The Enid News and Eagle, Enid, OK

Agriculture and Energy

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  • An oil pump stands near Breckinridge in Garfield County. (Staff Photo by SHAWN YORKS)

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April 11, 2010

OIPA works to protect interest of petroleum industry

By Robert Barron, Staff Writer Enid News and Eagle

ENID — Independent petroleum businesses have a friend in the Oklahoma Capitol — Oklahoma Independent Petroleum Association.

OIPA is the state’s largest oil and natural gas association and an industry advocacy group, according to its Web site: www.oipa.com.

One of the most important tasks is ensuring gross production tax incentives are in place as presented. Cody Bannister, spokesman for the organization, said much of the oil produced in Oklahoma comes from at-risk leases. If a well operates at a net loss for the year, the gross production tax drops from 7 percent to 1 percent for that year. The reason for the tax break is to prevent plugging wells that otherwise could remain in production.

“It helps companies keep wells going. The majority of oil in Oklahoma is produced from marginal wells,” Bannister said.

While there is specific legislation to watch, Bannister said this year is full of budget concerns, and whenever a tax cut is discussed there is a chance tax breaks for oil and gas producers and royalty owners will be scrutinized more closely.

Other legislation under OIPA eye is the oil and gas owners lien act, a bill authored in response to the bankruptcy of SEMGroup, a crude oil purchaser.

When that company declared bankruptcy, oil and gas royalty owners faced $137 million in losses. During the bankruptcy hearing, independent producers were placed behind banks and other lenders for repayment of debt. OIPA is working on a law to protect oil and gas royalty owners in the event of future bankruptcies.

OIPA not only works at the state level but is a strong voice for  independent oil and natural gas producers in Washington, D.C.

“Take your pick of things at the federal level that, if enacted, will damage Oklahoma oil and gas producers,” Bannister said.

Current legislation of interest focuses on hydraulic fracturing,  horizontal drilling in shell formations using a process that fractures rock and injects water, sand and chemicals at high pressure to lubricate and spread the crack, letting gas flow to the wellhead

A high percentage of injection is watered sand, Bannister said, and The Environmental Protection Agency wants to increase regulation, even though there is no evidence of ground water contamination, he said.

There also are federal actions to peel away oil company tax breaks, such as repealing intangible drilling costs. Bannister said those breaks have been an incentive.

“It takes a significant amount of money to drill, and if you take that money away, then you can’t drill as many and create oil field jobs,” he said.

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