Drilling bill merits support of lawmakers

WE have criticized Democrats in the Oklahoma House of Representatives for working to block efforts to approve revenue-raising legislation such as a tobacco tax increase. Yet there are Republican members serving as obstructionists as well.

The issue that has some GOP lawmakers saying “no thanks” is long-lateral horizontal drilling. A new compromise bill would allow horizontal drilling longer than 1 mile in nonshale formations. Since 2012, state law has allowed companies to drill these “extended lateral” wells only in shale formations or in formations that have shale-like characteristics.

We’re among those who wonder why, if long laterals are OK in one formation, they shouldn’t be allowed in all rock formations? After all, Oklahoma is the only state with such a restriction.

Passage of the 2012 long-lateral law resulted in a sharp increase in shale drilling in Oklahoma. But the shale-only restriction has also served to deter drilling in this state.

Senate Bill 867, unveiled this week, is a replacement for two other bills considered earlier in the session. Among other things, this compromise bill lets the Corporation Commission create horizontal well spacing units of up to 1,280 acres and preserves the right to combine two 640acre units for “multi-unit” drilling. Horizontal drilling in the larger spaces must be at least 7,500 feet long.

Passage would immediately trigger new drilling by companies that have been hoping for a change in the law, and would pay immediate benefits for the state. It’s estimated that $490 million in additional royalty payments would result within the first year after the change, with about $26.5 million in new revenue going to the School Land Trust, which benefits public schools, colleges and universities.

Also, backers say long-lateral drilling in all formations would generate $229 million in additional state and local revenue from the oil and gas industry, and produce 5,900 industry jobs that would indirectly impact 13,700 other jobs.

SB 867 is endorsed by the Oklahoma Oil and Gas Association, the Oklahoma Independent Petroleum Association and the Coalition of Oklahoma Surface and Mineral Owners. One group that strongly opposes it represents vertical drillers who worry about long laterals encroaching on their wells.

Some Republican House members oppose this effort, too, although there isn’t one clear alternative being proposed. Some members reportedly want to reduce the 36-month time frame during which drillers pay 2 percent in gross production taxes (the rate increases to 7 percent after that). Others want the 2 percent rate increased to 4 percent. Others aren’t saying exactly what they want, but have supported efforts by others to boost the 2 percent rate to 7 percent.

It falls to House Speaker Charles McCall to get his caucus on the same page. That page should be backing SB 867 in its present form.

We repeat our call from two months ago: Approving a change in the state’s long-lateral law would be a step toward getting the government out of the private sector’s way — something Republicans usually champion. This bill would benefit Oklahoma by producing goodpaying jobs and generating much-needed revenue, and thus merits approval.