blowing.

    Weird.

    • More likely, he thinks his competition doesn't pay enough taxes...

      • That's one of the most cynical observations I've ever read on Slashdot... Doesn't make it any less true though. LOL.

    • Re:Everyone prepare for Armageddon! (Score:5, Informative)

      by BKDotCom ( 542787 ) on Tuesday May 13, 2014 @09:03AM (#46988515) Homepage

      Actually, George Kaiser is Tulsa's largest philanthropist (perhaps in Oklahoma)
      he's donated millions to Tulsa's park system.
      Including at least a $100 million for a park project that begins construction this year
      http://agatheringplacefortulsa... [agathering...rtulsa.com]

    • Comment removed based on user account deletion

    • um... no... he wants to give more of YOUR money away. The alternative would likely be an increase in income taxes which would likely be progressive and come directly out of his pocket. A gas tax is applied to everyone equally based on their gasoline use.

      "...He is among the top 100 richest people in the world..."
      and
      "...during the 1980s bust in the oil industry in Oklahoma and Texas, Kaiser bought up struggling energy companies whose losses provided him with tax deductions that effectively offset his own inco

      • Re: (Score:2)

        by fnj ( 64210 )

        The alternative would likely be an increase in income taxes which would likely be progressive and come directly out of his pocket.

        Sorry; no. The 73,954 pages [townhall.com] of the Federal Income Tax Code blow that theory to hell. CEOs and other parasitic rich pricks leverage the countless loopholes to avoid the taxes.

        • Sorry; no. The 73,954 pages of the Federal Income Tax Code blow that theory to hell.

          The Federal Income Tax Code isn't Oklahoma's Income Tax Code, and the tax being talked about is a state tax.

          CEOs and other parasitic rich pricks leverage the countless legal deductions to pay the minimum amount of tax they are legally required to pay.

          FTFY. Just like every other parasitic prick on the planet. I bet you don't pay more than you are required to, do you? Am I a "parasitic prick" because I gave a thousand bucks to the Red Cross last year so I would owe less in federal taxes? I'd rather see RC get the money than the feds and I'm a bad person?

      • Re: (Score:2)

        by Ichijo ( 607641 )

        The alternative would likely be an increase in income taxes which would likely be progressive and come directly out of his pocket. A gas tax is applied to everyone equally based on their gasoline use.

        A better alternative is to replace transportation sales taxes, which are regressive, with variable express tolls, which permanently eliminate traffic congestion at a much, much lower cost to taxpayers than constantly trying to build your way out of congestion.

    • Re: (Score:2)

      by Richy_T ( 111409 )

      He doesn't want to give more of his money away otherwise he just would. He wants the government to take more of other peoples money.

      If he's an executive, the shareholders should fire him. Though he probably has some sweet golden parachute deal.

  • Idle threats (Score:5, Insightful)

    by tedgyz ( 515156 ) on Tuesday May 13, 2014 @08:24AM (#46988305) Homepage

    The other companies that argue higher taxes would scare them from drilling are full of crap. How about paying a fair share to keep the infrastructure well maintained and the populace well educated?

    As the last line of the summary says. Compared with those other factors, Kaiser says the tax rate is incidental. 'It's a rounding error.'"

    • How about paying a fair share to keep the infrastructure well maintained and the populace well educated?

      So, what, exactly, is a "fair share"? And how did you decide how much "fair" was?

      Do YOU pay that much? If not, why not?

    • I don't know what school you went to but it should be nuked from orbit and your parents need to be dope slapped, twice, just to make sure.
      Lets seem 7 percent versus 2 percent....
      Well golly, that's darn close to 5 percent.
      Or in your math. a rounding error.
      Really?

      • Re: (Score:3, Insightful)

        by causality ( 777677 )

        I don't know what school you went to but it should be nuked from orbit and your parents need to be dope slapped, twice, just to make sure. Lets seem 7 percent versus 2 percent.... Well golly, that's darn close to 5 percent. Or in your math. a rounding error. Really?

        Comparing the current tax rate to the proposed tax increase is not a "rounding error" at all. It's five percent, just as you say.

        Comparing the additional cost of this proposed tax increase to all the other costs involved in obtaining the fuels is what has been identified as a rounding error.

        So, while what you say is correct, you're missing the point entirely. This is why context is more important than trying to show everyone how clever you are for finding the obvious "flaw" everyone else "missed".

        • So, while what you say is correct, you're missing the point entirely.

          Another point that seems to be missing from the discussion is fracking.
          This isn't traditional oil drilling they're talking about.
          Fracking wells, unlike traditional wells, come with a very sharp drop in production after only a couple of years.

          http://www.businessweek.com/articles/2013-10-10/u-dot-s-dot-shale-oil-boom-may-not-last-as-fracking-wells-lack-staying-power [businessweek.com]

          Chesapeake Energyâ(TM)s (CHK) Serenity 1-3H well near Oklahoma City came in as a gusher in 2009, pumping more than 1,200 barrels of oil a day and kicking off a rush to drill that extended into Kansas. Now the well produces less than 100 barrels a day, state records show. Serenityâ(TM)s swift decline sheds light on a dirty secret of the oil boom: It may not last. Shale wells start strong and fade fast, and producers are drilling at a breakneck pace to hold output steady. In the fields, this incessant need to drill is known as the Red Queen, after the character in Through the Looking-Glass who tells Alice, âoeIt takes all the running you can do, to keep in the same place.â

          Low taxes on output for 4 years means the State has given up its opportunity to tax most of a fracking well's production.

          This is a naked resource

          • So, while what you say is correct, you're missing the point entirely.

            Another point that seems to be missing from the discussion is fracking. This isn't traditional oil drilling they're talking about. Fracking wells, unlike traditional wells, come with a very sharp drop in production after only a couple of years.

            http://www.businessweek.com/articles/2013-10-10/u-dot-s-dot-shale-oil-boom-may-not-last-as-fracking-wells-lack-staying-power [businessweek.com]

            Chesapeake Energyâ(TM)s (CHK) Serenity 1-3H well near Oklahoma City came in as a gusher in 2009, pumping more than 1,200 barrels of oil a day and kicking off a rush to drill that extended into Kansas. Now the well produces less than 100 barrels a day, state records show. Serenityâ(TM)s swift decline sheds light on a dirty secret of the oil boom: It may not last. Shale wells start strong and fade fast, and producers are drilling at a breakneck pace to hold output steady. In the fields, this incessant need to drill is known as the Red Queen, after the character in Through the Looking-Glass who tells Alice, âoeIt takes all the running you can do, to keep in the same place.â

            Low taxes on output for 4 years means the State has given up its opportunity to tax most of a fracking well's production.

            This is a naked resource grab that will leave the land scarred and the frackers no where to be found once the oil disappears.

            I assume you thought to reply to me because of the similarity between your scenario and the mistake GP made?

            It really sounds like another instance of regulatory capture, in which the industry encourages or allows an idea to become enshrined into law that just so happens to benefit its bottom line. The fossil fuel industry is one that can bring to bear a nearly unlimited budget for things like lawyers, lobbyists, advertisers, etc. If they ignore or applaud a law, it's because it serves their interests.

      • Re: (Score:2)

        by tedgyz ( 515156 )

        Never mind RTFA, how about RTFS? I was quoting the summary. The point was not meant to be literal. It is an expression meant to point out how little this would impact the cost of drilling.

      • Re: (Score:2)

        by SirSlud ( 67381 )

        Yikes. And you think *he's* dumb?

    • Re: (Score:2)

      by Trepidity ( 597 )

      In particular because oil isn't really something that spoils with age, nor is it something that's getting less valuable over time, as a general trend. Even if higher taxes did result in some more oil being left in the ground this year, it'd just be pumped later, probably for more money.

  • ...one of my favorite infotainers rush limbaugh was talking about this very meme yesterday on his show.

    it was an idea based on an article here [nationalreview.com] that postulates that super wealthy individuals propose liberal ideas not because they really believe them, but to shield themselves from criticisms from the media.

    so it's basically a 100% political act, which really makes a ton of economic sense for this guy...it's not like these tax increases are gonna affect his life in anyway.

    i must say...due to the timing it woul

    • Re:that new new... (Score:4, Informative)

      by pogopogo ( 464296 ) on Tuesday May 13, 2014 @10:34AM (#46989309)

      No, he's the opposite of Limbaugh -- he's a philanthropist.

      He was listed as the third largest donor behind Warren Buffett and Bill and Melinda Gates in 2008. He's also taken the Giving Pledge to give away half of his wealth to charity. The George Kaiser Family Foundation gives millions to the causes of education, child poverty, and community health services.

      He's been proposing eliminating tax breaks for oil and gas companies for years. He would rather the money go to health and education.

      He's not using this as a political stunt, he's willing to put his money where it counts instead of just being a blowhard like Limbaugh.

      • Kaiser users his charities as a tax write off and then funnels money back into his for profit businesses from them.This guy spent much of the 80's-90's "buying" dead and dying companies so that he could use their losses to offset his gains and pay zero taxes on his profits. http://www.bloomberg.com/news/... [bloomberg.com]

        • excellent link...pretty much proves my original point that this guy is just playing political games to appease the media and people.

    • ...one of my favorite infotainers rush limbaugh was talking about this very meme yesterday on his show.

      Because Rush is obviously an unbiased source of rational analysis... No chance at all that he would try to twist an event to try to bash liberal ideas. [/sarcasn]

      postulates that super wealthy individuals propose liberal ideas not because they really believe them, but to shield themselves from criticisms from the media.

      Or maybe we go with the simpler explanation that many of them actually believe what they are saying. It is possible to be wealthy and have liberal ideals you know. It's not like this guy is really in need of shielding from the media.

      i must say...due to the timing it would seem that mr. kaiser is a rush fan.

      Lots of people like to have their biases confirmed. Doesn't make them correct however.

  • Berry Mullennix, CEO at Tulsa-based Panther Energy, credits the tax program for helping his company grow to more than 90 employees, up from 18 a few years ago. 'I would argue the tax incentive is a direct reason we have so much horizontal drilling in the state today,' Mullennix says

    It would be far more efficient to tax the damned company and keep it at 18 people and use the money to bridges and roads and schools. That would create far more than the measly 72 jobs created by that company.

    Look, these entrepreneurs are hard negotiators. If the taxpayers start with, "please please please create some jobs", they will ask for an arm and a leg. You give them an arm and a leg they will be back next year, "an arm and a leg? That was last year. What are you gonna give us this year?". You give another arm and a leg. And the year after they ditch you and go to the next country or state or country because, "your state has people without arms and legs, we can't employ them".

    There is plenty of capital. If this Panther Energy does not want to invest there will be a Jaguar Energy or Tiger Energy. The capital markets are sloshing with 3 trillion dollars not knowing where to invest. Tell them the same thing they tell their employees, "this is what this job pays, if you don't like it, keep moving there are plenty who would work at this wage". Well, "this is what costs to do business in our state. If you don't like it, keep moving there are plenty of other investors for us". Unless the tax payer negotiates like this, you will not get anywhere. These crony capitalists invest in the election system, and get their own shills elected as legislators and government executives. That is why money in politics is so insidious.

    What we now lack is demand. That is what is stifling the growth. Not the lack of capital, Not the lack of labor (lack of labor would lead to wage inflation). What we need is tough negotiators to represent the tax payers in the government.

  • Fact of the matter is, our tax rates are too low to cover our preferred lifestyle. Full stop.

    So if we'd like to continue living in the manner we're accustomed, taxes absolutely positively have to go up. And the pain of that needs to be allowed to flow down from the top to the lower class just as it has throughout the millennia, without monetary meddling.

    Anything short of this will result in the eventual collapse of the system. There's simply no way around it.

    And that's the thing that bothers me about the

    • This is some pretty fucked up logic right here. Shit, God only wants 10% and that should be more than enough for any government! The argument that we need to pay more taxes and keep giving more away to entitlements belies the facts that we've given away so many tax breaks to big companies and billionaires that the only way the Feds can keep things afloat is to borrow massively and tax the middle class out of existence.

  • Won't happen (Score:3, Insightful)

    by Nimey ( 114278 ) on Tuesday May 13, 2014 @09:13AM (#46988601) Homepage Journal

    Oklahoma is one of the most conservative states of the Union. Instead the state government, under pressure from jerb creators, will cut social programs and raise sales taxes, while cutting corporate income taxes.

    • Yes, because people we hate can never, ever perform virtuous acts. Whenever they do, it is up to Us Good People[tm] to viciously shit all over them. It's just what we do.

    • Even Alaska has put all residents on the dole.

  • My bet is that he wants to go to 7% tax straight away instead of having the tax at 2% for the first four years because his wells are older than those of other companies and this tax structure would put him at a disadvantage? Unfortunately, more often than not when businesses push for regulations it's not out of pure motives but as a way to restrict competition.

    • Re: (Score:2)

      by geekoid ( 135745 )

      He drills new wells as well. The 2% is on new production, not new companies.

      He wants 7% becasue the state needs the money. There is no need for an ulterior motive here.

  • Not an unexpected proposal from a guy who already made his pile of money. Close the door behind him so nobody else gets to play by the same rules he did. I'd like to know how much money he would have had to pay in taxes if this were implemented when he was starting out.

    • Re: (Score:3)

      by geekoid ( 135745 )

      A) Who cares?
      B) It applies to new production; which include himself.
      C) His company started in 1966. the lower tax didn't started until 1995.

      IN short, you are wrong on every point.

      You're welcome.

      • A) You should because it's indicative of the human behavior of successful people throwing road blocks in the path of anyone trying to do the same.
        B) Irrelevant to my point. He's already made his pile so he doesn't care if it costs him more. People trying to break into the business without the benefit of a large fortune to draw from are now less able to do so. Some won't even bother which works to his advantage because somebody will drill for it.
        C) You're assuming that the higher tax rate prior to 1995 wa

  • Deficit Spending In The Guise of Job Creation (Score:3)

    by EXTomar ( 78739 ) on Tuesday May 13, 2014 @10:24AM (#46989183)

    Texas has this issue too where Perry runs around to "over regulated liberal states", dishes up big tax breaks for them to put a plant in Texas, and ignores the costs while claiming all of the unrealized future benefits! Going to California and cutting a tax break to a small company of the tune of $50 million is a boon to that company but it makes no sense to the market or the state because they will never "create" $50 million in revenue for the state.

    This behavior is stuff that creates bubbles and is just government deficit spending under the guise of "job creation". But that isn't their concern today is it because when the time comes that the business fails or overloaded infrastructure needs upgrades and expansions they won't have to deal with the raising taxes or a bond because they'll be long gone.

    • While I don't agree with Rick Perry on everything, the budget in Texas is just fine. [economist.com] Could there be changes? Yes, but there is no perfect economy in this nation and at some point you have to question governments that would much rather practice bureaucratic wealth re-distribution in the name of social progressiveness. That becomes collective thought where initiative dies. All that gets you is bigger government and more people wanting a hand out. Large, wealthy corporations don't deserve hand-outs and th

  • 72 more employees doesn't really matter when the state is going to hell. If it was enough employees to make a difference in state revenue, they would have a point.

  • It would be nice if the Oklahoma Legislature would use some of this money to halt its war on education. With 22% annual budget cuts, Oklahoma schools aren't doing so well.
    http://newsok.com/report-oklahoma-leads-nation-in-percentage-of-cuts-to-school-funding/article/3882174
  • Such abuses of government are common place amongst the top dogs in any industry. This guy, is undoubtedly seeking government assistance is making it harder for smaller operators to enter the market. By raising taxes he effectively makes it harder for anyone but the biggest companies in the market to succeed. It's despicable and is one problem with our form of capitalism, where government is used as a tool to keep others out of the market.

  • We all know that businesses really don't pay taxes, right? I mean they do, but the companies charge more for their products and services as a result of paying taxes. There's not a single business around that just eats that cost. My point is that it's not like this man is voluntarily giving up money. He will still make just as much money.

    Everyone who uses oil and gas products will pay a higher price because of this. I'm not saying that's good or bad - that's not the point of my post. I'm just trying to point

    • You're partially correct. The amount of tax that a business will pay is directly related to the elasticity of demand for their products / services. The more elastic the demand (the more people are willing to either buy a competing product or just do without it), the smaller the portion of the tax that they can shift to consumers. The less elastic the demand, the higher the portion of tax they can shift to consumers. If the government decided to levy an additional 10% tax on potato chips, the potato chip
  • How come every time a nation / state / city is overspending, people always immediately turn to how to raise more tax revenues? How come virtually no one ever looks at the other side of the math and looks at ways to cut spending? If you're in a dire financial situation, your first move is to cut all non-vital spending and then reassess the situation. For some reason, people don't think government spending should ever decrease.
  • I mean... news for nerds????

    One billionnaire is'nt a fully selfish guy, and understands the need for state financed infrastructure and services. How does this qualifies as stuff that matters? There are others in the same mood.

    Is this place becoming a libertarian shout house or what?

  • If the state is in dire straits, he should donate some of his profit to help it. Why should the tax payer take on even more of the corporate welfare debt?

  • Isn't the tax increase just passed onto customers as higher rates? How does this help? Wouldn't the same thing be achieved more efficiently by raising the income tax?

    In any case, why would Gilbert care? It's not his money.

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