OklahomaHB 3986Oklahoma 2026 Regular SessionHouse

Taxes; gross production tax; requiring certain completion methods for specific exemptions; effective date.

Sponsored By: Trey Caldwell (Republican)

Signed by Governor

Senate Committee

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Bill Overview

Analyzed Economic Effects

6 provisions identified: 0 benefits, 2 costs, 4 mixed.

Orphaned-well projects: half tax, $25K bond

Production from a project on a well taken from the orphaned-well list pays half the normal gross production tax for 36 months from the project start. This rule applies to projects on or after July 1, 2022. Operators must post $25,000 per transferred well before any production, using a bond, letter of credit, cash, or CD. The Secretary of State holds the money for the Plugging Fund if the well is abandoned and returns to the orphaned list.

2027 oil, gas, and minerals tax rates

Beginning January 1, 2027, oil and natural gas are taxed at 7% of gross value. Oil is measured per 42-gallon barrel at 60°F. Asphalt and ores with lead, zinc, jack, or copper are taxed at 0.75% of gross value. For wells spudded before January 1, 2027, the first 36 months of production are taxed at 5%, then 7% after that. If voters adopt Article XIII-C (State Question 795), that 36‑month rate becomes 2% instead of 5%.

Tax breaks for enhanced and recycled wells

Enhanced recovery projects that start on or after July 1, 2022 are exempt from gross production tax for up to five years from the project start or until the project ends. Wells completed using recycled water get a proportional exemption for 24 months from first sales, based on the share of recycled water used. A well can use only one of these exemptions at a time; after the recycled-water exemption ends, the well may later qualify for the enhanced-recovery exemption. Operators or working interest owners can claim refunds after the fiscal year ends and must file within 18 months after the first day of that fiscal year. Annual refund caps are $15 million (enhanced recovery) and $10 million (recycled water), refunds are prorated if claims exceed the caps, and no single claimant can receive over 20% of the enhanced-recovery cap.

Tax lien on oil and gas royalties

Beginning January 1, 2027, gross production tax attaches to royalty interests as a lien. If the tax is unpaid, the state can enforce that lien against the royalty interest. Royalty owners should factor this into payment and creditor priorities.

Stronger audits and penalties for producers

Starting January 1, 2027, the Tax Commission can demand records, hold hearings, and compel witnesses for gross production tax matters. Refusing to testify, provide records, or answer competent questions is a misdemeanor. The penalty is up to a $500 fine, up to one year in jail, or both. Each day of refusal is a separate offense.

Gross tax replaces some property taxes

Starting January 1, 2027, paying the gross production tax counts in place of some state and local property taxes on production rights, mineral interests, leases, and equipment used in production for that tax year. Only equipment and materials actually used in production are exempt. Offices, homes, hospitals, and similar facilities remain taxable. Oil in storage and other interests can still be taxed under normal rules.

Sponsors & Cosponsors

Sponsor

Trey Caldwell
Republican • House

Cosponsors

Kristen Thompson
Republican • Senate

Roll Call Votes

All Roll Calls

Yes: 168 • No: 19

Senate vote • 5/5/2026

THIRD READING

Yes: 40 • No: 5

Senate vote • 4/13/2026

Top_of_Page

Yes: 0 • No: 1

Senate vote • 4/13/2026

Committee vote: Revenue & Taxation

Yes: 10 • No: 1

Senate vote • 4/9/2026

Top_of_Page

Yes: 0 • No: 0

Senate vote • 4/9/2026

Committee vote: Energy

Yes: 10 • No: 0

House vote • 3/24/2026

THIRD READING

Yes: 81 • No: 11

House vote • 2/24/2026

DO PASS

Yes: 27 • No: 1

Actions Timeline

Approved by Governor 05/12/2026
5/12/2026House
Sent to Governor
5/6/2026House
Enrolled measure signed, returned to House
5/6/2026Senate
Enrolled, signed, to Senate
5/6/2026House
Referred for enrollment
5/5/2026House
Engrossed measure signed, returned to House
5/5/2026Senate
Measure passed: Ayes: 40 Nays: 5
5/5/2026Senate
General Order, Considered
5/5/2026Senate
Placed on General Order
4/15/2026Senate
Reported Do Pass Revenue and Taxation committee; CR filed
4/13/2026Senate
Referred to Revenue and Taxation
4/9/2026Senate
Reported Do Pass Energy committee; CR filed
4/9/2026Senate
Second Reading referred to Energy Committee then to Revenue and Taxation Committee
4/1/2026Senate
First Reading
3/25/2026Senate
Engrossed, signed, to Senate
3/25/2026House
Referred for engrossment
3/24/2026House
Third Reading, Measure passed: Ayes: 81 Nays: 11
3/24/2026House
General Order
3/24/2026House
Authored by Senator Thompson (principal Senate author)
2/25/2026House
CR; Do Pass, amended by committee substitute Appropriations and Budget Committee
2/25/2026House
Referred to Appropriations and Budget
2/18/2026House
Withdrawn from Rules Committee
2/18/2026House
Second Reading referred to Rules
2/3/2026House
Authored by Representative Caldwell (Trey)
2/2/2026House
First Reading
2/2/2026House

Bill Text

Enrolled (final version)
5/5/2026
PDF
Floor (Senate)
4/14/2026
PDF
Senate Committee Report 2
4/13/2026
PDF
Senate Committee Report 1
4/9/2026
PDF
Engrossed
3/25/2026
PDF
Floor (House)
3/2/2026
PDF
House Committee Report
2/25/2026
PDF
House Committee Substitute
2/25/2026
PDF
Introduced
1/15/2026
PDF

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