In April, lawmakers passed a bill to limit a huge tax break for oil and gas companies to just six months. The so-called “Big Trigger” would disappear entirely next January and be replaced by a different tax system. At the time, lawmakers believed the “Big Trigger” would go into effect in June. But as Emily Guerin reports from the monthly oil and gas production meeting, that’s looking unlikely.
The big trigger tax cut slashes the oil and gas tax rate from 11 and a half to five percent. But it only takes effect when the price of oil stays below $55 a barrel for 5 consecutive months. It seemed likely that May would be the fifth month, and the tax break would take effect in June. But this month, oil has averaged almost $60 a barrel. Tax Commissioner Ryan Rauschenberger says for the big trigger to take effect…
"The rest of May would have to be $52.25," said Rauchenberger.
In other words, the average price would have to drop by about 7 dollars a barrel -- something Rauschenberger says is unlikely.
Oil companies have been waiting for months for that tax break. There’s almost 900 wells that have already been drilled, but companies are waiting for either the tax break or higher oil prices to make them start producing oil. Department of Mineral Resources Director Lynn Helms says some companies will have to frack their wells soon anyway to comply with state rules.
"There’s still over 100 wells that have to be completed in June, so still looking for a production surge in June," said Helms. He says he’s expecting oil production to plateau around 1.1 million barrels a day for the foreseeable future.
"It looks like a pretty flat picture as we project out until this time next year." said Helms.
That’s when Helms is expecting prices to climb above $65 and companies will start fracking and drilling new wells in earnest.