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Oil And Gas Industry Flexes Its Financial Muscle In Governor’s Race

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Someone new will move into the Oklahoma Governor's Mansion when Gov. Mary Fallin ends her term in 2019.

The oil and gas industry is playing an early major role in deploying financial resources to try to influence the outcome of the Oklahoma governor’s race.

As the debate persists over how much the state should tax oil and gas production, an Oklahoma Watch review of campaign finance reports found oil and gas interest groups and executives have spent heavily in the early months of this year’s gubernatorial campaign. Fifteen candidates are running for the office.

Campaign reports through March – the latest available – show candidates took in more than a half-million dollars from donors with oil and gas ties this election cycle. Republicans claimed 97 percent of the money.

The total amount has likely increased since and will balloon further in the final weeks leading up to the June 26 primary. Donors who have reached the maximum spending limit – $2,700 per individual or $5,000 per political action committee – will get additional chances to give during the weeks before an expected Republican run-off on Aug. 28 and the subsequent 10 weeks before the Nov. 6 general election. The limits apply for each election.

The $516,725 in oil and gas-linked donations reported so far, which represents about 7 percent of all donations in the race, shows the influential industry is taking a strong interest in the primary. It also indicates many donors are not waiting until the general election to try to sway the outcome.

The industry is one of the largest contributors to political campaigns in the state. Other industries, such as the legal and medical fields, also contribute significantly to campaigns. But data from the organization FollowtheMoney.org shows oil and gas is the leader in all Oklahoma campaigns this cycle.

While the 7 percent may appear small, its profile stands out amid the numerous special interests and individuals who give to campaigns. The total also doesn’t include amounts given to so-called “dark money” groups that advocate on issues, sometimes with indirect benefit to a candidate.

This year’s primary comes three months after the Legislature and Gov. Mary Fallin defied calls from some of the top drillers in the state by increasing the gross production tax on oil and gas wells from 2 percent to 5 percent for their first 36 months of production. After that period, the rate rises to 7 percent.

The increase was part of a $425 million tax package that also included raising taxes on cigarettes and motor fuel. The gross production tax hike is expected to raise at least $170 million next year.

The future of those tax increases is in jeopardy, however.

A group of anti-tax activists led by former U.S. Sen. Tom Coburn is seeking to have voters decide in November whether to repeal the $425 million tax hike, which helped pay for a teacher pay raise.

Regardless, Oklahoma’s next governor could take a leading role in any efforts to lower or raise the gross production tax. A budget surplus caused by a surging economy, for instance, could increase pressure to reduce the tax.

“I think (oil and gas interests) are seeing what is at stake,” said Mickey O. Thompson, an oilman who formerly ran the Oklahoma Independent Petroleum Association. “Who knows if the governor can increase or decrease the taxes alone, but he will have a big bully pulpit and who knows what can happen.”

Republicans Gain Lion’s Share

Oklahoma Watch’s tally includes money from political action committees representing drilling companies and donors who self-identified as employees of oil and gas firms. Matching donations from top executives’ spouses were also included.

The half-million dollars given to candidates came from 426 separate donations.

By comparison, donors who identified as educators or school support staff gave $154,232, spread among 389 contributions, the analysis shows.

Republicans overwhelmingly were the recipients of oil and gas donations. Nine GOP candidates received $499,170 in the reporting period that runs through the end of March.

The two Democratic candidates collected only a small fraction of oil and gas donations, with Drew Edmondson taking in $17,455 and Connie Johnson reporting zero contributions. None of the three Libertarian candidates reported donations related to oil and gas.

Lt. Gov. Todd Lamb led the crowded GOP field by taking in slightly more than $225,000 from industry donors. He was followed by former Oklahoma City Mayor Mick Cornett, who reported about $179,000, and Tulsa businessman Kevin Stitt, who took in $83,000. No other GOP candidate took in more than $6,000.

Lamb, Cornett and Stitt have led the GOP field in total donations and also are frontrunners in the polls; two candidates will advance to a likely runoff.

Lamb, who leads in overall contributions, has won the support of some of the biggest players in the industry.

Those include Harold Hamm, chief executive officer of Continental Resources; Larry Nichols, co-founder of Devon Energy, and T. Boone Pickens, the Texas-based oil tycoon. Each gave the maximum $2,700.

Lamb, who worked as an oil and gas landman before he entered politics, has a long history of backing the industry, including casting the tie-breaking 2014 Senate vote that set the gross production tax at 2 percent for the first three years of production.

Industry leaders said the lower tax rate was necessary to protect the level of drilling in the state and all of its economic benefits. Critics said the discounted rate was an unneeded giveaway costing hundreds of millions of dollars that were better spent on state services such as education.

Lamb is also the only candidate who has received donations from PACs representing oil and gas interests. He has received $5,000 each from Newfield Exploration, Chesapeake Energy, Continental Resources and Devon Energy PACs, among others.

He also received $5,000 from the PAC run by the Oklahoma Independent Petroleum Association, the state’s largest oil and natural gas industry group.

Association President Tim Wigley said the group doesn’t usually endorse candidates so early, particularly for statewide office. But Lamb’s energy background and steadfast support of the industry as an officeholder made him an easy choice, Wigley said.

“We feel like he understands our industry and understands our state,” he said. “We think it was a smart move to support someone who has supported us in the past.”

Ideology vs. Money

Wigley said a candidate’s stance on gross production taxes is among the main factors that his group looks at when deciding whom to back.

But he rejected the perception that candidates’ political views are formed to appeal to industry donors. Wigley instead said he believes his industry supports Lamb because “he’s a candidate who gets that for us to remain completive and keep investors and drilling here we will need to be competitive on the tax front.”

When asked for comment, spokespeople for Cornett, Lamb and Stitt said that they have a diverse pool of donors and the candidates are not beholden to a single special interest.

Keith Beall, a spokesperson for Lamb, said the campaign doesn’t track how much an industry donates.

“It is not something we study because we know Oklahomans contribute to our campaign because they believe in Todd Lamb’s proven, conservative principles,” he said. “They believe in his detailed action plan, and that he is the best choice to move Oklahoma forward.”

Will Gattenby, a spokesman for Cornett, said, “Mick’s vision for the future of our state, combined with his record of results as mayor of Oklahoma City, is driving support and donations.”

Unlike Lamb, both Cornett and Stitt have not received any oil and gas PAC money.

Stitt spokeswoman Donelle Harder said this is “clearly demonstrating that he is going to be a governor independent of special interests.”

Differing Viewpoints

Lamb has been among the most vocal critics of the decision to raise the gross production tax.  During a gubernatorial debate in April, Lamb said raising the tax was “an ill-advised move” that will cost jobs and ultimately hurt state revenues.

During a debate Wednesday sponsored by the Oklahoma Oil and Gas Association, Lamb was the only candidate who unequivocally said he supports a lower tax rate.

“The gross production tax shouldn’t have been increased,” he said. “Oklahoma went back on its word to this industry.”

Stitt and Cornett have said raising the gross production tax wasn’t the ideal solution to funding teacher pay raises. But Cornett said he still would have signed the package with that increase.

Although Stitt said he would not have signed that bill, he noted during a debate this month that he does not support the petition to repeal it.

Harder didn’t say if Stitt would ultimately push for a lower rate. But she said Stitt has made it clear on the campaign trail that “he is for no new taxes.”

Among the Republican candidates, only State Auditor and Inspector Gary Jones has been a strong proponent of the new 5 percent rate. He has taken credit for convincing legislators of both partiesto pass the tax package and said he believes 5 percent is fair.

Jones, a former chair of the Oklahoma Republican Party who has struggled to rise in the polls, has taken in only $200 from oil and gas interests: $100 from the owner of Columbus Oil Co., a small producer, and an non-executive level employee of Devon

He said he believes his strong support of the 5 percent rate – something that was opposed by the Oklahoma Independent Petroleum Association, Oklahoma Oil and Gas Association and many of the larger producers – is to blame for the low total he has raised from the industry.

He added it’s fair to question candidates’ loyalties when they receive so much money from special interests.

“I think there can be at least a perception of a conflict of interest,” Jones said.

Oklahoma Watch is a nonprofit organization that produces in-depth and investigative journalism on important public-policy issues facing the state. More Oklahoma Watch content can be found at www.oklahomawatch.org.
Oklahoma Watch
Oklahoma Watch is a nonprofit organization that produces in-depth and investigative journalism on important public-policy issues facing the state. More Oklahoma Watch content can be found at www.oklahomawatch.org.

On the Democratic side, both Johnson and Edmondson have advocated for restoring the gross production tax to its historic 7 percent rate.

The $17,455 given to Edmondson by oil and gas interests came via 35 donations.

Among the donors was Thompson, the former OIPA head who now runs Ada-based True Energy Services and who briefly ran a group trying to organize a state question to increase the gross production rate.

Thompson said a candidate’s support of a higher rate isn’t necessarily a disqualifier for small producers.

He said many of the smaller producers are worried about the growing trend of “well-bashing,” where larger horizontal wells damage nearby vertical wells.

But Thompson said smaller producers can’t compete with large publicly traded corporations and industry groups that can not only donate the maximum amounts to candidates but also can influence elections through independent expenditure groups and nonprofits that don’t have to reveal their donors.

“What you are seeing is only part of what’s going on,” Thompson said. “I think there’s going to be a lot more money flowing into the campaigns.”

Oklahoma Watch is a non-profit organization that produces in-depth and investigative journalism on important public-policy issues facing the state. Oklahoma Watch is non-partisan and strives to be balanced, fair, accurate and comprehensive. The reporting project collaborates on occasion with other news outlets. Topics of particular interest include poverty, education, health care, the young and the old, and the disadvantaged.
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