Political Report: Debate continues over tax breaks for big oil
BY WAYNE GREENE World Senior Writer
Sunday, September 16, 2012
9/16/12 at 4:50 AM
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U.S. Rep. John Sullivan and Oklahoma City oil millionaire Harold Hamm - a top energy adviser to Mitt Romney - talked petro-policy before a congressional committee in Washington, D.C., last week.
The implication of what the two had to say was that North America can achieve energy independence, but it will take the cooperation of the federal government.
By cooperation they mean tax breaks for the oil industry.
The United States has 139.6 billion barrels of recoverable oil - enough to replace Persian Gulf imports for five decades - but domestic production could fall 40 percent if tax incentives to the petroleum industry are eliminated, said Hamm.
Citizens for Tax Justice issued a press release following the hearing that says Hamm's company, Continental Resources, had pre-tax U.S. profits of more than $1.8 billion in the past five years, but only paid $40 million in federal income taxes - a rate of 2.2 percent.
Hamm says the effective tax rate is 38 percent. But that only works out if you figure in deferred taxes - taxes that haven't been paid yet.
Of course, there's always a discount on press releases that come from advocacy groups. Citizens for Tax Justice pushes for higher taxes for the rich, more money for government programs and, in general, fiscal policies that would match those of President Obama. But the group's report on Hamm's taxes came from a pretty good source - Continental Resources' own Securities and Exchange filings.
The Oklahoma Legislature is again looking at reducing business incentives in state tax law. The idea is that by eliminating the tax advantages of the few, you can reduce the tax rate on the many without decimating core government services.
Rep. David Dank, the Oklahoma City Republican leading the effort, said, "We've got tax credits on coal in the east, wind power in the west and old buildings in between."
What Dank didn't mention are the tax breaks to companies taking oil and natural gas from the east, the west and all points in between.
By one estimate, deep and horizontal wells cost the state well over $100 million a year.
Advocates for scaling back the state's tax breaks to the petroleum industry point out that market forces have a lot more impact on how many Oklahomans get jobs in the oil fields than tax incentives.
When prices are high, investors drill. When price are low, they don't.
George Kaiser, Oklahoma's richest citizen and an oil man, testified to the state legislative committee in 2009 that tax incentives haven't affected his decisions about when and where to drill.
An Oklahoma City University economist conducted an informal survey of 25 independent Oklahoma producers in 2008 and found that state tax incentives were one of the least important factors in their drilling decisions.
Defenders of the petroleum industry say the tax breaks make a difference in the Oklahoma economy. Oil men have a choice about where to look for petroleum. They're going to go where the cost of doing business makes it attractive.
There's a lot of money in the petroleum business. You only have to look at the assets of Harold Hamm and George Kaiser to see that.
It'll be interesting to see - in Washington and Oklahoma City - how the claims of the industry - energy independence and economic growth - play out against the drive to push a higher tax burden on some of the richest people in the world.
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Original Print Headline: Debate continues over tax breaks for oil industry
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