Oil and Gas

The Ethic of Reciprocity

The Ethic of Reciprocity - March 24, 2019

State Representative David Perryman

                The Ethic of Reciprocity is found in nearly every world religion and philosophical tradition or dispensation. Bahá'í Faith: Choose for your neighbor what you would choose for yourself. Jewish Faith: (The Talmud) – What is hateful to you, do not to your fellow men. Buddhist Faith: Hurt no others with that which pains yourself.  Muslim Faith: You are not a believer until you desire for your brother what you desire for yourself.

The list goes on. Hindu Faith: One should not behave towards others in a way which is disagreeable to oneself. This is the essence of morality. All other activities are due to selfish desire. Analects of Confucius: Do not impose on others what you yourself do not desire. Isocrates: Do not do unto others what angers you if done to you by others.

Christianity’s version is: Do unto others as you would have others do unto you. Of course you recognize this Ethic of Reciprocity as The Golden Rule.

Unfortunately, those in charge at the Oklahoma Capitol have ascribed a different meaning to “The Golden Rule.” The state government version is more similar to that espoused in a May 1965 “Wizard of Id” comic strip where the king declares: “REMEMBER THE GOLDEN RULE!” and a peasant responds: “WHAT THE HECK IS THE GOLDEN RULE?” and a musician replies: “WHOEVER HAS THE GOLD MAKES THE RULES.”

Most all Oklahomans are aware that several decades ago Oil and Gas Exploration companies were able to convince Oklahoma Courts that the mineral estate was the dominant estate and the surface estate was the subservient estate. This “profit a prendre” determination gave mineral owners the absolute right to use so much of the surface as is necessary to produce the minerals.

While there were basically no regulatory limitations on oil and gas exploration in rural areas, municipalities for more than 8 decades were able to protect people and property from encroachment by establishing setbacks, requiring surety bonds to cover damages to homes, businesses, water sources and roads, and regulating other nuisances caused by oil and gas operations.

In 2015, in the face of increases in the number and severity of earthquakes and the introduction of hundreds of millions of gallons of Oklahoma’s valuable fresh water into the drilling process, “he that had the gold” undertook to convince the legislature that the 80 year old rule was too burdensome. As a result, a new “golden rule” was established in the form of 52 O.S. Section 137.1 requiring that any municipal rule, except for an undefined “reasonable setback and fencing” requirement had to be “consistent” with the rules of the Corporation Commission and moved all such regulations away from cities, towns, counties to the Oklahoma Corporation Commission.

Not only did this move undermine the ability of municipalities to protect its citizens and their property, it firmly solidified the jurisdiction of the Corporation Commission, historically the favorite lapdog of the oil and gas industry, and pre-empted local control on most issues.

Now, it seems that the oil and gas industry wants to totally extinguish the ability of local government to have any say in protecting houses, businesses and other property values. The current legislation, HB2150, would require municipalities and counties to compensate oil and gas business interests for any regulation or restriction that may limit oil and gas operations, even if the restrictions are intended to benefit the health and safety of the community.

The bill will punish cities, towns and communities for trying to protect citizens from pollution and is an attempt to scare municipalities away from passing any ordinance that might impact oil and gas. HB2150 is an overreach of state authority over local city and county governments and is further evidence that “Whoever has the gold makes the rules.”

Thanks for allowing me to serve. If you have any questions or comments, please call or write, 405-557-7401 or David.Perryman@okhouse.gov

King Oil

King Oil - February 17, 2019

State Representative David Perryman

Prior to Eli Whitney’s invention of the cotton gin in 1792, processing cotton had been a low-profit, labor-intensive drag on the agriculture industry of the American South. In fact, most early Americans believed (and many hoped) that rock bottom cotton prices would never sustain the long term viability of the “peculiar institution” of slavery and that the immorality would eventually be swept away.

Instead, the efficiency of the cotton gin spurred an immediate and unimaginable demand for raw cotton. Skyrocketing prices made Cotton King and for generations, slavery and the southern economy were inextricably intertwined. King Cotton became the foundation of the southern economy, southern culture and southern pride.

The world had never seen an industry that was so wealthy, so pervasive and so overwhelmingly controlling as King Cotton. No other industry of like power appeared until the rise of King Oil a hundred years later. Wielding massive amounts of financial, cultural and political influence, King Oil was allowed to dictate the terms of its own existence. Nowhere has a government been more capitulating than Oklahoma where legislators have drank deeply from the well of oil and gas campaign contributions.

The Oklahoma Corporation Commission had no general authority over the industry until 1915 when the commission began hearing cases that dealt with the protection of mineral owners, production companies and affected citizens. That protection within municipalities was largely left to the police power of the local governments themselves. In 1935 the Oklahoma legislature adopted Section 137 to the Oil and Gas Code making it abundantly clear that cities and towns possessed the authority to protect its waters, its residents, its roads and bridges and the property of its citizens from the effects of oil and gas production.

For eight decades the oil and gas industry complied with zoning regulations and setbacks. Through the years, municipalities were allowed to protect their resources from pollution; their citizens from harm and their roads from ruination.

As the industry experienced huge profits and made big campaign contributions, political influence ballooned. In 2015, nearly 80 years to the day after the 1935 Oklahoma legislature had affirmed the power of municipalities to protect citizens, lawmakers abruptly reversed course. The oil and gas industry called its chit. Legislators whose campaign accounts burgeoned with oil and gas cash dutifully obliged with the passage of SB 809, repealing Section 137 and adopting in its place a diametrically opposed Section 137.1 that basically stripped municipalities of their regulatory authority and placed most oil and gas activities under the exclusive jurisdiction of the Corporation Commission.

Cities and counties striving to protect residents by imposing setbacks of wells from homes or fracking noise ordinances or regulate the round the clock flaring of natural gas in close proximity to houses, businesses and other structures, were either sued or threatened with suit. One county that attempted to protect drainage in its ditches, culverts and bridges was sued in the Supreme Court and forced to repeal its regulations.

This session, those same legislators, who four years ago put the interests of oil companies ahead of the people of our state, have been joined by several new faces and are in the process of working HB 2150 through the legislature. This Bill will adopt a Section 137.2 aimed at blocking municipalities from enacting  Ordinances or Resolutions to protect citizens or property rights if the effect of the regulation would “make it more difficult” for the oil and gas to be produced. No matter that the intent of the municipality is to protect things like roads and bridges.

While this will be advertised as a “mineral owners rights bill,” the true benefit will inure to the “King Oil” corporations who own a growing percentage of Oklahoma’s minerals. Unfortunately, campaign contributions from oil companies will once again influence more votes than will what is right or what is best for the citizens of Oklahoma.

Questions or comments contact David.Perryman@okhouse.gov or 405-557-7401.

Roads and Temporary Pipelines

Roads and Temporary Pipelines - July 29, 2018

State Representative David Perryman

Most people in Oklahoma don’t give a second thought as to the width of section line roads. Those who do, find the subject bewildering because the general rule is that there is no general rule and that confounds the job of County Commissioners, City Managers and anyone else who is tasked with the responsibility of building and maintaining roads across the state.

While the most essential (and original) reason for section line road easements was to prevent property owners from being landlocked, the concept took many forms. For instance, depending on the applicable tribal treaty or organic act, in the old Oklahoma Territory, section line road widths were defined as being 4 rods (66 feet) wide but in the old Indian Territory, they were 2 rods (33 feet) in width, except for the Creek Nation where roads were 3 rods (49.5 feet) wide and in the Quapaw Agency in extreme Northeast Oklahoma where there are no road rights of way between sections of land.

The impact on these narrow rights of way has been compounded through the years by legislation greatly expanding the purposes for which the road right of way may be used. Rights of way and the things that are packed into them are important to all of us. The owners of the land who pay taxes on the land to the center of the roadway are affected. Cities, towns and water districts that use the rights of way for water and/or sewer lines are affected and electric companies and telephone companies all have a stake in the right of way being safe and available for uses to which it may legally be put.

When there are four or five utilities in, for instance, a 33 foot road easement, the road surface width is greatly constrained and road safety becomes a real concern, particularly when the roadway use involves scores of semi-trucks and oversized loads engaged in commercial pursuits. A newcomer to the right of way occupancy scene is the oil and gas industry which has chosen in many oil producing counties across the state to lay “temporary” pipelines in the rights of way to transport fresh water and produced saltwater to and from drilling operations.

With operators employing longer laterals, completing a single well in Oklahoma, now requires as much as 12 million barrels of water per frack and wells in Oklahoma cumulatively producing over 3 billion gallons of brackish wastewater per year (according to Julie Parker writing for OklahomaMinerals, a biweekly newsletter for mineral owners, investors and professionals in the oil and gas industry) transportation of those waters definitely pose a problem.

That problem however is not solved by endangering citizens and property by placing “temporary” pipe lines in the road rights of way. The risk to safety is underscored by the person on a narrow Grady County roadway was killed in 2015 when his vehicle struck a water pump that had been “temporarily” parked in the right of way.

Likewise, hoses and conduits that are laid through culverts and ditches displaces the engineered capacity of those drainage structures to carry floodwaters. Another frequent hazard is the incing of road surfaces when joints on the temporary lines leak or burst in freezing weather.

In an attempt to protect people and property, the Kingfisher County Commissioners recently imposed a ban on the placement of temporary water lines in rights of way. As with most controversies, there are two sides to the story. It was unfortunate that the editorial page of a large OKC paper only put forth the one that supported the oil and gas industry. The paper (which last year campaigned for lowered gross production taxes) threatened that increased truck traffic would further damage roadways if the waters were not allowed to be piped. What was not presented was that oil and gas companies could very easily place the hose across private property away from the roadways, compensate the landowner, and avert both the risks as well as the wear and tear on roadways.

Finally, no one can fault the commissioners from trying to protect their roads and make them safer. No one that is except the oil and gas industry whose attorneys have, according to the editorial, asserted that municipalities and counties cannot regulate or restrict the location of temporary lines in rights of way because of a 2015 law that assigns that jurisdiction solely to the oil and gas industry’s favorite lap dog, the Oklahoma Corporation Commission.

Questions or comments please call or write, 405-557-7401 or David.Perryman@okhouse.gov

Driving By the Rearview Mirror

Driving By the Rearview Mirror - March 18, 2018

State Representative David Perryman

My family included several soldiers and sailors who were members of the “Greatest Generation.” Most have passed on but their stories remain.

For instance, my mother’s first cousin was a nurse who was serving at the Borden Army Hospital in Chickasha. While there she encountered a handsome young Army Private who was recuperating from an injury that he had received. Her name was Dean and his was Clint.

After a few weeks, Clint had recovered sufficiently to go back to active duty and they continued to communicate. When the war ended, they reunited and were married in short order. Clint was eager to provide for his new bride but the hundreds of thousands of returning GI’s made the job market tight and very competitive.

Clint worked odd jobs and was able to supplement the family’s income enough to be able to purchase an old car. Finally, one day, through a friend, Clint received an offer for a full time construction job in the next town about 15 miles away.

Early the next day, Clint got up about 5 a.m. so that he would not be late on the first day of work. He fired up the car, backed out of the drive and discovered to his horror that the transmission was frozen in Reverse. Needless to say, the stakes were too high so Clint drove to work backwards that fifteen miles.

This story has been told many times with slight variation. But the gist is always the same. Clint did what it took to provide for his family time and time again.

The Oklahoma legislature needs to do what it takes to make Oklahoma better for its citizens. While driving backward is not recommended, we could begin by rolling back tax cuts that have been handed out to the oil and gas industry and high wage earners.

Income tax cuts from 7% to 5% for high wage earners over the past ten years have cost the state more than $1.4 Billion per year. That amount alone would more than pay for the teacher pay increase, support personnel pay increase, restoration of classroom funding cuts, state employee pay increase and health care funding called for in the “Together We’re Stronger”  Budget Plan submitted by Oklahoma Teachers.

During that same time, Gross Production Taxes on Oil and Gas Production has been cut from 7% to 2%. Those cuts cost the state$402 Million per year on horizontal wells and $59 Million per year on other wells.  When the depletion allowance that lets oil companies reduce taxable income by up to 22% is added in, the incentives and tax breaks equal around $480 Million per year.

State Auditor and Inspector Gary Jones, a Republican candidate for Governor said it best, “If citizens of Oklahoma have to pay a 5% income tax rate, why shouldn’t oil companies have to at least pay 5% GPT?

There are other plans that will provide the necessary funding. There are some that will not. The Step Up plan which was engineered to keep Gross Production Tax at an unreasonably low rate was a bad plan. Oil companies and their representatives marketed it as a way to get teachers a $5000 raise. Unfortunately, it took money out of teachers left pocket to put it in their right and totally neglected all the other costs of educating children.

The teachers’ “Together We’re Stronger” plan is a great plan and it needs to be paid for.

We don’t need to follow the Step Up Plan that shifts the tax burden from Oil Companies and those with high income to working Oklahomans.

We need to look in the rearview mirror and return the Gross Production Tax Rate to 7% and the Income Tax Rate on persons earning more than $200,000 per year to at least 5.5%.

Thanks for allowing me to serve. If you have any questions or comments, please call or write, 405-557-7401 or David.Perryman@okhouse.gov

Oh So Close, Or Was It?

Oh So Close, Or Was It? - November 12, 2017

State Representative David Perryman

Week Seven of Oklahoma’s 2017 Special Session came to a close this week after a vote on Wednesday produced absolute frustration in everyone who was searching for a solution. Any legislator who still thinks that our state is not in crisis has his or her “Honorable” head in the ground.

The vote, HB 1054 failed by a vote of 71-27-1. The Bill contained what had been referred to as the single last hope to fund DHS, Advantage Waiver, Mental Health and Medicaid programs funded through the Oklahoma Health Care Authority. It also included a $3000 raise for teachers and $1000 for state employees.

Due to a Constitutional Amendment that was passed by the people of Oklahoma in 1992, all revenue raising measures need 75% of the legislature to vote in favor of the Bill. When the dust had settled, 82% of the Democrats and only 67% of the Republicans had voted for the Bill. Because the House is comprised of 71 Republicans and only 28 Democrats, the final tally yielded the yielded an overall percentage of 70.2%.

Nearly everyone agreed that the Bill was not a good solution. Many Republicans did not want to vote for the Bill because they had signed pledges to never raise taxes and many Democrats did not want to vote for the Bill because most of the tax increases were on things that unequally affect poor and working class Oklahomans such as fuel and cigarettes and low point beer and the $2.6 Million that would be raised this year from the oil and gas industry nor the $13 Million that would be generated by that industry next year did not seem to be a fair trade-off.

The vote on the bill came the day after a large number of developmentally disabled Oklahomans and their caregivers had come to the capitol to meet with lawmakers and to explain the urgent need that their programs and agencies were facing.

Unfortunately on the day that the Bill was being voted on, buses full of oil company employees parked in front of the capitol and those employees filled the gallery to “watch” the vote. Of course, it didn’t hurt the oil and gas industry’s game plan that a rumor began circulating week before last that one Oklahoma oil company executive had contributed $500,000 to a “dark money” Political Action Committee to support legislators willing to keep the Gross Production Tax low. In the days that followed, news spread of an enhancement of an additional $500,000 by another executive for a total of $1,000,000 to influence future elections in favor of oil and gas.

In the days after the vote, conventional wisdom at the capitol was that the vote may not have been as close as the numbers showed and that it may have been more than a coincidence that the vote failed. Questions arose as to why 7 Republican legislators who had voted for the same exact tax increases on cigarettes, gasoline and beer a few days earlier, voted NO when the Gross Production Tax was added in.

Others questioned the peculiarity of last minute vote changes (some from red to green and some from green to red) immediately after an impromptu Republican caucus meeting that occurred while the vote was open.

Perhaps the greatest mystery was the “inability” of the Speaker to deliver just the five votes needed to pass HB1054. Of the 22 Republicans who voted NO, one was Majority Whip and four were Chairmen of Health and Human Services and Education Committees overseeing governmental agencies that would have been greatly aided by the increased revenue. In fact, those five and 17 more held chairmanships and vice-chairmanships at the pleasure of the Speaker. As shown earlier, the Speaker has the power to remove any member who does not tow the party line and will not hesitate to use that power. No wonder the question around the capitol is, “Was the vote really as close as it seemed or was it calculated to simply appear that way and still pacify the demands of the powerful oil and gas industry donors?”

Call or write with your comments to 405-557-7401 or david.perryman@okhouse.gov.

 

Let's Really Fix This

Let’s Really Fix This - October 29, 2017

State Representative David Perryman

Oklahoma schools, mental health agencies, hospitals and health care agencies are in financial crisis. That crisis translates to impending catastrophe for hundreds of thousands of Oklahomans of all ages. Oklahoma’s state government has a revenue problem that has deepened to the point that services can no longer be provided.

This situation did not occur overnight. For the past ten years taxes have been recklessly cut without considering the cost or the impact on services that citizens expect government to deliver. Income taxes on high income earners have been slashed to the end that hundreds of millions of dollars have been taken out of state revenues.

Gross Production Tax on the oil and gas that is extracted from Oklahoma has been reduced from 7% which is actually low compared to other states to 2% which has the effect of subsidizing companies who are drilling in other states where the GPT is actually two and a half to six times higher.

If the Oklahoma legislature had the courage to stand up to the oil and gas industry and its lobbyists, we would have an opportunity to avoid being 48th, 49th or 50th in every category that impacts our quality of life.

I am not talking about punishing an industry that is so vital to Oklahoma. I am talking about simply reminding it that its Oklahoma operations are destroying our roads and contributing to earthquakes that damage our property and there is simply no reason for its tax structure to be so low. The legislature simply needs to tell the oil and gas industry to pay its fair share of taxes.

The legislature clearly does not have the intestinal fortitude to confront the oil and gas industry. Today marks the end of the 5th week of Special Session. If you would like to understand the situation, I would ask that you read the 7 points below:

First, the Oklahoma Energy Producers Alliance recently had a poll conducted that showed that 67 percent of Oklahomans favored an increase in the Gross Production Tax (GPT) to 7 percent.

Second, the current Oklahoma GPT rate is 2 percent for the first three years (“tax holiday”) of each well’s production and then it increases to 7 percent in the 37th month of the life of the well.

Third, Oklahoma’s GPT Tax Rate is not only the lowest in the country, if it were raised to 4%, it would STILL be the lowest in the country.

Fourth, the length of the “tax holiday” is every bit as important as the percentage rate. For instance, horizontal wells in Oklahoma are more than half depleted after just 36 months of production. So, when Democrats said months ago that they would accept 4% at 12 months; 4.5% at 18 months or 5% at 36 months, the length of the “tax holidays” were not just numbers that were casually tossed around.

• A 12 month tax holiday means that 37% of the lifetime oil production of the well is depleted before the 7% rate kicks in.

• A 24 month tax holiday means that 53% of the lifetime oil production of the well is depleted before the 7% rate starts.

• A 36 month tax holiday means that 62% of the wells total oil production is depleted before 7% applies.

Fifth, even though the Democrats have been requesting an increase in Gross Production Tax for months, it has only last week that the Republicans announced a budget deal WITH EACH OTHER… and that budget deal didn’t include the Gross Production Tax….or Democrats.

Sixth, last Friday, for the first time, Republicans claimed to offer a deal that included Gross Production Tax. The purported offer was: THE LOWEST GROSS PRODUCTION TAX RATE IN THE COUNTRY and a plan that would allow 62% OF EACH NEW WELL’S LIFETIME PRODUCTION OF OIL TO BE DEPLETED BEFORE the tax went to 7%. The “deal” ended up deadlocked and dying in committee with a tie vote that the Republican Chairman and Co-Chairman refused to break.

Seventh, I truly believe that most legislators (Republican and Democratic) want to fix this, but those who are beholden to their campaign contributors are having a tough time right now. They need courage. If you really want this fixed, pick up the phone or sit down and write a note to your legislator, Democratic or Republican, and encourage them to REALLY FIX this by increasing the Gross Production Tax and decreasing the length of the Tax Holiday.

If you have comments or questions, please call or write, 405-557-7401 or david.perryman@okhouse.gov.

Oklahoma's Budget Plan: Rob Peter to Pay Paul

Oklahoma’s Budget Plan: Rob Peter to pay Paul - November 8, 2015

State Representative David Perryman

                Borrowing lyrics from Hee Haw, the country music television variety show, a mournful tune wafts through the air between 2300 N. Lincoln Boulevard and the Governor’s Mansion next door.

“Gloom, Despair and Agony on me.”

“Deep, Dark Depression, Excessive Misery.”

“If it weren’t for bad luck, I’d have no luck at all.”

“Gloom, Despair and Agony on me.”

                To be fair, the current price of oil is deepening Oklahoma’s budget crisis, but the Price Quotes for West Texas Intermediate Crude is not the only reason that the governor and legislative leaders are howling at the moon.

When oil was more than $100 a barrel, other states used the windfall to shore up education, repair roads and bridges and replace aging infrastructure. Instead, Oklahoma let its highways and county roads continue to deteriorate and gave a huge tax cut to oil and gas producers.

When Oklahoma’s unemployment rate was lower than a snake’s belly and employers and employees were in “high cotton,” other states took steps to improve health care and address mental illness. Instead, Oklahoma cut benefits to injured workers and gave income tax cuts to the wealthy.

When Oklahoma’s economy was ginning right along instead of planning for the future, we pandered to campaign contributors and gave away hundreds of millions of dollars in corporate tax credits and rebates.

A little planning could have avoided much of the current crisis. One should not have to dust off his copy of Adam Smith’s “Wealth of Nations” to predict that the proverbial “invisible hand” of supply and demand would correct the market. Consequently, OPEC and domestic oversupply has suppressed prices, profitability and tax revenue. Market forces have resulted in a 12 year low of active rigs with only 83 today compared to 208 during the first week of November 2014.

Economic indicators and indexes published by Creighton University and the Federal Reserve Bank of Philadelphia show us that for the first time since the Great Recession of 2008-2010, Oklahoma’s monthly receipts have dropped for six straight months when compared to the prior year.

The $590 Million budget hole from last year will likely grow to somewhere around $1 Billion this year since the budget projections were based on $57.55 per barrel oil and the current price is hovering at just over $45. A difference of more than 20% will result in unprecedented budget cuts so that Peter can be robbed to pay Paul.

According to the Creighton study, Oklahoma’s Business Conditions Index fell for the sixth straight month to a weak 40.1, signaling that state businesses will likely eliminate thousands more jobs between now and March 2016. State Treasurer Ken Miller was aware of losses of sales tax revenue and that Oklahoma had just lost nearly 6 percent of its manufacturing jobs when he said, “Revenue growth from the past year has been erased and indications are the situation is going to get worse before it gets better.”

It doesn’t take a quartet from Hee Haw to tell us  “It’s not as bad as we thought. It’s worse.”

Call or email with questions or comments at 800-522-8502 or 405-557-7401 or David.Perryman@okhouse.gov.