The economic impact of oil and gas production and drilling on the Oklahoma economy

              The Economic and Local Impact of Oklahoma’s
Oil and Natural Gas Industry 2006
1
Table of Contents
The Economic Impact of Oil and Gas Production and Drilling
On the Oklahoma Economy – Report��……………………………………2
The Local Impact of Oil and Gas Production and Drilling
In Oklahoma – Report………………….………………………………….26
Footnotes…………………………………………………………………………..54
2
THE ECONOMIC IMPACT OF
OIL AND GAS PRODUCTION AND DRILLING
ON THE OKLAHOMA ECONOMY
Prepared for
OKLAHOMA COMMISSION ON MARGINALLY PRODUCING
OIL AND GAS WELLS
AND
OKLAHOMA ENERGY RESOURCES BOARD
Prepared by
Mark C. Snead, Ph.D.
Director and Research Economist
and
Dolores A. Willett
Research Economist
Center for Applied Economic Research
Spears School of Business
Oklahoma State University
December 2006
3
The Economic Impact of Oil and Gas
Production and Drilling on the Oklahoma Economy
INTRODUCTION
The oil and gas sector continues to serve as the trademark industry of Oklahoma. Despite
the contraction of the industry since the oil bust, oil and gas drilling and production remain vital
components of the state economy. Oklahoma likewise remains an important component of the
U.S. energy infrastructure ranking fifth among the states in crude oil production and second in
natural gas production in 2005. Currently, the state produces an estimated 3.3 percent of the
nation’s crude output and 8.8 percent of natural gas output.
The substantial nature of oil and gas drilling and production produces significant
economic multiplier, or ripple, effects that impact most every sector of the state economy. The
industry produced an estimated $23 billion in output, employed more than 60,000 workers, and
generated more than $6.2 billion in income in 2005. Because the industry produces more output
per worker than nearly all other industry sectors, oil and gas firms subsequently are able to pay
relatively high wages per worker.
The recent upward shift in energy prices has once again triggered a surge in activity in
Oklahoma’s oil and gas industry. Drilling activity has expanded across the state as oil and gas
firms have added more than 10,000 jobs since the bottom in hiring in 2002. The industry is also
undergoing an important structural change in terms of the relative proportions of oil and gas
produced. Crude oil production continues to decline in importance relative to natural gas, and
recent well completions favor natural gas over crude oil by 4 to 1.
This report evaluates the current economic impact of Oklahoma’s oil and gas industry on
the broader state economy.1 The report first evaluates current trends in employment, drilling,
and production and evaluates the role of the state in the national energy complex. Next, the
economic impact on the state economy is examined in terms of employment and income
generated, output produced, purchases by the oil and gas industry from other state firms, and tax
revenue generated. The final section discusses forecasts of future crude oil and natural gas
production and employment in the industry through 2010.
4
INDUSTRY TRENDS
The Oklahoma oil and gas industry has undergone significant restructuring the past two
decades in response to changing geological fundamentals and market conditions. This section of
the paper examines the impact of these changes on the role of oil and gas workers in the state
labor force, including trends in total employment and wage levels. The next two sections
examine changes in Oklahoma crude oil and natural gas production, along with the state’s
changing role in the national energy infrastructure. A final section examines recent trends in
exploration and drilling activity across the state.
Employment and Wages
From 1975 to the height of the oil boom in 1982, Oklahoma’s oil and gas companies
added workers at an unprecedented pace, increasing the number of energy-related jobs statewide
from approximately 50,000 to nearly 160,000. At the peak of the price-driven boom, nearly 1 in
10 state workers was employed in the oil patch.
Although oil and gas employment entered a long phase of contraction following the bust,
the industry nevertheless remains an important and vital element of the state economy. Oil and
gas employment as a share of the total state workforce bottomed at 2.7 percent in 2002 and the
recent surge in oil and gas prices has once again
generated hiring gains in the industry. As shown
in Figure 1, total hiring expanded by more than 20
percent between 2002 and 2005 with the creation
of more than 10,000 oil and gas jobs. Roughly
three in four of the newly created jobs are wage
and salary.
Total employment at the state’s oil and gas
firms reached a reported 60,616 persons in 2005,
or about 3.0 percent of the total state workforce. Table 1 provides a breakdown of state oil and
gas employment in 2005 by type (wage and salary versus self-employed) and activity
(production versus drilling). Wage and salary employment is estimated at 33,709 workers, while
self-employed workers total 26,907. The oil and gas industry is unique relative to other state
industries in its large share of self-employed workers relative to wage and salaried workers.
0
20000
40000
60000
80000
100000
120000
140000
160000
1970 1975 1980 1985 1990 1995 2000 2005
Total
Self Employed
Wage & Salary
FIGURE 1
Oklahoma Oil and Gas Employment by Type
Source: Bureau of Labor Statistics, Bureau of Economic Analysis
5
The oil and gas industry generated total labor income of $6.22 billion in 2005; employee
compensation reached $2.83 billion, while self-employed workers earned an additional $3.4
billion in income. Wage and salary workers earned an average of $83,858 and self-employed
workers more than $126,000 in compensation in 2005.
Production jobs outnumber drilling jobs by more than 10 to 1, as shown in Table 1, or
approximately 56,142 production jobs versus 4,474 drilling jobs. Production jobs include mostly
administrative, professional, and technical staff and are heavily concentrated in the Oklahoma
City and Tulsa metropolitan areas. Drilling jobs include mostly field personnel and are dispersed
throughout the state. Average pay in 2005 was significantly higher for production workers
($104,461) than for drilling workers ($79,893).
Table 1. Oklahoma Oil and Gas Industry Employment and Income (2005)2
Employ-ment
%
Share
Total
Labor
Income
%
Share
Avg.
Labor
Income
Employment Type:
Wage and Salary 33,709 55.6% $2,826,785,000 45.4% $83,858
Self Employed 26,907 44.4% 3,395,342,000 54.6% 126,188
Total by Type 60,616 100.0% $6,222,127,000 100.0% $102,648
Oil and Gas Activity:
Production 56,142 92.6% $5,864,706,625 94.3% $104,461
Drilling 4,474 7.4% 357,420,375 5.7% 79,893
Total by Activity 60,616 100.0% $6,222,127,000 100.0% $102,648
Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Oklahoma State Econometric Model
The high level of output generated by the oil and gas sector has long allowed the industry
to pay attractive salaries relative to other industries in the state. Table 2 illustrates the average
pay for wage and salary workers in the highest paying 3-digit NAICS (North American Industry
Classification System) industry sectors in Oklahoma. NAICS industries 211 and 213 contain oil
and gas production and drilling employment in 2005, and both appear among the top ten highest
paying industries. The average wage for NAICS 211 Oil and Gas Extraction (contains only
production workers) was estimated at $86,696 and Support Activities for Mining (contains both
production and drilling workers) at $52,915. These average pay levels are, respectively, more
6
than 170 percent and more than 66 percent higher than the state average pay of $31,722 for wage
and salary workers across all industries.
Table 2. Highest Paying Wage and Salary Jobs by 3-Digit NAICS Industry (2005)
NAICS Industry Division
Average
Annual Pay
Employ-ment
Total Wages
Establish-ments
211 Oil And Gas Extraction $86,696 14,160 $1,227,636,133 1,108
523 Securities, Commodity Activities 68,762 3,905 268,540,054 908
221 Utilities 64,713 9,540 617,361,266 434
486 Pipe Transportation 64,004 1,678 107,408,572 99
324 Petroleum And Coal Products Manufacture 63,811 2,091 133,422,739 56
551 Management Of Companies And Enterprises 58,002 12,401 719,288,097 369
213 Support Activities For Mining 52,915 19,677 1,041,207,921 1,181
515 Broadcasting(Except Internet) 52,550 4,778 251,094,909 135
481 Air Transportation 51,912 8,880 460,956,342 64
322 Paper Manufacturing 49,281 3,192 157,324,257 42
All Industries $31,722 1,465,384 $46,485,502,954 94,603
Private Industries 31,558 1,158,141 36,548,520,628 89,123
Government 32,343 307,243 9,936,982,326 5,481
Source: Bureau of Labor Statistics Quarterly Census of Employment and Wages (QCEW)
Crude Oil and Natural Gas Production – Oklahoma vs. the U.S.
Oklahoma crude oil production peaked in 1927-29 with average annual production
around 250 million barrels. As shown in Figure 2, Oklahoma’s share of total U.S. output
approached 35 percent during this period. Much
of the decline in the state’s share of U.S. crude
production occurred in the early 1930s, but the
decline slowed markedly and reached a somewhat
steady share of about 8 percent in the 1943 to
1966 period, before resuming a steady but slower
decline that is currently approaching 3 percent of
U.S. output.
Oklahoma’s share in 1966 was 7.2
percent, 5 percent in 1982 at the height of the oil
boom, and 3.3 percent of total U.S. production in 2005. Even though the state’s share of total
.00
.04
.08
.12
.16
.20
.24
.28
.32
.36
00 10 20 30 40 50 60 70 80 90 00
Gas Oil
Source: Oklahoma Corporation Commission, U.S. Dept. of Energy
FIGURE 2
Oklahoma Share of U.S. Oil and Gas Production
7
domestic oil production has declined, Oklahoma oil and gas fields remain strong relative to other
states and remain an important component of the overall U.S. energy program. Oklahoma
ranked fifth in U.S. Department of Energy crude oil production estimates in 2005, as shown in
Table 3. Oklahoma has held this approximate rank since 2002. Among the 33 crude oil
producing states and federal offshore fields, only 12 produced 1 percent or more of U.S. crude
output.
Table 3. Top 10 Crude Oil and Natural Gas Producing States (2005)
Rank State
Crude
Production
(barrels)
% of U.S.
Crude
Production Rank State
Natural Gas
Production
(billion cf)
% of U.S.
Gas
Production
1 Texas 385,144,000 20.6% 1 Texas 5,233.9 27.3%
2 Alaska 315,420,000 16.9% 2 Oklahoma 1,678.7 8.8%
3 California 229,963,000 12.3% 3 Wyoming 1,646.9 8.6%
4 Louisiana 72,823,000 3.9% 4 New Mexico 1,608.7 8.4%
5 Oklahoma 61,543,000 3.3% 5 Louisiana 1,295.5 6.8%
6 New Mexico 60,603,000 3.2% 6 Colorado 1,098.1 5.7%
7 Wyoming 50,900,000 2.7% 7 Alaska 488.3 2.6%
8 North Dakota 34,744,000 1.9% 8 Kansas 365.4 1.9%
9 Kansas 33,635,000 1.8% 9 California 319.6 1.7%
10 Montana 33,011,000 1.8% 10 Utah 301.6 1.6%
Other 591,204,000 31.6% Other 5,108.0 26.7%
United States 1,868,990,000 100.0% United States 19,144.8 100.0%
Source: U.S. Department of Energy, Energy Information Administration (EIA)
Relative to crude, Oklahoma remains a more important component of the U.S. natural gas
infrastructure. As shown in Figure 2, the state’s contribution to national gas output was at its
highest in 1932 when it provided 16 percent of the U.S. natural gas supply. The decline in
Oklahoma’s share was steep from around 1935 to 1946, then rose slightly to 9.1 percent, and
once again began to decline in the early 1950s. Natural gas production showed favorable gains
through the 1980s when the state’s share peaked at 12.8 percent in 1989. The decline resumed
from that year, albeit at a slower rate. Since the recent surge in energy prices beginning in late
2000, the state has maintained at least an 8 percent share of U.S. production. In preliminary
2005 U.S. Department of Energy data in Table 3, the state ranks second at 1.68 trillion cubic
feet, only slightly ahead of Wyoming but well behind leading onshore producer Texas.
8
Crude Oil Trends
Crude oil production levels are shown in Figure 3 relative to overall U.S. production.
The highs and lows in Oklahoma crude production have largely mirrored changes in U.S.
production since the early 1940s. Prior to that time Oklahoma was experiencing oil discoveries
at a much greater rate than the U.S. overall. State production has experienced little variability
other than a steady decline since the modest bounce in crude output statewide during the oil
boom. The boom was largely reflected in the form of higher market prices, not large production
increases.
Production peaked most recently at 165 million barrels in 1984, well behind the more
than 200 million barrels produced two years in the
1950s, six years in the 1960s, and two in the
1970s. Crude oil output totaled 112 million
barrels in 1990 and progressively declined
throughout the remainder of the decade.
Oklahoma’s recent position relative to U.S.
production remains constant because the state’s
overall decline rate has closely mirrored the
decline in production at the national level. Since 1999, Oklahoma has maintained a share of
approximately 3 percent of the nation’s overall crude production.
Neither state nor national production, however, has increased in response to the recent
upward shift in energy prices. Decline rates have slowed, but the responsiveness of state crude
production appears to be dominated by geological fundamentals at current market prices. Recent
Oklahoma Tax Commission estimates indicate state crude oil and condensate production totaled
60.9 million barrels in 2005, less than 40 percent of the crude production from the recent peak in
1984. The decline in crude production in the two-decade period 1984 to 2005 represents a 4.6
percent annual decline rate.
Natural Gas Trends
Figure 4 illustrates the path of long-run natural gas production in Oklahoma from 1906 to
2005, and as compared to the nation in the period. Natural gas production in Oklahoma
maintained a close relationship to U.S. production until the recent state peak set in 1990. In
0
40
80
120
160
200
240
280
320
360
0
400
800
1200
1600
2000
2400
2800
3200
3600
00 10 20 30 40 50 60 70 80 90 00
Oklahoma U.S.
FIGURE 3
Crude Oil and Condensate Production, OK & U.S.
OK - Million barrels
U.S. - Million barrels
Source: Oklahoma Corporation Commission, U.S. Dept. of Energy
9
1990, state production reached 2.22 trillion cubic
feet before declining to the recent low of 1.59
trillion cubic feet by 2002. In contrast, natural gas
output at the national level has increased
consistently in the period since 1990, pushing the
state’s share of U.S. production down from 12
percent to 8.8 percent in the period.
While state output of natural gas has
declined by one-fourth since the 1990 peak, it has
shown much more responsiveness to the recent surge in energy prices than state crude
production. Oklahoma natural gas output managed to post small increases in both 2003 and
2004, but declined 3.5 percent to 1.61 trillion cubic feet in 2005. The cumulative decline rate for
natural gas production in the 1990 to 2005 period is 2.15 percent per year.
Oil and Gas Drilling Activity
Drilling activity in Oklahoma has completed three major cycles of expansion and
contraction in the past century, as shown in Figure 5. The most recent cycle stretched from the
mid 1970s to the mid 1980s and culminated with an all-time peak in drilling activity of more
than 12,000 well completions in 1982. Following
the peak, total completions declined rapidly to
only 1,264 in 1999, the lowest number of
completions since the World War II era.
However, the recent surge in energy prices
has again stimulated drilling activity in
Oklahoma. From 2000 to 2005, well completions
have been on an upswing with a post-bust high of
2,369 wells completed in 2005 and an average of
2,294 wells completed annually in the 2001 to
2005 period. However, given both the relatively measured response of drilling activity to the
current price environment and the diminishing geological fundamentals of the state’s fields, it is
unlikely that the recent surge in drilling signals the onset of another major cycle of oil and gas
0.0
0.4
0.8
1.2
1.6
2.0
2.4
0
4
8
12
16
20
24
00 10 20 30 40 50 60 70 80 90 00
Oklahoma U.S.
FIGURE 4
Natural and Casinghead Gas Production, OK & U.S.
OK - Trillion CF
U.S. - Trillion CF
Source: Oklahoma Corporation Commission, U.S. Dept. of Energy
0
2000
4000
6000
8000
10000
12000
14000
00 10 20 30 40 50 60 70 80 90 00
Source: Oklahoma Corporation Commission
FIGURE 5
Total Well Completions, OK
10
exploration across the state.
Prior to the early 1990s, oil wells typically outnumbered gas wells among total well
completions. However, the mix of wells being drilled in Oklahoma has since shifted in favor of
natural gas and continues to reflect an increasing emphasis statewide on natural gas relative to
crude. As seen in Figure 6, both gas and oil well completions have increased since 2000,
however the majority of the increase is in gas
drilling. Of the 2,369 wells completed across the
state in 2005, 1,704 were gas wells, 415 were oil
wells, and 250 were dry. This ratio of nearly 4 to
1 gas to oil wells is in contrast to drilling activity
in 1982 when oil wells comprised more than 50
percent of total well completions. The percentage
of dry wells continues to decline as the industry
posts increasingly higher success rates. Dry holes
have averaged less than 14 percent since 2001,
falling as low as 10.6 percent in 2005, ratios well below the historical state average of more than
30 percent dry wells since the 1950s.
Another trend in state drilling activity is the ongoing shift toward recovering deep
reserves in the state’s natural gas fields. Oklahoma has long played an important role in the
development of deep drilling. The first well drilled below 30,000 feet for commercial production
purposes was completed in Beckham County in 1972. From an economic impact point of view,
drilling a deep well is a much more significant economic event than drilling a typical shallow
well. Much greater capital investment is required and deep wells tend to produce significantly
greater average quantities of gas, both of which lead to greater economic impacts. From a recent
study of deep drilling in Oklahoma,3 most wells less than 10,000 feet deep cost less than $1.5
million to complete, while deep wells below 15,000 feet can range from $5 million to $15
million. On average, a deep well is estimated to have an economic impact six times that of a
typical shallow well under 15,000 feet.
0
1000
2000
3000
4000
5000
6000
7000
60 65 70 75 80 85 90 95 00 05
Dry
Gas
Oil
Source: Oklahoma Corporation Commission
FIGURE 6
Total Well Completions by Type, OK
11
ECONOMIC IMPACT
The drilling and production activities of the oil and gas industry have a large and
pervasive effect on the Oklahoma economy. The recent upward shift in oil and gas prices has
stimulated the expansion of the industry after it began to languish as recently as 1999 in response
to the decline of oil prices to below $11 per barrel. As discussed in earlier sections, the industry
has expanded rapidly since 2001, experiencing strong hiring gains and a resurgence in drilling
activity. The industry has also enjoyed a substantial increase in the value of total industry
output. The state’s oil and gas sector produced an estimated $23 billion in total output in 2005,
more than double the level at the recent bottom in 1999. More than 95 percent of total industry
output is generated by production, which includes professional, administrative, and technical
workers. Less than 5 percent of output was a result of drilling and exploration activities.
These activities create significant economic multiplier, or ripple, effects throughout the
state economy. The oil and gas sector is well known to produce among the largest economic
impacts of all industry sectors. The relatively large impact is the result of several factors,
including the high value of output produced by the industry, the capital intensive nature of
production and drilling, the large number of purchases made by oil and gas firms from other state
firms, the high average wages paid to workers, and the large stream of tax revenue generated
from severance taxes.
The impact of the industry reaches most every area of the state as well, as oil and gas
workers resided in every county and the production of either oil or gas occurred in 71 of the
state’s 77 counties in 2005. These economic impacts are examined in the following sections
along with forecasts of future production and hiring activity for the industry through 2010.
LINKAGES TO OTHER OKLAHOMA INDUSTRIES
Oklahoma oil and gas companies purchase inputs from business establishments both
within and outside of Oklahoma. Purchases from Oklahoma businesses generate beneficial
indirect effects on the Oklahoma economy. Table 4 provides an estimate of the purchases made
by Oklahoma companies engaged in oil and gas activities within the state in 2005.
Total inputs purchased for production and drilling activities by Oklahoma oil and gas
companies were an estimated $11.1 billion in 2005. Of this amount, 63 percent or $7.0 billion in
value was transacted with Oklahoma businesses. The remaining 37 percent ($4.1 billion) was
12
spent on purchases from businesses located in other states or foreign counties. When evaluated
for production (versus drilling), $6.9 billion (63 percent) was from inputs purchased from
Oklahoma businesses and $4.0 billion (37 percent) from businesses outside the state. Because
drilling activities produce significantly less output than production, the expenditures on inputs
are proportionately smaller than for production. As shown in Table 4, $92.8 million (48 percent)
was spent on inputs from Oklahoma businesses and $100.1 million (52 percent) from businesses
outside of Oklahoma.
Direct purchases by the state’s oil and gas firms reach most every industry sector of the
state, including both goods- and services-producing sectors. As detailed in Table 4, production
and drilling require large amounts of machinery and equipment from specialty manufacturers in
the state. Chemical, petroleum, and mineral companies likewise are important suppliers to oil
and gas firms. Traditional service firms such as eating and drinking establishments, food and
beverage stores, and general merchandise stores receive significant purchases from the oil and
gas industry. Payments for the use of real estate also make up a significant component of in-state
purchases for both production and drilling. Purchases of services from legal, financial, and
medical professionals comprise a significant portion of the purchases made by the state’s oil and
gas firms. Transportation and warehousing firms play a key role in the ongoing activities of the
industry, while utility, communications, and construction firms are also recipients of significant
energy industry purchases.
13
Table 4. Inputs Used in Oklahoma Oil and Gas Production and Drilling (2005)
Production Drilling
Oklahoma Input Demand: Oklahoma Input Demand:
Oil & Gas Production $3,232,665,742 14.54% Petroleum & Coal Products $15,465,845 1.99%
Rental & Leasing 2,207,519,105 9.93% Management of Companies 10,913,675 1.41%
Professional-Scientific & Technical Services 254,194,476 1.14% Professional-Scientific & Technical Services 10,470,352 1.35%
Management of Companies 242,011,266 1.09% Wholesale Trade 7,972,605 1.03%
Petroleum & Coal Products 169,270,334 0.76% Transportation & Warehousing 6,437,194 0.83%
Transportation & Warehousing 134,026,872 0.60% Machinery Mfg 5,503,693 0.71%
Wholesale Trade 111,428,982 0.50% Financial Services 5,092,808 0.66%
Utilities 100,921,830 0.45% Rental & Leasing 3,589,835 0.46%
Financial Services 87,062,562 0.39% Chemical Manufacturing 2,876,193 0.37%
Machinery Manufacturing 78,809,419 0.35% Utilities 2,494,142 0.32%
Chemical Manufacturing 52,732,263 0.24% Administrative Support Services 1,052,442 0.14%
Plastics & Rubber Products 31,845,109 0.14% Plastics & Rubber Products 1,034,420 0.13%
Real Estate 26,412,368 0.12% Information 774,914 0.10%
Information 22,054,616 0.10% Computer & Other Electronic Manufacturing 720,850 0.09%
Administrative Support Services 16,841,497 0.08% Real estate 706,433 0.09%
Nonmetal Mineral Products 15,789,625 0.07% Metal Manufacturing & Fabrication 670,391 0.09%
Metal Manufacturing & Fabrication 15,500,650 0.07% Transportation Equipment 612,723 0.08%
Transportation Equipment 11,639,936 0.05% Non-Metal Mineral Products 500,991 0.06%
Food Services & Drinking Places 8,218,465 0.04% Food & Beverage Stores 320,778 0.04%
Construction 6,842,942 0.03% Building Materials & Garden Dealers 255,902 0.03%
Art Entertain & Recreation 6,149,400 0.03% Motor vehicle & Parts Dealers 216,255 0.03%
Accommodations 3,028,464 0.01% Waste Management & Remediation Services 183,817 0.02%
Educational Services 2,254,009 0.01% General Merchandise Stores 180,213 0.02%
Waste Management & Remediation Services 1,907,239 0.01% Gasoline Stations 72,085 0.01%
Food & Beverage Stores 1,537,350 0.01% Educational Services 61,272 0.01%
Computer & other Electronics 1,340,847 0.01% Construction 39,647 0.01%
Building Materials & Garden Dealers 1,225,256 0.01% Wood Paper & Printing 28,834 0.00%
Motor Vehicle & Parts Dealers 1,028,753 0.00% Oil & Gas Production 21,626 0.00%
General Merchandise Stores 866,927 0.00% Accommodations 18,021 0.00%
Wood Paper & Printing 427,684 0.00% Other Industries 14,478,280 1.87%
Gasoline Stations 346,771 0.00% Oklahoma Input Demand $92,766,235 11.96%
Electrical Equipment & Appliances 312,094 0.00%
State & Local Government 115,590 0.00%
All Other Industries 59,112,844 0.27%
Oklahoma Input Demand $6,905,441,288 31.05%
Imported Inputs $3,995,883,160 17.97% Imported Inputs $100,103,622 12.91%
Total Input Demand $10,901,324,448 49.02% Total Input Demand $192,869,857 24.88%
Value Added: Value Added:
Employee Compensation 2,542,581,271 11.43% Employee Compensation 284,203,729 36.65%
Proprietor’s Income 3,322,125,354 14.94% Proprietor’s Income 73,216,646 9.44%
Other Property Income 4,531,250,778 20.38% Other Property Income 181,871,740 23.46%
Indirect Business Taxes 940,864,767 4.23% Indirect Business Taxes 43,187,223 5.57%
Total Value Added $11,336,822,170 50.98% Total Value Added $582,479,338 75.12%
Total Inputs $22,238,146,618 100.00% Total Inputs $775,349,194 100.00%
Source: Bureau of Economic Analysis, IMPLAN Input-Output Model, Oklahoma State Econometric Model
14
Multiplier Effects
The flow of business activity between Oklahoma oil and gas companies and other
businesses within the state creates interrelationships that are typically referred to as economic
multiplier, or ripple, effects. The impact can be described using common measures of economic
activity such as output, employment, and the components of value added, which include labor
income (employee compensation plus proprietor’s income), other property income, and indirect
business taxes. The economic impacts are described using the following three measures:4
· direct effect - the employment and income generated directly within the
Oklahoma oil and gas industry;
· indirect effect - the employment and income generated as a result of state oil and
gas firms doing business with firms in other industries within the state;
· induced effect - the economic activity generated by new household spending
resulting from compensation generated from the direct and indirect effects.
The three effects provide a convenient way to describe the resulting multiplier effects that occur
as the oil and gas industry engages in drilling and production (direct effect), then impacts those
firms that support and supply the oil and gas sector (indirect effect), and then finally affects the
broader regional economy as worker’s incomes and spending patterns are affected (induced
effect).
Table 5 summarizes the estimated economic impact of the oil and gas industry on the
broader state economy in 2005. The impacts are estimated separately for production and drilling
and measured in three ways: 1) total economic impact, 2) impact per $1 million in final output
by the industry, and 3) impact per 1,000 jobs in the industry.
Activity on the production side of the industry generated more than $22 billion in output
in 2005, resulting in multiplier effects (indirect and induced) supporting the production of an
estimated $27.3 billion in additional goods and services in other state industries. Drilling
activities generated $878 million in output in 2005 while simultaneously supporting the
production of $1.1 billion in indirect and induced goods and services in other industries.
In terms of direct oil and gas employment, 56,142 workers were employed in production-related
activities and 4,474 in drilling. These workers supported an additional 186,016 jobs
statewide (sum of the indirect and induced employment). In total, an estimated 246,632 jobs
statewide are provided either directly by the oil and gas sector or supported through multiplier
15
effects generated by the industry. In other words, each direct job in the oil and gas sector
supported 3.1 additional jobs in the broader state economy in 2005. Total direct labor income
earned by workers in oil and gas is estimated at $6.22 billion in 2005; $5.86 billion for
production and $357.4 million for drilling. Through multiplier effects, an additional $11.8
billion in labor income is supported statewide.
In Part B of Table 5, the multiplier effects are estimated per $1 million dollars of final
output by the oil and gas industry. Each $1 million dollars in oil and gas production generates an
additional $1.23 million of indirect and induced goods and services across Oklahoma; drilling
activities generate $1.25 million. There were 2.5 direct jobs for every million dollars in
production activities, and 5.1 jobs in drilling. In terms of the indirect and induced effects, a total
of 7.9 jobs were supported for every million dollars in direct production output, and 11.6 jobs
supported by drilling activities.
For every $1 million dollars in final output in production, workers receive $264,941 in
direct labor income, versus a comparatively higher $407,253 for drilling workers. These
payments of labor income to production and drilling employees per $1 million in output support
an estimated $506,882 and $638,659, respectively, in additional labor earnings to workers in
other industries throughout Oklahoma.
Finally, the economic impacts are described per 1,000 production and drilling jobs in Part
C of Table 5. For every 1,000 production jobs, $394.3 million dollars was generated in direct
output, and through indirect and induced effects an additional $485.7 million in goods and
services was generated statewide. Every 1,000 production jobs contributed to 3,132 additional
jobs, while every 1,000 drilling jobs added 2,270 jobs statewide. For every 1,000 production
jobs, $104.5 million dollars was paid in direct employee compensation and proprietor’s income;
$79.9 million for every 1,000 drilling job. Every 1,000 production and drilling workers support
an additional $199.9 million and $125.3 million, respectively, in wages and salaries through
indirect and induced multiplier effects.
16
Table 5. Economic Impact of Oklahoma Oil and Gas Production and Drilling (2005)
Part A. Total
Production Drilling
Direct Indirect Induced Total Direct Indirect Induced Total
Output ($ Million) $22,136 $8,317 $18,954 $49,407 $878 $262 $832 $1,971
Employment (Jobs) 56,142 45,744 130,117 232,003 4,474 1,578 8,577 14,629
Value Added: ($ Million)
Employee Compensation $2,543 $2,120 $6,094 $10,757 $284 $81 $367 $732
Proprietor's Income 3,322 1,190 1,816 6,328 $73 36 77 186
Other Property Income 4,531 1,506 2,291 8,328 182 30 114 326
Indirect Business Taxes 941 260 625 1,826 43 7 31 81
Total Value Added $11,337 $5,077 $10,826 $27,239 $582 $154 $589 $1,325
Part B. Per $1 Million in Final Output
Production Drilling
Direct Indirect Induced Total Direct Indirect Induced Total
Output $1,000,000 $375,705 $856,274 $2,231,979 $1,000,000 $298,000 $948,000 $2,246,000
Employment (Jobs) 2.5 2.1 5.9 10.5 5.1 1.8 9.8 16.7
Value Added:
Employee Compensation $114,863 $95,779 $275,322 $485,963 $323,828 $92,157 $417,620 $833,605
Proprietor's Income 150,079 53,748 82,034 285,861 83,425 41,261 87,621 212,307
Other Property Income 204,702 68,053 103,483 376,238 207,229 34,658 129,791 371,678
Indirect Business Taxes 42,504 11,761 28,221 82,486 49,209 7,544 35,839 92,591
Total Value Added $512,147 $229,341 $489,059 $1,230,548 $663,690 $175,619 $670,871 $1,510,181
Part C. Per 1,000 Jobs
Production Drilling
Direct Indirect Induced Total Direct Indirect Induced Total
Output $394,281,445 $148,133,510 $337,612,950 $880,027,904 $196,163,844 $58,456,826 $185,963,324 $440,583,994
Employment (Jobs) 1,000 815 2,318 4,132 1,000 353 1,917 3,270
Value Added:
Employee Compensation $45,288,174 $37,763,770 $108,554,348 $191,606,292 $63,523,408 $18,077,809 $81,921,947 $163,523,165
Proprietor's Income 59,173,326 21,191,802 32,344,436 112,709,564 16,364,919 8,093,974 17,188,139 41,647,032
Other Property Income 80,710,133 26,832,164 40,801,232 148,343,529 40,650,814 6,798,564 25,460,336 72,909,714
Indirect Business Taxes 16,758,578 4,637,099 11,127,026 32,522,702 9,652,933 1,479,795 7,030,231 18,162,959
Total Value Added $201,930,211 $90,424,835 $192,827,042 $485,182,088 $130,192,074 $34,450,142 $131,600,654 $296,242,870
Source: Bureau of Economic Analysis, IMPLAN Input-Output Model, Oklahoma State Econometric Model
17
TAX REVENUE ATTRIBUTED TO THE OIL AND GAS SECTOR
Activity in the oil and gas sector generates a large amount of tax revenue and plays a
major role in determining the fiscal health of state and local government. By far the largest
source of tax revenue is the gross production tax on oil and gas extraction. However, oil and gas
industry activity also generates significant amounts of personal and corporate income taxes and
sales and use taxes. The impact of the tax revenue generated both directly and indirectly by the
oil and gas industry is discussed below.
Gross Production Tax
Because the Oklahoma gross production tax is levied on the gross value of crude oil and
natural gas produced, the recent rise in energy prices has produced windfall amounts of tax
revenue to the state and has become an increasingly important component of the funding formula
for government at the state and local levels.
Table 6 details the annual production tax revenue generated from oil and gas extraction
for the fiscal years 1984 to 2006. This period captures the relatively high production tax receipts
at the end of the oil boom, the subsequent decline in receipts up to the recent bottom in industry
activity in 1999, and the surge in receipts driven by the recent upward shift in energy prices. The
tax stream has shifted from a fairly equal contribution from crude oil and natural gas during the
1980s to a much greater reliance on gas relative to crude. Starting in 1997, the share of gross
production tax revenue from natural gas began to rise to its current level of approximately 80
percent of the overall total.
An all time high in gross production receipts was achieved in fiscal year 2006 with a total
of $1.07 billion; natural gas totaled $812.1 million (76.2 percent) and crude oil $254.1 million
(23.8 percent). With the surge in energy prices in the four most recent fiscal years, 2003 through
2006, total severance tax receipts have averaged $775 million.
Oklahoma law determines the allocation of severance tax receipts, and Table 7 shows the
distribution in fiscal years 2001, 2004, 2005, and 2006. For oil, a greater share of the allocation
goes to education. In total, 77.16 percent of the revenues are evenly distributed among the
Common Education Technology Fund, Higher Education Capital Fund, and the Tuition
Scholarship Fund. Education receives an additional 7.14 percent that is allocated to local school
18
Table 6. Oklahoma Gross Production Tax by Source
Fiscal
Year
Crude Oil
Tax
Crude as %
of Total
Natural Gas
Tax
Gas as
% of Total Total Tax
1984 326,893,006 47.9% 355,855,539 52.1% 682,748,545
1985 308,200,319 45.7% 366,093,122 54.3% 674,293,441
1986 236,712,824 45.0% 288,890,749 55.0% 525,603,573
1987 142,177,551 40.8% 206,020,761 59.2% 348,198,312
1988 155,779,858 41.9% 215,635,138 58.1% 371,414,996
1989 130,633,053 36.0% 232,290,970 64.0% 362,924,023
1990 142,368,628 36.4% 248,411,884 63.6% 390,780,512
1991 173,963,235 43.6% 225,212,160 56.4% 399,175,395
1992 135,814,455 39.6% 206,934,429 60.4% 342,748,884
1993 123,711,551 32.4% 258,421,295 67.6% 382,132,846
1994 93,692,790 27.0% 252,903,783 73.0% 346,596,573
1995 99,959,189 35.4% 182,466,669 64.6% 282,425,858
1996 105,087,666 33.7% 206,378,476 66.3% 311,466,142
1997 120,998,227 31.0% 269,834,041 69.0% 390,832,268
1998 89,114,322 26.0% 253,618,812 74.0% 342,733,134
1999 43,357,704 17.8% 199,886,735 82.2% 243,244,439
2000 112,017,406 29.2% 272,006,710 70.8% 384,024,116
2001 139,027,814 19.4% 577,415,242 80.6% 716,443,056
2002 103,642,265 26.7% 284,600,893 73.3% 388,243,158
2003 126,562,485 21.1% 472,931,614 78.9% 599,494,099
2004 140,684,370 20.5% 544,985,974 79.5% 685,670,344
2005 192,892,072 23.5% 558,303,985 76.5% 751,196,057
2006e 254,061,959 23.8% 812,110,645 76.2% 1,066,172,604
Source: Oklahoma Tax Commission, OSU Center for Applied Economic Research
Table 7. Distribution of Oklahoma Gross Production Tax Receipts
Gross Production Tax on Crude Oil
Fund (Crude Oil Distribution) Allocation FY-2001 FY-2004 FY-2005 FY-2006e
To Counties for Highways 7.14% $9,926,586 $10,044,864 $13,772,494 $18,140,024
To Local School Districts 7.14% 9,926,586 10,044,864 13,772,494 18,140,024
County Bridge & Road Improvement Fund 4.28% 5,950,390 6,021,291 8,255,781 10,873,852
Water Resources Board Fund 4.28% 5,950,390 6,021,291 8,255,781 10,873,852
Common Education Technology Fund 25.72% 35,757,954 36,184,020 49,611,841 65,344,736
Higher Education Capital Fund 25.72% 35,757,954 36,184,020 49,611,841 65,344,736
Tuition Scholarship Fund 25.72% 35,757,954 36,184,020 49,611,841 65,344,736
Total - Crude Oil 100.00% $139,027,814 $140,684,370 $192,892,072 $254,061,959
Gross Production Tax on Natural Gas
Fund (Natural Gas Distribution) Allocation FY-2001 FY-2004 FY-2005 FY-2006e
General Revenue Fund 85.72% $494,960,345 $467,161,977 $478,578,176 $696,141,245
To Counties for Highways 7.14% 41,227,448 38,911,999 39,862,905 57,984,700
To Local School Districts 7.14% 41,227,448 38,911,999 39,862,905 57,984,700
Total - Natural Gas 100.00% $577,415,242 $544,985,974 $558,303,985 $812,110,645
Source: Oklahoma Tax Commission, Oklahoma Office of State Finance, OSU Center for Applied Economic Research
19
districts. Counties receive 7.14 percent of the revenues for highways. Another 4.28 percent is
allocated to the County Bridge and Improvement Fund. The Water Resources Board Fund
receives the remaining 4.28 percent.
The gross production revenues from natural gas are distributed to fewer funds. The State
General Revenue Fund is the largest recipient and is allocated 85.72 percent of the gross
production tax revenues from natural gas. In fiscal year 2006, this amounted to nearly $700
million. The remaining allocation is shared equally by local school districts and counties for
highway use, with each receiving 7.14 percent of the tax revenues, respectively.
Other Tax Revenue
Tax revenue generated by the oil and gas sector extends beyond the gross production tax.
Estimates of the full range of taxes paid both directly and indirectly as a result of oil and gas
industry activity are shown in Table 8. While the gross production tax is by far the highest and
represented 66.5 percent of the tax revenues in fiscal year 2006, the personal income tax
generated over $196 million with its share of the total estimated at 12.2 percent.
Table 8. Oklahoma Tax Revenue Attributable to Oil and Gas Activity (FY2006)
Type of Tax Tax Revenue % of Total
Gross Production Tax
Crude Oil $254,061,959 15.8%
Natural Gas 812,110,645 50.6%
Total Gross Production Tax 1,066,172,604 66.5%
Personal Income Tax 196,322,836 12.2%
Corporate Income Tax 17,486,973 1.1%
Motor Vehicle Tax 39,004,332 2.4%
Sales and Use Tax
State 169,445,362 10.6%
Local 115,576,273 7.2%
Total Sales and Use Tax 285,021,635 17.8%
Total Tax Revenue $1,604,008,379 100.0%
Source: Oklahoma Tax Commission, IMPLAN Input-Output Model, Oklahoma State Econometric Model, Oklahoma
Office of State Finance
20
Another large source of tax revenue is the sales and use tax. This tax generated nearly
$170 million for state government and around $115 million for local government in fiscal year
2006. Total sales and use tax collections accounted for 17.8 percent of the total tax revenues
attributed to the oil and gas sector. The remaining sources of tax revenues are the corporate
income tax, which brought in an estimated $17.5 million, and the motor vehicle tax at over $39
million. These final two sources contributed a smaller share percentage wise, yet are sizeable in
dollar amounts and important sources of revenue for funding state government.
FORECASTS OF CRUDE OIL AND NATURAL GAS PRODUCTION THROUGH 2010
This section presents forecasts for state production of crude oil and natural gas in the 2006
to 2010 period developed using the Oklahoma State Econometric Model.5 The Model is a large-scale
econometric forecasting model maintained at Oklahoma State University and provides
information on the probable performance of the Oklahoma economy in upcoming years.
Energy Price Scenarios
Forecasts for the Oklahoma price of crude
oil and natural gas are based on three price
scenarios: 1) a base case projection using Global
Insight’s6 long-range energy price forecast, 2) an
optimistic case based on historically high energy
prices, and 3) a pessimistic case based on
historically low energy prices. The three
production forecasts are generated by alternating
the price series used in the estimated equations
and then re-solving the model forecasts through 2010.
The underlying price scenarios for Oklahoma crude oil and natural gas are shown in
Figures 7 and 8. For crude oil in Figure 7, the base case price reaches a peak at approximately
$70/barrel in the third quarter of 2006, falls back to near $60/barrel in the fourth quarter of 2007,
and then trends to around $65/barrel through 2010. The high price scenario for crude follows the
same growth pattern as the base case, but spikes rapidly upward to $90/barrel by 2008. The low
price crude scenario trends downward to around $50/barrel by 2008.
10
20
30
40
50
60
70
80
90
100
1985 1990 1995 2000 2005 2010
High
Base
Low
Figure 7
Crude Oil and Condensate Price Scenarios
$ per barrel
Source: Oklahoma State Econometric Model, Global Insight
21
The base case natural gas price, shown in
Figure 8, increases to $8.00/mcf by the first
quarter of 2007 and then increases slowly to a
new long-run trend of $9.00/mcf through 2010.
The high price scenario for natural gas follows
the same growth trend as the base case but
reaches a new long-run price of $12.00/mcf by
2010. In the low price scenario, gas prices
fluctuate around a new long-run price of
$6.50/mcf through 2010.
Crude Oil Production Forecast – 2006 to 2010
Figure 9 highlights the three forecast scenarios through 2010 for crude oil production along
with actual production levels since 1985. The forecast scenarios suggest that state-based crude
production is not expected to be highly responsive to changes in the market price of oil below the
$90/barrel level. The expected impact of the high and low price scenarios on future production
is best described as a slight change in the long-run decline rate in production. No sharp response
in crude output is predicted for either the high or
low crude price scenario.
The base crude oil forecast suggests a
continuation of the ongoing decline in output,
with crude production falling to 53.0 million
barrels by 2010. The forecasted base case output
level equates to an expected decline rate of
approximately 3.0 percent annually through 2010,
an improvement over the 4.6 percent annual
decline rate experienced since 1984. The slowing
of the decline rate in the base forecast is due to the
expected small positive response of state oil production to historically high oil prices.
Under the high price scenario with oil reaching nearly $90/barrel, Oklahoma production of
crude oil falls to 54.5 million barrels per year in 2010. However, the high price crude oil output
0
2
4
6
8
10
12
14
1985 1990 1995 2000 2005 2010
High
Base
Low
Figure 8
Natural and Casinghead Gas Price Scenarios
$ per mcf
Source: Oklahoma State Econometric Model, Global Insight
40
60
80
100
120
140
160
1985 1990 1995 2000 2005 2010
High
Base
Low
Figure 9
Forecast of OK Crude Oil and Condensate Production
Million barrels
Source: Oklahoma State Econometric Model
22
forecast is only 3 percent above the base case in 2010. Conversely, under the low price scenario,
total production falls to only 51.7million barrels in 2010, or 2.5 percent below the base case
forecast in 2010.
In general, at the price levels considered, state production of crude oil is expected to be
predominately driven by geological fundamentals and to exhibit a steady decline rate through
2010. The high and low price scenarios result in only a small adjustment to the expected base
case decline rate.
Natural Gas Production Forecast – 2006 to 2010
The forecast scenarios for Oklahoma natural gas are shown in Figure 10 and suggest that
gas production is expected to be more price responsive than crude oil. The base case forecast,
with gas prices rising to $9.00/mcf, calls for a
small increase in gas production through 2007 in
response to the surge in price before declining
steadily to total production of 1.47 trillion cubic
feet (TCF) in 2010.
The high gas price scenario of $12.00/mcf
provides a slightly more favorable outlook, with
total output increasing approximately 2 percent in
2007 and 1.4 percent in 2008 before retreating to
a production level of 1.50 trillion cubic feet in
2010, a level 2.0 percent above the base case forecast.
Under the low price scenario with gas prices declining to approximately $6.50/mcf, total
natural gas output does not respond to the price spike in 2007 and production declines steadily to
1.44 trillion cubic feet by 2010. This results in Oklahoma natural gas output falling 3.0 percent
below the base case forecast in 2010.
Energy Industry Employment Forecasts
Employment in the state’s oil and gas sector is also responsive to changes in energy prices.
The recent upward shift in energy prices has served to reverse the long-run decline in oil and gas
hiring underway since the oil bust and has generated significant new hiring by state oil and gas
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
1985 1990 1995 2000 2005 2010
High
Base
Low
Figure 10
Forecast of OK Natural and Casinghead Gas Production
Trillion CF
Source: Oklahoma State Econometric Model
23
firms. More than 10,000 self-employed and wage and salary jobs were created in the industry in
the 2002 to 2005 period alone.
The impact of energy price changes on total oil and gas employment is modeled under
three scenarios. The first scenario assumes that the base case price forecasts for both oil and gas
from the prior section are realized. The remaining two scenarios examine the high and low price
scenarios for crude oil and natural gas where either the two high price scenarios or the two low
price scenarios occur simultaneously. The employment forecasts are formed in two stages.
First, a linear regression of employment on oil and gas production levels in the 1984 to 2005
period is estimated. Forecasts of employment in the 2006 to 2010 period are then formed using
the estimated regression equation along with forecasts of oil and gas production.
Figure 11 illustrates the expected path for
total oil and gas employment through 2010 for the
three price scenarios. Employment increases
rapidly in the short run in response to the current
high level of energy prices in all three scenarios,
but peaks in 2008 as energy prices begin to trend
sideways. In the base case, the state is expected
to add more than 5,300 jobs (8.5 percent gain) in
2006 and 3,300 jobs (4.9 percent gain) in 2007,
before peaking at 74,593 total oil and gas workers in 2008, or a level 23,400 workers (39 percent
increase) above the 2002 bottom in hiring. In the high price scenario, the state adds 7,250 oil
and gas workers (11.5 percent gain) in 2006 and 3,500 (4.9 percent gain) in 2007, and then peaks
at 77,188 in 2008, a level 3.5 percent above the base case in 2010. In the low price scenario,
3,800 jobs (6.0 percent gain) are added in 2006 and 2,800 (4.2 percent gain) in 2007 before
peaking at 71,834 jobs by 2008, or 3.7 percent below the base case. In the three price scenarios
examined, the forecast suggests that the industry will increase employment in both 2006 and
2007 before peaking in 2008, and then retreat gradually to a new long-run level of employment
by 2010.
50000
55000
60000
65000
70000
75000
80000
85000
1990 1995 2000 2005 2010
High
Base
Low
Figure 11
Forecast of OK Oil and Gas Total Employment
Thousands
Source: Oklahoma State Econometric Model
24
SUMMARY
Although the Oklahoma oil and gas industry has downsized from the height of the oil
boom in 1982 when the industry employed nearly 160,000 workers, the sector remains an
important component of the state economy. The recent upward shift in oil and gas prices has
stimulated another cyclical expansion of the industry. Total oil and gas employment expanded
by more than 20 percent (10,000 jobs) between 2002 and 2005, reaching a reported 60,616
persons in 2005, or about 3.0 percent of the total state workforce. Wage and salary employment
is estimated at 33,709 workers, while self-employed workers total 26,907.
The oil and gas industry generated total labor income of $6.22 billion in 2005; employee
compensation reached $2.83 billion while self-employed workers earned an additional $3.4
billion in income. The oil and gas industry continues to pay high wages relative to other state
industries; wage and salary workers earned an average of $83,858 while self-employed workers
earned more than $126,000 in income in 2005.
Oklahoma’s oil and gas fields remain strong relative to most other states and remain an
important component of the overall U.S. energy program. Oklahoma’s share of total U.S. crude
production continues to fall slowly, reaching 3.3 percent in 2005 as compared to 7.2 percent in
1966 and 5 percent in 1982 at the height of the oil boom. Oklahoma ranked fifth among the
states in 2005 crude oil production. Since the recent surge in energy prices, the state has
maintained at least an 8 percent share of U.S. natural gas production and ranked second among
the states in total natural gas production in 2005.
Drilling activity in Oklahoma has responded to higher market prices for crude oil and
natural gas. From 2000 to 2005, well completions have been on an upswing with a post-bust
high of 2,369 wells completed in 2005 and an average of 2,294 wells completed annually in the
2001 to 2005 period. The mix of wells being drilled in Oklahoma continues to shift in favor of
natural gas relative to crude. The current ratio of nearly 4 to 1 gas to oil wells is in contrast to
drilling activity in 1982 when oil wells comprised more than 50 percent of total well
completions.
The drilling and production activities of the oil and gas industry have a large and
pervasive effect on the Oklahoma economy and create significant economic multiplier, or ripple,
effects. These impacts can be measured in terms of purchases of inputs from other state firms,
employment and income generated, output produced, and tax revenue generated.
25
Total inputs purchased by Oklahoma oil and gas companies were an estimated $11.1
billion in 2005. From this amount, 63 percent or $7.0 billion in value was transacted with
Oklahoma businesses. Direct purchases by the state’s oil and gas firms reach most every
industry sector of the state, including both the goods- and services-producing sectors.
In terms of direct oil and gas employment, 56,142 workers were employed in production-related
activities and 4,474 in drilling. These workers supported an additional 186,016 jobs
statewide. In total, an estimated 246,632 jobs statewide are either provided directly by the oil
and gas sector or supported through multiplier effects generated by the industry. In other words,
each direct job in the oil and gas sector supported 3.1 additional jobs in the broader state
economy in 2005. Total direct labor income earned by workers in oil and gas is estimated at
$6.22 billion in 2005; $5.86 billion for production and $357 million for drilling. Through
multiplier effects, an additional $11.8 billion in labor income is supported statewide.
The recent rise in energy prices has produced windfall amounts of tax revenue to the
state. An all time high in gross production receipts was achieved in fiscal year 2006 with a total
of $1.1 billion; natural gas totaled $901.6 million (79.5 percent) and crude oil $232.7 million
(20.5 percent). In fiscal years 2003 through 2006, total severance tax receipts have averaged
more than $790 million. The personal income tax generated an estimated $146.6 million, the
corporate income tax brought in $13.1 million, and the motor vehicle tax totaled $29.1 million.
The industry directly and indirectly generated over $126.5 million in sales and use tax for state
government and around $86.3 million for local government in fiscal year 2006.
Forecasts through 2010 suggest that state crude oil production is not expected to increase
in response to any of the price level scenarios modeled (below $80 per barrel), though natural
gas production is expected to increase slightly in the near term at current or higher natural gas
prices. Forecasts for employment suggest that the industry will add jobs in both 2006 and 2007,
adding 3,100 jobs in the base case, and then retreat gradually to a new long-run level of
employment by 2010.
26
THE LOCAL IMPACT OF
OIL AND GAS PRODUCTION AND DRILLING
IN OKLAHOMA
Prepared for
OKLAHOMA COMMISSION ON MARGINALLY PRODUCING
OIL AND GAS WELLS
AND
OKLAHOMA ENERGY RESOURCES BOARD
Prepared by
Dolores A. Willett
Research Economist
and
Mark C. Snead, Ph.D.
Director and Research Economist
Center for Applied Economic Research
Spears School of Business
Oklahoma State University
December 2006
27
The Local Impact of Oil and Gas
Production and Drilling In Oklahoma
INTRODUCTION
This report examines the economic impact of Oklahoma’s oil and gas industry at the local
level.7 While production and drilling occur in most areas of the state, the economic impact is not
distributed evenly across all regions of the state. The local impacts are examined at the county
level and by Oklahoma Corporation Commission District and illustrate the dispersion of oil and
gas industry employment, income, drilling, and production across the state.
LOCAL PRODUCTION8
Oil and gas deposits are found throughout most of Oklahoma’s 77 counties, with oil
production occurring in 68 counties and gas production in 69 counties in 2005. The bulk of the
state’s oil production is confined to three areas: a large block of counties stretching across much
of the central and south central portion of the state; the Texas County area in the panhandle; and
Osage, Creek, and Noble Counties in the north central portion of the state. The major natural gas
producing areas are found in the west central portion of the state (Anadarko Basin), Texas and
Beaver Counties in the panhandle, and Latimer and Pittsburg Counties in the southeast.
Crude oil production remains largely concentrated in a small number of counties
containing the state’s most highly productive fields. As shown in Part A of Table 1, Carter
County with over 6.3 million barrels and Stephens County at just over 6.0 million barrels are the
two largest crude oil producing counties. Both counties are located in south central Oklahoma
and account for a combined 20 percent of the crude oil production in the state. The next tier of
crude oil producing counties includes Osage, Grady, Texas, and Garvin and in order range from
slightly under 4.3 million barrels to just over 3.1 million barrels. These four counties, together
with the higher crude oil producing Carter County and Stephens County, account for 43.4
percent of the state’s oil production. Map 1 illustrates the broad geographic distribution of oil
production across the state, as well as the relatively small amount of crude oil production
originating in the extreme eastern portion of the state.
28
Table 1. Rankings of Oil and Gas Production by County (2005)
A. Crude Oil and Condensate
Barrels (bbls)
B. Natural and Casinghead Gas
Thousand Cubic Feet (mcf)
C. Barrel of Oil Equivalent Production
(1 Barrel = 6 mcf)
Rank County Production
% of
Total
Cumu-lative
% of
Total Rank County Production
% of
Total
Cumu-lative
% of
Total Rank County
Equivalent
Production
% of
Total
Cumu-lative
% of
Total
1 Carter 6,321,680 10.4% 10.4% 1 Roger Mills 148,461,559 9.2% 9.2% 1 Beckham 31,065,273 9.5% 9.5%
2 Stephens 6,054,799 9.9% 20.3% 2 Latimer 138,106,499 8.6% 17.8% 2 Roger Mills 29,072,549 8.8% 18.3%
3 Osage 4,292,885 7.0% 27.4% 3 Beckham 136,718,598 8.5% 26.4% 3 Latimer 27,079,318 8.2% 26.5%
4 Grady 3,503,814 5.7% 33.1% 4 Grady 85,931,897 5.4% 31.7% 4 Grady 17,825,797 5.4% 32.0%
5 Texas 3,154,799 5.2% 38.3% 5 Pittsburg 83,590,743 5.2% 36.9% 5 Texas 17,086,590 5.2% 37.2%
6 Garvin 3,141,754 5.2% 43.4% 6 Caddo 79,484,488 5.0% 41.9% 6 Caddo 16,389,169 5.0% 42.2%
7 Pontotoc 2,526,763 4.1% 47.6% 7 Texas 68,856,689 4.3% 46.2% 7 Stephens 14,002,878 4.3% 46.4%
8 Creek 2,333,584 3.8% 51.4% 8 Custer 65,917,607 4.1% 50.3% 8 Pittsburg 13,319,852 4.1% 50.5%
9 Caddo 2,039,380 3.3% 54.8% 9 Washita 61,626,228 3.8% 54.1% 9 Washita 12,310,418 3.7% 54.2%
10 Oklahoma 1,924,149 3.2% 57.9% 10 Stephens 61,107,855 3.8% 57.9% 10 Custer 12,108,792 3.7% 57.9%
11 Seminole 1,846,738 3.0% 60.9% 11 Beaver 52,219,482 3.3% 61.2% 11 Beaver 10,549,985 3.2% 61.1%
12 Major 1,680,435 2.8% 63.7% 12 Woodward 46,201,584 2.9% 64.0% 12 Canadian 9,380,699 2.9% 64.0%
13 Pottawatomie 1,465,891 2.4% 66.1% 13 Canadian 45,652,593 2.8% 66.9% 13 Carter 9,074,657 2.8% 66.7%
14 Beaver 1,290,494 2.1% 68.2% 14 Major 45,167,844 2.8% 69.7% 14 Major 8,818,468 2.7% 69.4%
15 Lincoln 1,138,107 1.9% 70.1% 15 Blaine 40,532,979 2.5% 72.2% 15 Garvin 7,893,604 2.4% 71.8%
16 Kingfisher 1,107,336 1.8% 71.9% 16 Haskell 37,481,283 2.3% 74.6% 16 Blaine 7,354,217 2.2% 74.1%
17 Noble 1,082,083 1.8% 73.7% 17 Dewey 34,123,752 2.1% 76.7% 17 Dewey 6,769,375 2.1% 76.1%
18 McClain 1,082,065 1.8% 75.5% 18 Garvin 30,721,182 1.9% 78.6% 18 Woodward 6,202,262 1.9% 78.0%
19 Canadian 973,218 1.6% 77.1% 19 Ellis 29,506,220 1.8% 80.4% 19 Haskell 5,890,921 1.8% 79.8%
20 Roger Mills 813,509 1.3% 78.4% 20 LeFlore 29,498,926 1.8% 82.3% 20 Ellis 5,729,997 1.7% 81.5%
21 Kay 805,275 1.3% 79.7% 21 Woods 26,490,519 1.6% 83.9% 21 Kingfisher 5,220,362 1.6% 83.1%
22 Dewey 727,288 1.2% 80.9% 22 Kingfisher 25,550,348 1.6% 85.5% 22 Osage 4,985,679 1.5% 84.7%
23 Payne 702,036 1.2% 82.1% 23 Harper 21,989,598 1.4% 86.9% 23 Logan 4,366,969 1.3% 86.0%
24 Logan 696,586 1.1% 83.2% 24 Logan 19,775,081 1.2% 88.1% 24 Woods 3,992,433 1.2% 87.2%
25 Ellis 682,858 1.1% 84.3% 25 Garfield 14,769,096 0.9% 89.0% 25 Harper 3,144,374 1.0% 88.2%
26 Cleveland 632,995 1.0% 85.4% 26 McClain 13,936,022 0.9% 89.9% 26 LeFlore 2,955,665 0.9% 89.1%
27 Custer 575,715 0.9% 86.3% 27 Carter 13,115,435 0.8% 90.7% 27 Lincoln 2,761,621 0.8% 89.9%
28 Garfield 541,462 0.9% 87.2% 28 Lincoln 12,371,177 0.8% 91.5% 28 Oklahoma 2,603,325 0.8% 90.7%
29 Woods 518,607 0.9% 88.0% 29 Oklahoma 12,129,388 0.8% 92.2% 29 McClain 2,540,172 0.8% 91.5%
30 Grant 488,862 0.8% 88.9% 30 Osage 8,990,094 0.6% 92.8% 30 Garfield 1,987,211 0.6% 92.1%
31 Love 469,980 0.8% 89.6% 31 Pushmataha 8,956,423 0.6% 93.4% 31 Creek 1,962,717 0.6% 92.7%
32 Beckham 464,323 0.8% 90.4% 32 Pottawatomie 8,198,095 0.5% 93.9% 32 Pontotoc 1,830,672 0.6% 93.2%
33 Pawnee 432,712 0.7% 91.1% 33 Hughes 7,927,562 0.5% 94.4% 33 Pottawatomie 1,753,972 0.5% 93.8%
34 Washita 432,352 0.7% 91.8% 34 Nowata 7,747,964 0.5% 94.8% 34 Seminole 1,723,679 0.5% 94.3%
35 Jefferson 407,621 0.7% 92.5% 35 Coal 6,434,741 0.4% 95.2% 35 Noble 1,480,078 0.5% 94.7%
36 Alfalfa 385,987 0.6% 93.1% 36 Grant 6,354,849 0.4% 95.6% 36 Hughes 1,445,129 0.4% 95.2%
37 Hughes 381,071 0.6% 93.7% 37 McIntosh 5,722,097 0.4% 96.0% 37 Pushmataha 1,334,754 0.4% 95.6%
38 Okfuskee 370,442 0.6% 94.3% 38 Seminole 5,587,358 0.3% 96.3% 38 Nowata 1,301,668 0.4% 96.0%
39 Okmulgee 367,259 0.6% 94.9% 39 Washington 5,511,805 0.3% 96.7% 39 Grant 1,285,893 0.4% 96.4%
40 Blaine 365,158 0.6% 95.5% 40 Alfalfa 4,934,475 0.3% 97.0% 40 Alfalfa 1,187,571 0.4% 96.7%
41 Woodward 333,709 0.5% 96.1% 41 Payne 4,648,028 0.3% 97.3% 41 Payne 1,108,380 0.3% 97.1%
42 Murray 317,927 0.5% 96.6% 42 Marshall 4,593,525 0.3% 97.6% 42 Love 1,083,515 0.3% 97.4%
43 Tulsa 290,661 0.5% 97.1% 43 Kiowa 4,085,734 0.3% 97.8% 43 Coal 971,617 0.3% 97.7%
44 Washington 255,848 0.4% 97.5% 44 Noble 3,856,066 0.2% 98.1% 44 Washington 898,526 0.3% 98.0%
45 Harper 253,026 0.4% 97.9% 45 Cimarron 3,135,143 0.2% 98.3% 45 Marshall 775,550 0.2% 98.2%
46 Nowata 183,459 0.3% 98.2% 46 Sequoyah 3,079,623 0.2% 98.5% 46 Cleveland 696,730 0.2% 98.4%
47 Comanche 174,414 0.3% 98.5% 47 Creek 2,821,596 0.2% 98.6% 47 Okfuskee 644,680 0.2% 98.6%
48 Marshall 144,750 0.2% 98.7% 48 Okfuskee 2,703,911 0.2% 98.8% 48 Kay 595,402 0.2% 98.8%
49 Cotton 135,914 0.2% 99.0% 49 Atoka 2,675,966 0.2% 99.0% 49 McIntosh 581,908 0.2% 99.0%
50 Cimarron 112,019 0.2% 99.2% 50 Love 2,613,621 0.2% 99.1% 50 Oklahoma 547,623 0.2% 99.1%
Continued
29
Table 1. (Continued) Rankings of Oil and Gas Production by County (2005)
A. Crude Oil and Condensate
Barrels (bbls)
B. Natural and Casinghead Gas
Thousand Cubic Feet (mcf)
C. Barrel of Oil Equivalent Production
(1 Barrel = 6 mcf)
Rank County Production
% of
Total
Cumu-lative
% of
Total Rank County Production
% of
Total
Cumu-lative
% of
Total Rank County
Equivalent
Production
% of
Total
Cumu-lative
% of
Total
51 Coal 105,564 0.2% 99.3% 51 Comanche 2,070,576 0.1% 99.3% 51 Kiowa 450,660 0.1% 99.3%
52 Jackson 91,251 0.1% 99.5% 52 Rogers 1,980,208 0.1% 99.4% 52 Comanche 421,286 0.1% 99.4%
53 Muskogee 80,025 0.1% 99.6% 53 Okmulgee 1,769,574 0.1% 99.5% 53 Sequoyah 374,954 0.1% 99.5%
54 Tillman 68,962 0.1% 99.7% 54 Cleveland 1,633,644 0.1% 99.6% 54 Pawnee 341,236 0.1% 99.6%
55 Bryan 43,614 0.1% 99.8% 55 Bryan 1,600,193 0.1% 99.7% 55 Jefferson 310,313 0.1% 99.7%
56 Wagoner 31,539 0.1% 99.8% 56 Craig 1,185,900 0.1% 99.8% 56 Cimarron 229,189 0.1% 99.8%
57 Rogers 27,367 0.0% 99.9% 57 Kay 1,153,958 0.1% 99.8% 57 Tulsa 219,693 0.1% 99.8%
58 Kiowa 24,532 0.0% 99.9% 58 Pontotoc 872,649 0.1% 99.9% 58 Bryan 169,974 0.1% 99.9%
59 Mayes 24,056 0.0% 100.0% 59 Tulsa 656,296 0.0% 99.9% 59 Murray 133,439 0.0% 99.9%
60 Atoka 8,767 0.0% 100.0% 60 Pawnee 486,298 0.0% 100.0% 60 Atoka 89,817 0.0% 100.0%
61 Harmon 3,118 0.0% 100.0% 61 Muskogee 324,519 0.0% 100.0% 61 Rogers 57,205 0.0% 100.0%
62 McIntosh 2,722 0.0% 100.0% 62 Cotton 97,896 0.0% 100.0% 62 Craig 19,038 0.0% 100.0%
63 Johnston 1,844 0.0% 100.0% 63 Greer 57,697 0.0% 100.0% 63 Cotton 11,460 0.0% 100.0%
64 Greer 1,047 0.0% 100.0% 64 Wagoner 43,251 0.0% 100.0% 64 Muskogee 8,256 0.0% 100.0%
65 Pittsburg 681 0.0% 100.0% 65 Johnston 37,194 0.0% 100.0% 65 Jackson 6,880 0.0% 100.0%
66 Craig 234 0.0% 100.0% 66 Jackson 36,673 0.0% 100.0% 66 Tillman 6,346 0.0% 100.0%
67 Pushmataha 168 0.0% 100.0% 67 Murray 18,135 0.0% 100.0% 67 Mayes 3,191 0.0% 100.0%
68 Latimer 82 0.0% 100.0% 68 Jefferson 16,402 0.0% 100.0% 68 Wagoner 2,816 0.0% 100.0%
Cherokee 0 0.0% 100.0% 69 Mayes 65 0.0% 100.0% 69 Greer 11 0.0% 100.0%
Choctaw 0 0.0% 100.0% Cherokee 0 0.0% 100.0% 70 Johnston 0 0.0% 100.0%
Delaware 0 0.0% 100.0% Choctaw 0 0.0% 100.0% 71 Harmon 0 0.0% 100.0%
Haskell 0 0.0% 100.0% Delaware 0 0.0% 100.0% Adair 0 0.0% 100.0%
LeFlore 0 0.0% 100.0% Harmon 00.0% 100.0% Cherokee 0 0.0% 100.0%
McCurtain 0 0.0% 100.0% McCurtain 0 0.0% 100.0% Choctaw 0 0.0% 100.0%
Ottawa 0 0.0% 100.0% Ottawa 00.0% 100.0% Delaware 0 0.0% 100.0%
Sequoyah 0 0.0% 100.0% Tillman 0 0.0% 100.0% McCurtain 0 0.0% 100.0%
Adair 0 0.0% 100.0% Adair 0 0.0% 100.0% Ottawa 0 0.0% 100.0%
Statewide 60,939,372 Statewide 1,605,654,476 Statewide 328,548,451
Source: Oklahoma Corporation Commission
30
31
Part B of Table 1 shows that 26.5 percent of Oklahoma’s natural gas production occurs in Roger
Mills, Latimer, and Beckham Counties with production levels ranging from 148.5 billion cubic
feet to 136.7 billion cubic feet. The top twelve gas producing counties account for 64.0 percent
of the natural gas production in Oklahoma. With the exception of Latimer County and Pittsburg
County in the southeast, natural gas production is heavily concentrated in western Oklahoma.
Map 2 illustrates the location of natural gas production throughout Oklahoma in 2005.
Few counties are large producers of both crude oil and natural gas. Grady and Texas
Counties standout, with Grady ranked fourth in both crude oil and natural gas production and
Texas fifth in crude oil production and seventh in natural gas. Converting natural gas to its crude
oil equivalent, as shown in Part C of Table 1, allows the ranking of counties by combined crude
oil and natural gas production. Natural gas production is converted to barrels of crude oil using
the conversion ratio of 6,000 cubic feet (6 mcf) of natural gas per barrel of oil. On an equivalent
basis, 50.5 percent of crude oil and natural gas production occurs in eight counties. Six of these
eight counties are major natural gas producing counties. First and second ranked crude oil
producing Carter and Stephens Counties ranked thirteenth and seventh, respectively, in
equivalent production. By contrast, the three top natural gas producing counties, Roger Mills,
Latimer, and Beckham, are also the three top oil equivalent producing counties. Map 3 illustrates
the statewide distribution of oil equivalent production of crude oil and natural gas by county.
Table 2 displays crude oil and gas production trends over the ten year period 1995 to
2005. Crude oil production declined markedly in most counties in the period, with Texas County
the only county among the top ten crude oil producing counties to show an increase in
production. Production rose in Texas County by 1.06 million barrels, which equates to a 50.4
percent increase. Carter and Stephens Counties, the top two 2005 crude oil producing counties
each had a decline in production compared to the 1995 levels. Production in Carter County
declined by 5.1 million barrels (44.7 percent reduction) and in Stephens County by 1.6 million
barrels (20.8 percent reduction). Production rose in only nine counties in the period with the
overall increase insignificant in all but Texas County.
Oklahoma continues to rank among the major natural gas producing states, ranking
second in natural gas production in 2005 based on preliminary U.S. Department of Energy data.9
The decline in production seen in the crude producing counties since 1995 is not typical of most
gas producing counties. Table 2 details county-level production of natural gas and highlights the
32
growing importance of natural gas relative to crude oil within the state. In the ten year period,
natural gas production rose in 30 counties and declined in 39. When comparing natural gas
production among the top three producing counties in 2005 (i.e., Roger Mills, Latimer, and
Beckham Counties), an increase occurred only in Beckham County where production rose by
67.7 billion cubic feet, a 98.1 percent increase. Natural gas production in Roger Mills and
Latimer Counties declined by 22.3 billion cubic feet (33.0 percent) and 11.9 billion cubic feet
(25.6 percent decrease), respectively.
33
34
35
Table 2. Change in Crude Oil and Natural Gas Production (1995 to 2005)
Crude Oil and Condensate (Barrels) Natural and Casinghead Gas (mcf)
County 1995 2005
Period
Change
Period %
Change County 1995 2005
Period
Change
Period %
Change
Texas 2,098,165 3,154,799 1,056,634 50.4% Beckham 69,005,280 136,718,598 67,713,318 98.1%
Jefferson 265,794 407,621 141,827 53.4% Woodward 26,741,648 46,201,584 19,459,936 72.8%
Woodward 235,066 333,709 98,643 42.0% Stephens 50,575,119 61,107,855 10,532,736 20.8%
Lincoln 1,085,520 1,138,107 52,587 4.8% Logan 10,518,359 19,775,081 9,256,722 88.0%
Washita 390,014 432,352 42,338 10.9% Pushmataha 0 8,956,423 8,956,423 na
Atoka 453 8,767 8,314 1835.3% Nowata 398,585 7,747,964 7,349,379 1843.9%
Johnston 0 1,844 1,844 na Pottawatomie 1,359,160 8,198,095 6,838,935 503.2%
Pushmataha 0 168 168 na Osage 3,498,171 8,990,094 5,491,923 157.0%
Pittsburg 548 681 133 24.3% Pittsburg 78,414,320 83,590,743 5,176,423 6.6%
Adair 0 0 0 na Washington 748,614 5,511,805 4,763,191 636.3%
Cherokee 0 0 0 na Lincoln 8,028,876 12,371,177 4,342,301 54.1%
Choctaw 0 0 0 na Seminole 1,457,259 5,587,358 4,130,099 283.4%
Delaware 0 0 0 na Kiowa 90,336 4,085,734 3,995,398 4422.8%
Haskell 0 0 0 na Washita 57,635,975 61,626,228 3,990,253 6.9%
LeFlore 0 0 0 na Haskell 34,059,766 37,481,283 3,421,517 10.0%
McCurtain 0 0 0 na McIntosh 3,218,595 5,722,097 2,503,502 77.8%
Ottawa 0 0 0 na Grant 3,876,840 6,354,849 2,478,009 63.9%
Sequoyah 0 0 0 na Payne 2,601,805 4,648,028 2,046,223 78.6%
Latimer 371 82 -289 -77.9% Coal 4,505,794 6,434,741 1,928,947 42.8%
McIntosh 4,525 2,722 -1,803 -39.8% Rogers 201,671 1,980,208 1,778,537 881.9%
Craig 2,780 234 -2,546 -91.6% Craig 0 1,185,900 1,185,900 na
Harper 256,954 253,026 -3,928 -1.5% Pontotoc 385,968 872,649 486,681 126.1%
Greer 6,365 1,047 -5,318 -83.6% Love 2,164,766 2,613,621 448,855 20.7%
Tillman 75,083 68,962 -6,121 -8.2% Atoka 2,315,656 2,675,966 360,310 15.6%
Mayes 33,028 24,056 -8,972 -27.2% Woods 26,324,297 26,490,519 166,222 0.6%
Jackson 101,002 91,251 -9,751 -9.7% Cotton 0 97,896 97,896 na
Harmon 15,656 3,118 -12,538 -80.1% Tulsa 559,289 656,296 97,007 17.3%
Kiowa 41,033 24,532 -16,501 -40.2% Wagoner 1,864 43,251 41,387 2220.3%
Bryan 61,909 43,614 -18,295 -29.6% Jackson 0 36,673 36,673 na
Ellis 702,923 682,858 -20,065 -2.9% Johnston 4,046 37,194 33,148 819.3%
Rogers 53,374 27,367 -26,007 -48.7% Adair 0 0 0 na
Muskogee 118,982 80,025 -38,957 -32.7% Cherokee 0 0 0 na
Wagoner 81,679 31,539 -50,140 -61.4% Choctaw 0 0 0 na
Coal 162,654 105,564 -57,090 -35.1% Delaware 0 0 0 na
Beckham 553,620 464,323 -89,297 -16.1% Harmon 0 0 0 na
Cotton 232,865 135,914 -96,951 -41.6% McCurtain 0 0 0 na
Nowata 284,358 183,459 -100,899 -35.5% Ottawa 0 0 0 na
Marshall 253,782 144,750 -109,032 -43.0% Tillman 0 0 0 na
Dewey 844,188 727,288 -116,900 -13.8% Mayes 77 65 -12 -15.6%
Comanche 292,934 174,414 -118,520 -40.5% Jefferson 50,461 16,402 -34,059 -67.5%
Love 594,471 469,980 -124,491 -20.9% Murray 79,954 18,135 -61,819 -77.3%
Tulsa 436,562 290,661 -145,901 -33.4% Noble 3,919,346 3,856,066 -63,280 -1.6%
Cimarron 270,221 112,019 -158,202 -58.5% Greer 179,703 57,697 -122,006 -67.9%
Washington 426,115 255,848 -170,267 -40.0% Muskogee 456,385 324,519 -131,866 -28.9%
Blaine 553,593 365,158 -188,435 -34.0% Bryan 1,923,991 1,600,193 -323,798 -16.8%
Hughes 595,462 381,071 -214,391 -36.0% Okmulgee 2,171,215 1,769,574 -401,641 -18.5%
Kay 1,022,046 805,275 -216,771 -21.2% Pawnee 1,132,360 486,298 -646,062 -57.1%
Roger Mills 1,053,408 813,509 -239,899 -22.8% Kay 2,051,164 1,153,958 -897,206 -43.7%
Noble 1,357,471 1,082,083 -275,388 -20.3% Creek 3,769,409 2,821,596 -947,813 -25.1%
Okmulgee 672,706 367,259 -305,447 -45.4% Okfuskee 3,740,936 2,703,911 -1,037,025 -27.7%
Cleveland 996,641 632,995 -363,646 -36.5% Marshall 5,797,830 4,593,525 -1,204,305 -20.8%
Pawnee 800,157 432,712 -367,445 -45.9% Cleveland 3,191,736 1,633,644 -1,558,092 -48.8%
Pontotoc 2,916,382 2,526,763 -389,619 -13.4% Cimarron 5,197,755 3,135,143 -2,062,612 -39.7%
Continued
36
Table 2. (Continued) Change in Crude Oil and Natural Gas Production (1995 to 2005)
Crude Oil and Condensate (Barrels) Natural and Casinghead Gas (mcf)
County 1995 2005
Period
Change
Period %
Change County 1995 2005
Period
Change
Period %
Change
Okfuskee 770,207 370,442 -399,765 -51.9% Comanche 4,981,153 2,070,576 -2,910,577 -25.5%
Logan 1,113,128 696,586 -416,542 -37.4% Hughes 10,953,637 7,927,562 -3,026,075 -60.8%
Seminole 2,266,681 1,846,738 -419,943 -18.5% Ellis 32,592,573 29,506,220 -3,086,353 -52.8%
Garfield 1,031,709 541,462 -490,247 -47.5% Sequoyah 6,244,285 3,079,623 -3,164,662 -22.8%
Grant 989,187 488,862 -500,325 -50.6% Carter 17,453,812 13,115,435 -4,338,377 -68.3%
Murray 823,180 317,927 -505,253 -61.4% Alfalfa 11,998,961 4,934,475 -7,064,486 -5.6%
Osage 4,802,295 4,292,885 -509,410 -10.6% McClain 21,183,528 13,936,022 -7,247,506 -57.9%
McClain 1,600,001 1,082,065 -517,936 -32.4% Oklahoma 21,487,950 12,129,388 -9,358,562 -35.0%
Custer 1,116,028 575,715 -540,313 -48.4% Garfield 25,050,317 14,769,096 -10,281,221 -37.1%
Beaver 1,839,483 1,290,494 -548,989 -29.8% Garvin 41,871,862 30,721,182 -11,150,680 -29.9%
Woods 1,087,389 518,607 -568,782 -52.3% Dewey 45,432,713 34,123,752 -11,308,961 -51.4%
Payne 1,313,285 702,036 -611,249 -46.5% Latimer 150,056,257 138,106,499 -11,949,758 -25.6%
Grady 4,359,770 3,503,814 -855,956 -19.6% LeFlore 41,911,749 29,498,926 -12,412,823 -28.9%
Creek 3,190,889 2,333,584 -857,305 -26.9% Caddo 93,242,903 79,484,488 -13,758,415 -20.3%
Oklahoma 2,872,957 1,924,149 -948,808 -33.0% Canadian 61,428,755 45,652,593 -15,776,162 -33.1%
Caddo 3,026,600 2,039,380 -987,220 -32.6% Kingfisher 42,893,165 25,550,348 -17,342,817 -27.3%
Alfalfa 1,389,561 385,987 -1,003,574 -72.2% Blaine 59,118,375 40,532,979 -18,585,396 -25.1%
Canadian 1,998,663 973,218 -1,025,445 -51.3% Major 66,317,989 45,167,844 -21,150,145 -19.8%
Pottawatomie 2,496,868 1,465,891 -1,030,977 -41.3% Beaver 73,585,631 52,219,482 -21,366,149 -48.5%
Kingfisher 2,306,804 1,107,336 -1,199,468 -52.0% Roger Mills 170,754,824 148,461,559 -22,293,265 -33.0%
Garvin 4,696,527 3,141,754 -1,554,773 -33.1% Harper 45,480,225 21,989,598 -23,490,627 -24.1%
Stephens 7,643,658 6,054,799 -1,588,859 -20.8% Custer 92,517,959 65,917,607 -26,600,352 -38.8%
Major 3,537,679 1,680,435 -1,857,244 -52.5% Grady 112,935,834 85,931,897 -27,003,937 -26.6%
Carter 11,433,907 6,321,680 -5,112,227 -44.7% Texas 103,580,227 68,856,689 -34,723,538 -33.2%
Statewide 87,657,316 60,939,372 -26,717,944 -30.5% Statewide 1,775,429,065 1,605,654,476 -169,774,589 -9.6%
Source: Oklahoma Corporation Commission
37
DRILLING AND EXPLORATION ACTIVITY
In order to examine changes in drilling activity over time, well completions by type (oil,
gas, dry, and total) are compared for the years 1995 and 2005 in Table 3. Completions are
significantly higher in 2005 relative to 1995 due to the more attractive drilling environment
presented by current historically high energy prices. Well completions in 2005 numbered 2,377,
with a 90 percent success ratio, compared to 1,427 in 1995, with an 85 percent ratio. In 2005, 10
counties had a 100 percent success ratio, 29 counties fell at the 90th percentile or above, and 19
fell between the 80th and 50th percentiles. The change in the average well depth statewide was
insignificant between the two years, increasing from 7,229 feet to 7,366 feet over the ten year
period. In 2005, the number of counties above the state average well depth was 20. For the high
natural gas producing Beckham County, the average depth increased by about 2,500 feet to
14,953 feet and reflects the increased emphasis on deep gas exploration. By contrast, the high
crude oil producing Carter County experienced no significant change in the average well depth in
the county of approximately 3,800 feet.
In 2005, five counties accounted for 32 percent of total well completions statewide:
Roger Mills (193), Pittsburg (183), Woodward (175), Stephens (113), and Texas (97). In the
high crude oil producing Stephens County, 74 wells were crude oil, 35 were natural gas, and 4
were dry. The second highest number of crude oil completions occurred in Carter County, which
had only 42 total wells with 38 being crude oil wells, 2 gas wells, and 2 dry wells. Consistent
with the declining role of crude oil relative to natural gas, the number of oil well completions
statewide decreased from 505 in year 1995 to 419 in 2005.
In contrast, the total number of gas wells completed more than doubled from 709 in 1995
to 1,713 in 2005. Among the top 8 natural gas producing counties, Roger Mills County showed
the greatest increase from 51 natural gas wells in 1995 to 187 in 2005. The changes in
completions over the period for the remaining top eight producing counties are Latimer going
from 63 natural gas wells to 69; Beckham 18 to 66; Grady 39 to 41; Pittsburg 45 to 179; Caddo
16 to 39; Texas 12 to 47; and Custer 17 to 36. These top eight natural gas producing counties
accounted for 50.3 percent of the natural gas well completions in 2005. Woodward County,
which ranked twelfth in natural gas production, had 162 natural gas well completions in 2005
and joined Pittsburg and Roger Mills as the only counties with more than 100 natural gas well
completions.
38
Table 3. Well Completions by County (1995 and 2005)
1995 2005
County
Oil
Gas
Dry
Total
Wells
Total
Depth
(feet)
Avg.
Depth
Success
Ratio
Oil
Gas
Dry
Total
Wells
Total
Depth
(feet)
Avg.
Depth
Success
Ratio
Period
Change
in Total
Wells
Adair 0 0 0 0 0.0% 0.0% 0.0% 0 0 0 0 0.0% 0.0% 0.0% 0
Alfalfa 10 10 2 22 131,834 5,992 90.9% 4 5 2 11 63,544 5,777 81.8% -11
Atoka 0 1 1 2 7,840 3,920 50.0% 0 3 0 3 26,829 8,943 100.0% 1
Beaver 13 57 4 74 541,833 7,322 94.6% 7 52 10 69 503,635 7,299 85.5% -5
Beckham 0 18 3 21 262,108 12,481 85.7% 2 66 2 70 1,046,708 14,953 97.1% 49
Blaine 3 25 5 33 314,749 9,538 84.9% 5 35 6 46 466,235 10,136 87.0% 13
Bryan 0 1 0 1 5,081 5,081 100.0% 0 0 1 1 7,200 7,200 0.0% 0
Caddo 6 16 1 23 303,657 13,202 95.7% 13 39 8 60 825,751 13,763 86.7% 37
Canadian 4 19 1 24 253,725 10,572 95.8% 7 26 4 37 372,401 10,065 89.2% 13
Carter 66 1 20 87 330,197 3,795 77.0% 38 2 2 42 159,817 3,805 95.2% -45
Cherokee 0 0 0 0 0 0 0.0% 0 0 0 0 0 0 0.0% 0
Choctaw 0 0 0 0 0 0 0.0% 0 0 0 0 0 0 0.0% 0
Cimarron 3 0 0 3 14,370 4,790 100.0% 0 9 7 16 77,539 4,846 56.3% 13
Cleveland 3 0 3 6 42,480 7,080 50.0% 2 0 1 3 21,246 7,082 66.7% -3
Coal 4 0 3 7 33,555 4,794 57.1% 0 13 4 17 138,452 8,144 76.5% 10
Comanche 2 5 0 7 62,876 8,982 100.0% 1 2 0 3 24,901 8,300 100.0% -4
Cotton 1 0 1 2 3,534 1,767 50.0% 0 0 1 1 2,450 2,450 0.0% -1
Craig 0 0 0 0 0 0 0.0% 0 2 0 2 2,110 1,055 100.0% 2
Creek 18 5 6 29 80,078 2,761 79.3% 5 7 1 13 42,368 3,259 92.3% -16
Custer 0 17 1 18 239,566 13,309 94.4% 3 36 2 41 539,808 13,166 95.1% 23
Delaware 0 0 0 0 0 0 0.0% 0 0 0 0 0 0 0.0% 0
Dewey 4 16 2 22 75,042 3,411 90.9% 6 24 11 41 419,683 10,236 73.2% 19
Ellis 1 27 3 31 270,928 8,740 90.3% 11 27 9 47 437,167 9,301 80.9% 16
Garfield 10 3 2 15 103,551 6,903 86.7% 3 0 1 4 23,489 5,872 75.0% -11
Garvin 59 11 16 86 673,364 7,830 81.4% 19 5 8 32 198,545 6,205 75.0% -54
Grady 27 39 9 75 897,872 11,972 88.0% 23 41 1 65 709,656 10,918 98.5% -10
Grant 3 2 2 7 45,214 6,459 71.4% 5 13 16 34 174,749 5,140 52.9% 27
Greer 0 0 0 0 0 0 0.0% 0 0 0 0 0 0 0.0% 0
Harmon 0 0 0 0 0 0 0.0% 0 0 0 0 0 0 0.0% 0
Harper 1 25 1 27 205,260 7,602 96.3% 4 18 8 30 207,250 6,908 73.3% 3
Haskell 1 30 3 34 196,478 5,779 91.2% 0 70 6 76 322,270 4,240 92.1% 42
Hughes 2 13 2 17 66,606 3,918 88.2% 0 28 9 37 149,977 4,053 75.7% 20
Jackson 1 0 2 3 32,641 10,880 33.3% 0 0 2 2 8,400 4,200 0.0% -1
Jefferson 0 0 0 0 0 0 0.0% 12 0 3 15 24,684 1,646 80.0% 15
Johnston 0 0 0 0 0 0 0.0% 0 0 0 0 0 0 0.0% 0
Kay 10 1 2 13 56,494 4,346 84.6% 20 2 3 25 82,428 3,297 88.0% 12
Kingfisher 16 9 4 29 235,795 8,131 86.2% 2 9 0 11 111,156 10,105 100.0% -18
Kiowa 2 0 0 2 904 452 100.0% 0 4 1 5 54,520 10,904 80.0% 3
Latimer 0 36 2 38 288,486 7,592 94.7% 0 69 2 71 734,700 10,348 97.2% 33
LeFlore 0 18 5 23 158,473 6,890 78.3% 0 75 3 78 418,155 5,361 96.2% 55
Lincoln 12 5 3 20 89,407 4,470 85.0% 8 9 5 22 126,010 5,728 77.3% 2
Logan 22 4 5 31 189,103 6,100 83.9% 6 9 5 20 124,019 6,201 75.0% -11
Love 1 1 1 3 24,700 8,233 66.7% 3 1 0 4 29,761 7,440 100.0% 1
Major 13 1 1 15 171,064 11,404 93.3% 7 4 5 16 149,707 9,357 68.8% 1
Marshall 0 0 0 0 0 0 0.0% 0 0 0 0 0 0 0.0% 0
Mayes 0 6 1 7 14,438 2,063 85.7% 0 27 4 31 124,835 4,027 87.1% 24
McClain 28 57 0 85 723,182 8,508 100.0% 2 50 1 53 427,837 8,072 98.1% -32
McCurtain 3 3 0 6 31,632 5,272 100.0% 0 1 0 1 5,815 5,815 100.0% -5
McIntosh 0 0 0 0 0 0 0.0% 0 0 0 0 0 0 0.0% 0
Murray 3 1 5 9 31,283 3,476 44.4% 2 0 2 4 15,356 3,839 50.0% -5
Muskogee 0 0 1 1 2,180 2,180 0.0% 1 0 0 1 1,315 1,315 100.0% 0
Noble 8 4 4 16 68,674 4,292 75.0% 11 15 5 31 79,265 2,557 83.9% 15
Continued
39
Table 3. (Continued) Well Completions by County (1995 and 2005)
1995 2005
County
Oil
Gas
Dry
Total
Wells
Total
Depth
(feet)
Avg.
Depth
Success
Ratio
Oil
Gas
Dry
Total
Wells
Total
Depth
(feet)
Avg.
Depth
Success
Ratio
Period
Change
in Total
Wells
Nowata 2 6 0 8 10,004 1,251 100.0% 5 39 44 56,602 1,286 100.0% 36
Okfuskee 10 3 5 18 57,613 3,201 72.2% 5 4 3 12 33,752 2,813 75.0% -6
Oklahoma 14 2 4 20 132,980 6,649 80.0% 4 8 3 15 91,024 6,068 80.0% -5
Okmulgee 4 5 3 12 36,254 3,021 75.0% 7 5 2 14 26,429 1,888 85.7% 2
Osage 0 1 0 1 3,551 3,551 100.0% 0 0 0 0 0 0 0.0% -1
Ottawa 0 0 0 0 0 0 0.0% 0 0 0 0 0 0 0.0% 0
Pawnee 0 0 2 2 6,874 3,437 0.0% 0 1 0 1 3,340 3,340 100.0% -1
Payne 18 2 7 27 101,958 3,776 74.1% 5 7 5 17 71,700 4,218 70.6% -10
Pittsburg 0 45 2 47 254,799 5,421 95.7% 0 179 4 183 1,101,672 6,020 97.8% 136
Pontotoc 10 0 7 17 57,577 3,387 58.8% 20 5 2 27 93,906 3,478 92.6% 10
Pottawatomie 12 1 5 18 78,325 4,351 72.2% 4 13 1 18 120,104 6,672 94.4% 0
Pushmataha 0 0 0 0 0 0 0.0% 0 3 1 4 29,713 7,428 75.0% 4
Roger Mills 2 51 4 57 764,781 13,417 93.0% 0 187 6 193 2,623,148 13,591 96.9% 136
Rogers 0 0 0 0 0 0 0.0% 2 21 1 24 29,981 1,249 95.8% 24
Seminole 13 1 5 19 115,115 6,059 73.7% 17 13 1 31 166,697 5,377 96.8% 12
Sequoyah 0 2 0 2 8,104 4,052 100.0% 0 3 2 5 22,839 4,568 60.0% 3
Stephens 34 19 4 57 362,466 6,359 93.0% 74 35 4 113 586,768 5,193 96.5% 56
Texas 9 12 32 53 303,850 5,733 39.6% 26 47 24 97 559,167 5,765 75.3% 44
Tillman 0 0 0 0 0 0 0.0% 1 0 4 5 18,724 3,745 20.0% 5
Tulsa 2 1 0 3 5,722 1,907 100.0% 0 2 1 3 4,848 1,616 66.7% 0
Wagoner 3 0 1 4 5,192 1,298 75.0% 1 1 0 2 2,350 1,175 100.0% -2
Washington 2 11 0 13 16,037 1,234 100.0% 6 86 1 93 129,461 1,392 98.9% 80
Washita 0 28 1 29 398,150 13,729 96.6% 4 36 5 45 574,309 12,762 88.9% 16
Woods 8 11 1 20 128,004 6,400 95.0% 3 58 4 65 432,843 6,659 93.8% 45
Woodward 2 21 3 26 187,837 7,225 88.5% 3 162 10 175 1,249,030 7,137 94.3% 149
Statewide 505 709 213 1,427 10,315,447 7,229 85.1% 419 1,713 245 2,377 17,510,150 7,366 89.7% 950
Source: Oklahoma Corporation Commission
40
Table 4. Total Well Completions by County (1995 to 2005)
Annual Change in Well Completions
Total Well Completions
County 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 County
1995
to
1996
1996
to
1997
1997
to
1998
1998
to
1999
1999
to
2000
2000
to
2001
2001
to
2002
2002
to
2003
2003
to
2004
2004
to
2005
Adair 0 0 0 0 0 0 0 0 0 0 0 Adair 0 0 0 0 0 0 0 0 0 0
Alfalfa 22 16 10 5 3 12 11 13 6 8 11 Alfalfa -6 -6 -5 -2 9 -1 2 -7 2 3
Atoka 2 4 4 2 0 2 5 0 0 3 3 Atoka 2 0 -2 -2 2 3 -5 0 3 0
Beaver 74 79 56 59 89 123 193 126 79 76 69 Beaver 5 -23 3 30 34 70 -67 -47 -3 -7
Beckham 21 32 27 21 21 41 48 43 56 51 70 Beckham 11 -5 -6 0 20 7 -5 13 -5 19
Blaine 33 42 45 42 52 54 72 53 43 40 46 Blaine 9 3 -3 10 2 18 -19 -10 -3 6
Bryan 1 2 0 3 0 0 7 2 2 6 1 Bryan 1 -2 3 -3 0 7 -5 0 4 -5
Caddo 23 39 61 54 27 43 56 49 64 68 60 Caddo 16 22 -7 -27 16 13 -7 15 4 -8
Canadian 24 26 20 51 33 44 73 66 43 57 37 Canadian 2 -6 31 -18 11 29 -7 -23 14 -20
Carter 87 88 81 54 36 51 80 54 27 36 42 Carter 1 -7 -27 -18 15 29 -26 -27 9 6
Cherokee 0 0 0 0 0 0 0 0 0 0 0 Cherokee 0 0 0 0 0 0 0 0 0 0
Choctaw 0 0 0 0 0 0 0 0 0 0 0 Choctaw 0 0 0 0 0 0 0 0 0 0
Cimarron 3 5 4 5 10 11 7 5 4 8 16 Cimarron 2 -1 1 5 1 -4 -2 -1 4 8
Cleveland 6 2 9 1 2 2 6 3 1 6 3 Cleveland -4 7 -8 1 0 4 -3 -2 5 -3
Coal 7 3 4 10 4 13 13 25 21 10 17 Coal -4 1 6 -6 9 0 12 -4 -11 7
Comanche 7 8 10 4 6 5 6 8 5 3 3 Comanche 1 2 -6 2 -1 1 2 -3 -2 0
Cotton 2 0 0 2 0 1 0 1 0 2 1 Cotton -2 0 2 -2 1 -1 1 -1 2 -1
Craig 0 0 0 3 2 2 21 25 11 6 2 Craig 0 0 3 -1 0 19 4 -14 -5 -4
Creek 29 30 26 20 8 15 12 11 9 8 13 Creek 1 -4 -6 -12 7 -3 -1 -2 -1 5
Custer 18 29 42 64 44 55 42 61 60 48 41 Custer 11 13 22 -20 11 -13 19 -1 -12 -7
Delaware 0 0 0 0 0 0 0 0 0 0 0 Delaware 0 0 0 0 0 0 0 0 0 0
Dewey 22 21 30 47 50 56 59 45 52 33 41 Dewey -1 9 17 3 6 3 -14 7 -19 8
Ellis 31 28 49 45 35 56 65 48 63 43 47 Ellis -3 21 -4 -10 21 9 -17 15 -20 4
Garfield 15 20 19 26 10 30 40 15 13 9 4 Garfield 5 -1 7 -16 20 10 -25 -2 -4 -5
Garvin 86 56 49 64 24 60 85 39 57 41 32 Garvin -30 -7 15 -40 36 25 -46 18 -16 -9
Grady 75 60 60 89 65 91 124 82 54 49 65 Grady -15 0 29 -24 26 33 -42 -28 -5 16
Grant 7 6 13 19 10 12 20 30 42 24 34 Grant -1 7 6 -9 2 8 10 12 -18 10
Greer 0 0 3 0 0 0 0 0 0 0 0 Greer 0 3 -3 0 0 0 0 0 0 0
Harmon 0 0 0 0 0 0 0 0 0 0 0 Harmon 0 0 0 0 0 0 0 0 0 0
Harper 27 43 35 26 32 52 55 38 38 27 30 Harper 16 -8 -9 6 20 3 -17 0 -11 3
Haskell 34 15 27 23 72 87 109 82 124 91 76 Haskell -19 12 -4 49 15 22 -27 42 -33 -15
Hughes 17 19 15 19 18 21 32 29 30 19 37 Hughes 2 -4 4 -1 3 11 -3 1 -11 18
Jackson 3 3 1 2 1 0 1 0 2 1 2 Jackson 0 -2 1 -1 -1 1 -1 2 -1 1
Jefferson 0 0 2 1 0 0 0 5 8 11 15 Jefferson 0 2 -1 -1 0 0 5 3 3 4
Johnston 0 0 0 1 0 1 0 1 0 0 0 Johnston 0 0 1 -1 1 -1 1 -1 0 0
Kay 13 5 13 18 13 16 12 10 6 10 25 Kay -8 8 5 -5 3 -4 -2 -4 4 15
Kingfisher 29 25 32 20 16 19 17 14 21 21 11 Kingfisher -4 7 -12 -4 3 -2 -3 7 0 -10
Kiowa 2 6 9 9 13 5 1 1 0 3 5 Kiowa 4 3 0 4 -8 -4 0 -1 3 2
Latimer 38 56 45 63 47 88 97 55 61 59 71 Latimer 18 -11 18 -16 41 9 -42 6 -2 12
LeFlore 23 19 17 18 18 34 76 50 71 36 78 LeFlore -4 -2 1 0 16 42 -26 21 -35 42
Lincoln 20 31 17 35 62 97 76 38 25 21 22 Lincoln 11 -14 18 27 35 -21 -38 -13 -4 1
Logan 31 28 32 23 33 51 71 46 41 36 20 Logan -3 4 -9 10 18 20 -25 -5 -5 -16
Love 3 5 8 5 6 10 7 10 4 2 4 Love 2 3 -3 1 4 -3 3 -6 -2 2
Major 15 10 9 29 6 23 20 18 13 15 16 Major -5 -1 20 -23 17 -3 -2 -5 2 1
Marshall 0 0 0 0 0 0 0 0 0 0 0 Marshall 0 0 0 0 0 0 0 0 0 0
Mayes 7 11 15 21 32 32 38 43 34 29 31 Mayes 4 4 6 11 0 6 5 -9 -5 2
McClain 85 73 91 78 62 95 123 84 42 61 53 McClain -12 18 -13 -16 33 28 -39 -42 19 -8
McCurtain 6 0 0 2 1 2 5 4 7 3 1 McCurtain -6 0 2 -1 1 3 -1 3 -4 -2
McIntosh 0 0 0 0 0 0 0 0 0 0 0 McIntosh 0 0 0 0 0 0 0 0 0 0
Murray 9 6 1 2 3 3 1 4 2 1 4 Murray -3 -5 1 1 0 -2 3 -2 -1 3
Muskogee 1 1 0 0 1 1 3 3 5 2 1 Muskogee 0 -1 0 1 0 2 0 2 -3 -1
Noble 16 33 57 49 32 55 62 46 41 38 31 Noble 17 24 -8 -17 23 7 -16 -5 -3 -7
Nowata 8 10 14 38 45 61 53 50 68 41 44 Nowata 2 4 24 7 16 -8 -3 18 -27 3
Continued
41
Table 4. (Continued) Total Well Completions by County (1995 to 2005)
Annual Change in Well Completions
Total Well Completions
County 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 County
1995
to
1996
1996
to
1997
1997
to
1998
1998
to
1999
1999
to
2000
2000
to
2001
2001
to
2002
2002
to
2003
2003
to
2004
2004
to
2005
Okfuskee 18 13 28 14 18 18 36 16 10 9 12 Okfuskee -5 15 -14 4 0 18 -20 -6 -1 3
Oklahoma 20 26 25 18 10 20 21 25 15 9 15 Oklahoma 6 -1 -7 -8 10 1 4 -10 -6 6
Okmulgee 12 3 9 7 3 15 15 20 22 8 14 Okmulgee -9 6 -2 -4 12 0 5 2 -14 6
Osage 1 0 0 0 0 0 0 0 0 0 0 Osage -1 0 0 0 0 0 0 0 0 0
Ottawa 0 0 0 0 0 0 0 0 0 0 0 Ottawa 0 0 0 0 0 0 0 0 0 0
Pawnee 2 11 0 0 0 3 2 0 4 2 1 Pawnee 9 -11 0 0 3 -1 -2 4 -2 -1
Payne 27 22 25 21 6 17 15 19 19 15 17 Payne -5 3 -4 -15 11 -2 4 0 -4 2
Pittsburg 47 47 55 74 87 126 176 118 156 161 183 Pittsburg 0 8 19 13 39 50 -58 38 5 22
Pontotoc 17 18 8 19 13 9 12 21 46 34 27 Pontotoc 1 -10 11 -6 -4 3 9 25 -12 -7
Pottawatomie 18 17 11 11 5 11 14 16 15 29 18 Pottawatomie -1 -6 0 -6 6 3 2 -1 14 -11
Pushmataha 0 0 0 0 1 7 11 1 0 0 4 Pushmataha 0 0 0 1 6 4 -10 -1 0 4
Roger Mills 57 46 59 64 40 54 86 87 101 107 193 Roger Mills -11 13 5 -24 14 32 1 14 6 86
Rogers 0 1 7 10 4 8 23 13 18 19 24 Rogers 1 6 3 -6 4 15 -10 5 1 5
Seminole 19 23 27 20 25 48 62 16 22 32 31 Seminole 4 4 -7 5 23 14 -46 6 10 -1
Sequoyah 2 7 8 12 9 6 10 7 3 1 5 Sequoyah 5 1 4 -3 -3 4 -3 -4 -2 4
Stephens 57 79 49 54 35 65 121 115 55 113 113 Stephens 22 -30 5 -19 30 56 -6 -60 58 0
Texas 53 40 102 132 105 141 172 188 137 149 97 Texas -13 62 30 -27 36 31 16 -51 12 -52
Tillman 0 0 0 0 0 0 0 5 1 4 5 Tillman 0 0 0 0 0 0 5 -4 3 1
Tulsa 3 1 5 57 32 4 7 4 4 9 3 Tulsa -2 4 52 -25 -28 3 -3 0 5 -6
Wagoner 4 3 1 6 1 1 1 0 1 0 2 Wagoner -1 -2 5 -5 0 0 -1 1 -1 2
Washington 13 19 23 18 11 6 35 24 59 47 93 Washington 6 4 -5 -7 -5 29 -11 35 -12 46
Washita 29 34 33 30 40 48 63 38 43 56 45 Washita 5 -1 -3 10 8 15 -25 5 13 -11
Woods 20 27 37 36 54 46 69 81 55 76 65 Woods 7 10 -1 18 -8 23 12 -26 21 -11
Woodward 26 27 54 44 58 82 124 92 102 116 175 Woodward 1 27 -10 14 24 42 -32 10 14 59
Statewide 1,427 1,459 1,628 1,819 1,601 2,267 2,979 2,341 2,243 2,158 2,377 Statewide 32 169 191 -218 666 712 -638 -98 -85 219
Source: Oklahoma Corporation Commission
42
Table 4 illustrates the year-to-year fluctuations in well completions in the 1995 to 2005
period. Increases in gas well completions are most prevalent after the surge in natural gas prices
in 2000. The change from year to year, however, varies widely with some of the top twelve
natural gas producing counties rising and others declining. Yearly well completions were heavy
in five of the top six crude oil producing counties, the exception being Osage County. Even
within these counties, the change from year to year shows more declining than rising well
completions.
EMPLOYMENT AND EARNINGS
County-level employment and income generated by the oil and gas industry in 2005 is
detailed in Table 5. The greatest share of the state’s oil and gas-related employment and income
is concentrated in Oklahoma County (ranked first) and Tulsa County (ranked second).
Oklahoma County currently has nearly double the employment and income from oil and gas
relative to Tulsa County, reflecting both the diminished role of the energy industry in Tulsa and
the expanding presence of independent energy companies headquartered in Oklahoma City.
Washington, Kay, and Stephens counties rank third, fourth, and fifth, respectively. Oil and gas
industry corporate headquarters and regional offices are heavily concentrated in Oklahoma
County and Tulsa County. Corporate offices are located in the other three counties along with a
refinery in Kay County. Administrative, professional, and technical staff is housed at the
corporate facilities and refinery, which accounts for these five counties having a high share of the
state’s oil and gas industry employment and income.
This observation is illustrated further in Table 6 where the top five ranking counties in
employment and income are compared to the top two in crude oil production (Carter and
Stephens), and top three in natural gas production (Roger Mills, Latimer, and Beckham). From
the cross comparisons, only Stephens County ranks in the top ten on all four factors of
comparison (i.e., employment, income, crude oil production, and natural gas production),
implying large numbers of professional and technical employees as well as production and
drilling employees. The data for Tulsa County indicates mostly professional employees in the
corporate sector. On the other hand, employment and income are attributed to production and
drilling activities in Beckham, Carter, Latimer, and Roger Mills Counties. By employment, the
43
Table 5. Mining Industry Employment and Labor Income (2005)
Ranked by Employment Ranked by Income
County Employment
Labor
Income County Rank Employment
Labor
Income County Rank Employment
Labor
Income
Adair 138 4,335,627 Oklahoma 1 13,726 2,220,732,232 Oklahoma 1 13,726 2,220,732,232
Alfalfa 48 1,482,052 Tulsa 2 8,333 1,255,897,319 Tulsa 2 8,333 1,255,897,319
Atoka 104 3,011,893 Washington 3 3,993 628,413,284 Washington 3 3,993 628,413,284
Beaver 313 12,326,439 Kay 4 2,561 365,976,204 Kay 4 2,561 365,976,204
Beckham 1,267 110,930,544 Stephens 5 2,532 262,340,824 Stephens 5 2,532 262,340,824
Blaine 322 11,075,098 Carter 6 1,731 99,527,802 Beckham 6 1,267 110,930,544
Bryan 59 775,609 Garfield 7 1,640 87,273,556 Latimer 7 1,244 105,584,583
Caddo 254 9,647,905 Cleveland 8 1,552 39,150,651 Carter 8 1,731 99,527,802
Canadian 1,313 55,647,604 Canadian 9 1,313 55,647,604 Garfield 9 1,640 87,273,556
Carter 1,731 99,527,802 Beckham 10 1,267 110,930,544 Osage 10 1,122 80,339,355
Cherokee 109 4,294,540 Latimer 11 1,244 105,584,583 Garvin 11 1,067 69,678,902
Choctaw 127 6,393,666 Osage 12 1,122 80,339,355 Payne 12 1,024 68,547,883
Cimarron 12 187,503 Woodward 13 1,094 67,637,145 Woodward 13 1,094 67,637,145
Cleveland 1,552 39,150,651 Garvin 14 1,067 69,678,902 Canadian 14 1,313 55,647,604
Coal 28 416,497 Kingfisher 15 1,056 53,831,681 Kingfisher 15 1,056 53,831,681
Comanche 233 9,117,430 Payne 16 1,024 68,547,883 Seminole 16 863 45,768,314
Cotton 47 1,529,507 Logan 17 1,008 18,790,461 Pottawatomie 17 785 40,459,374
Craig 153 9,279,340 Creek 18 980 34,796,876 Cleveland 18 1,552 39,150,651
Creek 980 34,796,876 Seminole 19 863 45,768,314 Creek 19 980 34,796,876
Custer 579 26,520,632 Pottawatomie 20 785 40,459,374 Pittsburg 20 585 33,647,346
Delaware 313 12,583,314 Grady 21 653 31,507,481 Grady 21 653 31,507,481
Dewey 151 4,740,653 Pittsburg 22 585 33,647,346 LeFlore 22 437 27,055,598
Ellis 37 1,090,921 Custer 23 579 26,520,632 Custer 23 579 26,520,632
Garfield 1,640 87,273,556 Hughes 24 575 13,451,904 Pontotoc 24 575 22,649,994
Garvin 1,067 69,678,902 Pontotoc 25 575 22,649,994 Rogers 25 443 22,594,460
Grady 653 31,507,481 Murray 26 445 20,532,342 McClain 26 349 21,596,719
Grant 165 7,656,128 Okmulgee 27 443 15,365,936 Murray 27 445 20,532,342
Greer 27 686,756 Rogers 28 443 22,594,460 McCurtain 28 377 19,939,725
Harmon 6 4,222 LeFlore 29 437 27,055,598 Logan 29 1,008 18,790,461
Harper 100 4,577,757 McCurtain 30 377 19,939,725 Pawnee 30 314 16,502,508
Haskell 224 10,075,509 McClain 31 349 21,596,719 Okmulgee 31 443 15,365,936
Hughes 575 13,451,904 Blaine 32 322 11,075,098 Johnston 32 206 15,256,722
Jackson 166 4,770,101 Pawnee 33 314 16,502,508 Texas 33 256 15,143,805
Jefferson 142 7,469,167 Beaver 34 313 12,326,439 Hughes 34 575 13,451,904
Johnston 206 15,256,722 Delaware 35 313 12,583,314 Delaware 35 313 12,583,314
Kay 2,561 365,976,204 Woods 36 306 7,237,780 Beaver 36 313 12,326,439
Kingfisher 1,056 53,831,681 Texas 37 256 15,143,805 Blaine 37 322 11,075,098
Kiowa 139 7,298,865 Caddo 38 254 9,647,905 Haskell 38 224 10,075,509
Latimer 1,244 105,584,583 Comanche 39 233 9,117,430 Caddo 39 254 9,647,905
LeFlore 437 27,055,598 Lincoln 40 225 7,167,426 Craig 40 153 9,279,340
Lincoln 225 7,167,426 Haskell 41 224 10,075,509 Comanche 41 233 9,117,430
Logan 1,008 18,790,461 Muskogee 42 222 4,394,499 Okfuskee 42 143 7,770,896
Love 61 1,634,516 Johnston 43 206 15,256,722 Grant 43 165 7,656,128
Major 116 7,596,905 Jackson 44 166 4,770,101 Major 44 116 7,596,905
Marshall 141 5,647,690 Grant 45 165 7,656,128 Mayes 45 162 7,503,275
Mayes 162 7,503,275 Mayes 46 162 7,503,275 Jefferson 46 142 7,469,167
McClain 349 21,596,719 Craig 47 153 9,279,340 Kiowa 47 139 7,298,865
McCurtain 377 19,939,725 Dewey 48 151 4,740,653 Woods 48 306 7,237,780
McIntosh 66 1,455,556 Nowata 49 146 2,039,906 Lincoln 49 225 7,167,426
Murray 445 20,532,342 Okfuskee 50 143 7,770,896 Choctaw 50 127 6,393,666
Muskogee 222 4,394,499 Jefferson 51 142 7,469,167 Ottawa 51 61 6,191,912
Noble 114 5,866,072 Marshall 52 141 5,647,690 Noble 52 114 5,866,072
Nowata 146 2,039,906 Kiowa 53 139 7,298,865 Marshall 53 141 5,647,690
Okfuskee 143 7,770,896 Adair 54 138 4,335,627 Jackson 54 166 4,770,101
Continued
44
Table 5. (Continued) Mining Industry Employment and Labor Income (2005)
Ranked by Employment Ranked by Income
County Employment
Labor
Income County Rank Employment
Labor
Income County Rank Employment
Labor
Income
Oklahoma 13,726 2,220,732,232 Choctaw 55 127 6,393,666 Dewey 55 151 4,740,653
Okmulgee 443 15,365,936 Major 56 116 7,596,905 Harper 56 100 4,577,757
Osage 1,122 80,339,355 Noble 57 114 5,866,072 Muskogee 57 222 4,394,499
Ottawa 61 6,191,912 Cherokee 58 109 4,294,540 Washita 58 108 4,355,025
Pawnee 314 16,502,508 Washita 59 108 4,355,025 Adair 59 138 4,335,627
Payne 1,024 68,547,883 Atoka 60 104 3,011,893 Cherokee 60 109 4,294,540
Pittsburg 585 33,647,346 Harper 61 100 4,577,757 Atoka 61 104 3,011,893
Pontotoc 575 22,649,994 Wagoner 62 68 2,054,715 Wagoner 62 68 2,054,715
Pottawatomie 785 40,459,374 McIntosh 63 66 1,455,556 Nowata 63 146 2,039,906
Pushmataha 4 4,015 Love 64 61 1,634,516 Tillman 64 55 1,747,127
Roger Mills 18 698,735 Ottawa 65 61 6,191,912 Love 65 61 1,634,516
Rogers 443 22,594,460 Bryan 66 59 775,609 Cotton 66 47 1,529,507
Seminole 863 45,768,314 Sequoyah 67 59 844,099 Alfalfa 67 48 1,482,052
Sequoyah 59 844,099 Tillman 68 55 1,747,127 McIntosh 68 66 1,455,556
Stephens 2,532 262,340,824 Alfalfa 69 48 1,482,052 Ellis 69 37 1,090,921
Texas 256 15,143,805 Cotton 70 47 1,529,507 Sequoyah 70 59 844,099
Tillman 55 1,747,127 Ellis 71 37 1,090,921 Bryan 71 59 775,609
Tulsa 8,333 1,255,897,319 Coal 72 28 416,497 Roger Mills 72 18 698,735
Wagoner 68 2,054,715 Greer 73 27 686,756 Greer 73 27 686,756
Washington 3,993 628,413,284 Roger Mills 74 18 698,735 Coal 74 28 416,497
Washita 108 4,355,025 Cimarron 75 12 187,503 Cimarron 75 12 187,503
Woods 306 7,237,780 Harmon 76 6 4,222 Harmon 76 6 4,222
Woodward 1,094 67,637,145 Pushmataha 77 4 4,015 Pushmataha 77 4 4,015
Statewide 60,616 6,222,126,411
Source: Bureau of Economic Analysis, Oklahoma State Econometric Model, IMPLAN Input-Output Model
45
remaining top ten counties are as follows: Carter (6th), Garfield (7th), Cleveland (8th), and
Canadian (9th), and Beckham (10th).
Table 6. Comparison of Employment and Income to Production by Selected Counties (2005)
Rank and Percent Share of State Total
County Employment
Labor
Income
Crude Oil
Production
Natural Gas
Production
Oklahoma County 1st 22.6% 1st 35.7% 10th 3.2% 29th 0.8%
Tulsa County 2nd 13.8% 2nd 20.2% 43rd 0.5% 59th 0.1%
Washington County 3rd 6.6% 3rd 10.1% 44th 0.4% 39th 0.3%
Kay County 4th 4.2% 4th 5.9% 21st 1.3% 57th 0.1%
Stephens County 5th 4.2% 5th 4.2% 2nd 9.9% 10th 3.8%
Carter County 6th 2.9% 8th 1.6% 1st 10.4% 27th 0.8%
Roger Mills County 74th 0.1% 72nd 0.1% 20th 1.3% 1st 9.2%
Latimer County 11th 2.1% 7th 1.7% -- -- 2nd 8.6%
Beckham County 10th 2.1% 6th 1.8% 32nd 0.8% 3rd 8.5%
Source: Oklahoma Corporation Commission, Bureau of Economic Analysis, Oklahoma State Econometric Model
Production, Employment, and Income by Corporation Commission District
The local economic impacts of oil and gas activities are evaluated for each of the four
Oklahoma Corporation Commission Districts. The counties within each District’s boundaries
are identified in Map 4, and summary statistics by District are in Tables 7 through 10. As shown
in Tables 7 and 8, oil and gas industry employment and income is predominantly found in
Districts 1 and 2, while production occurs largely in Districts 2, 3, and 4.
District 1 encompasses the northeastern portion of the state and includes Tulsa and
Washington Counties, which accounts for its large share of employment and income. District 1
is second in 2005 employment and income from oil and gas activities, third in crude oil
production, and fourth in natural gas production. District 2 encompasses the northwestern
portion of the state and is first in income and employment, second in crude oil production, and
first in natural gas production. Oklahoma County, the top ranked county in oil and gas
employment and wage and salary income, is in its boundaries. Texas County (5th in crude oil
production, 7th in natural gas production) is also in District 2. Among the other top ten natural
gas producing counties in District 2 are Roger Mills (1st) and Custer (8th).
District 3 covers the southwestern portion of the state and ranks third in 2005 employment
and wage and salary income. However, it ranks first in crude oil and second in natural gas
production. Carter County and Stephens County, first and second ranked, respectively, in crude
46
oil production are located in District 3. Among the other top ten crude oil producing counties in
District 3 are Grady (4th), Garvin (6th), and Caddo (9th). Top ten ranking natural gas producing
counties in District 3 are Beckham (3rd), Grady (4th), Caddo (6th), Washita (9th), and Stephens
(10th). District 4 covers the southeastern portion of the state and is fourth in oil and gas
employment and income, fourth in crude oil production, and third in natural gas production.
Latimer County, the second largest producer of natural gas, is located in District 4.
Table 8. Oil and Gas Production by OCC District (2005)
OCC
District
Crude Oil
and
Condensate
(bbls)
Natural and
Casinghead
Gas
(mcf)
1 12,417,338 55,064,810
2 16,625,451 712,954,706
3 25,367,928 493,272,083
4 6,528,655 344,362,877
Statewide 60,939,372 1,605,654,476
Source: Oklahoma Corporation Commission (OCC)
Table 9 summarizes well completions in 2005 within each Oklahoma Corporation
Commission District while Table 10 provides historical data on total well completions by
District. District 1 (northeast) is fourth in well completions both in 2005 and historically and
shows a ratio of three natural gas wells completed for every crude oil well. District 2 (northwest)
historically is the most active in total well completions but has the lowest success ratio in 2005
Table 7. Employment and Income by OCC District (2005)
OCC Oil and Gas Labor
District Employment Income
1 20,236 $2,430,940,152
2 28,505 2,776,917,109
3 7,733 709,086,108
4 4,142 305,183,042
Statewide 60,616 $6,222,126,411
Source: Oklahoma Corporation Commission (OCC), Bureau of Economic Analysis,
Oklahoma State Econometric Model, IMPLAN Input-Output Model
47
among the four districts. In District 2, 7 natural gas wells were completed for every crude oil
well. District 3 (southwest) ranks second in well completions historically, but fell to third in the
2005 rankings. There is a relative balance among the number of crude oil and gas wells
completed in 2005 in District 3.
District 4 (southeast) is second in well completions and shows more than 10 natural gas
wells completed for every crude oil well in 2005. The 2005 success ratio in District 4 is highest
at 93.5 percent.
Table 9. Well Completions by OCC District (2005)
OCC Completions
District Oil Gas Dry Total
Total
Footage
Avg.
Depth
(feet)
Success
Ratio
1 76 226 31 333 814,684 2,446 90.7%
2 106 731 133 970 8,627,704 8,895 86.3%
3 196 281 45 522 4,729,433 9,060 91.4%
4 41 475 36 552 3,338,329 6,048 93.5%
Total 419 1,713 245 2,377 17,510,150 7,366 89.7%
Source: Oklahoma Corporation Commission (OCC)
Table 10. Annual Well Completions by OCC District
OCC
District 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
1 174 194 240 314 268 349 390 297 325 258 333
2 527 544 673 758 692 943 1,238 1,076 939 908 970
3 495 491 494 470 341 520 722 541 421 508 522
4 231 230 221 277 300 455 629 427 558 484 552
Total 1,427 1,459 1,628 1,819 1,601 2,267 2,979 2,341 2,243 2,158 2,377
Source: Oklahoma Corporation Commission (OCC)
LOCAL ECONOMIC IMPACT
Input-output models were constructed for each of the four Oklahoma Corporation
Commission districts in order to estimate the economic impact of the oil and gas industry within
broad regions of the state.10 The economic impact is measured in terms of employment and
income rather than production level due to the disparity between location of production and
48
49
employment; that is, oil and gas industry employees may not reside in the same county in which
they work. The economic impacts are described by the following three measures from economic
impact analysis:11
• direct effect – the employment and income generated directly within the
Oklahoma oil and gas industry;
• indirect effect – the employment and income generated as a result of state oil
and gas firms doing business with firms in other industries within the state;
• induced effect – the economic activity generated by new household spending
resulting from compensation generated from the direct and indirect effects.
The three effects provide a convenient way to describe the multiplier, or ripple, effects that
occur as the oil and gas industry engages in drilling and production (direct effect), then impacts
those firms that support and supply the oil and gas sector (indirect effect), and then finally affects
the broader regional economy as worker’s incomes and spending patterns are affected (induced
effect).
The estimated impact of the oil and gas industry on employment and labor income (i.e.,
employee compensation and self employment income) within each District is summarized in
Table 11. The estimated direct, indirect, and induced effects are shown separately for both
production and drilling activities. Production employment is made up of primarily
administrative and clerical workers, while drilling employment is mainly field workers.
The direct economic impact in District 1 (northeast, including Tulsa) is measured as 19,721
production workers and 515 drilling workers earning $2.39 billion and $39.0 million,
respectively. The indirect and induced effects support an estimated 54,567 jobs (i.e., 53,448 jobs
from production activities and 1,119 from drilling) with a combined payroll of $2.43 billion (i.e.,
$2.56 billion production related and $35.7 million drilling). Direct production jobs combined
with jobs created through the indirect and induced effects make up 9.5 percent of employment
and 17.0 percent of income in District 1. Jobs related to drilling activities made up 0.2 percent of
District 1 employment and 0.3 percent of income. District 1 showed the second largest total
economic impact among the four Districts in terms of earnings generated from oil and gas
production at $5.03 billion.
District 2, which covers the northwestern portion of the state, including Oklahoma County,
showed the greatest impact in terms of jobs. Direct production jobs along with indirect and
50
induced employment comprise 12.6 percent of total employment and 24.9 percent of income
within the district. Drilling activities as a percent of total district employment and income were
0.7 percent and 1.2 percent, respectively. The direct economic impact in District 2 is measured
as 26,745 production workers earning $2.64 billion dollars and 1,760 drilling workers earning
$141.5 million. The indirect and induced effects support an additional 59,709 jobs (i.e., 56,814
from production activities and 2,895 from drilling) statewide with a combined payroll of $4.15
billion ($3.95 billion production related and $193.8 million drilling).
Table 11. Regional Economic Impact of Oil and Gas Production and Drilling (2005)
Total (Production + Drilling)
Employment Labor Income ($million)
OCC
District Direct Indirect Induced
Total
Impact
% of
District
Earnings
OCC
District Direct Indirect Induced
Total
Impact
% of
District
Earnings
1 20,236 19,563 35,003 74,803 9.7% 1 2,430.9 1,308.3 1,288.5 5,027.8 17.2%
2 28,505 27,415 32,294 88,214 12.6% 2 2,776.9 2,343.4 1,803.3 6,923.6 24.9%
3 7,733 6,423 5,887 20,044 5.9% 3 709.1 408.0 253.0 1,370.0 13.8%
4 4,142 3,264 2,634 10,039 4.7% 4 305.2 177.0 111.1 593.3 11.2%
Total 60,616 56,666 75,818 193,100 9.5% Total $6,222.1 $4,236.7 $3,455.9 $13,914.7 19.3%
Production
Employment Labor Income ($million)
OCC
District Direct Indirect Induced
Total
Impact
% of
District
Earnings
OCC
District Direct Indirect Induced
Total
Impact
% of
District
Earnings
1 19,721 19,139 34,309 73,169 9.5% 1 2,391.9 1,291.8 1,269.4 4,953.0 17.0%
2 26,745 26,043 30,771 83,559 11.9% 2 2,635.4 2,237.0 1,716.0 6,588.4 23.7%
3 6,226 5,393 4,724 16,343 4.8% 3 579.5 368.7 214.7 1,162.9 11.7%
4 3,450 2,858 2,296 8,604 4.0% 4 257.9 158.3 95.9 512.1 9.7%
Total 56,142 53,433 72,099 181,675 9.0% Total $5,864.7 $4,055.7 $3,295.9 $13,216.4 18.3%
Drilling
Employment Labor Income ($million)
OCC
District Direct Indirect Induced
Total
Impact
% of
District
Earnings
OCC
District Direct Indirect Induced
Total
Impact
% of
District
Earnings
1 515 424 695 1,634 0.2% 1 39.0 16.5 19.2 74.7 0.3%
2 1,760 1,372 1,523 4,655 0.7% 2 141.5 106.4 87.3 335.3 1.2%
3 1,507 1,031 1,163 3,701 1.1% 3 129.6 39.3 38.3 207.2 2.1%
4 692 405 338 1,435 0.7% 4 47.2 18.7 15.2 81.2 1.5%
Total 4,474 3,232 3,719 11,425 0.6% Total $357.4 $181.0 $159.9 $698.4 1.0%
Source: Bureau of Economic Analysis, IMPLAN Input-Output Model, Oklahoma State Econometric Model, Oklahoma Corporation
Commission (OCC)
51
District 3 ranks third in overall impact from oil and gas activity with 20,044 direct, indirect,
and induced jobs generating annual labor income of $1.16 billion from production and $207.2
million from drilling. District 3 is in the southwestern portion of the state and includes the top
oil producing Carter County and Stephens County. Oil and gas production activities make up 4.8
percent of overall employment and 11.7 percent of income. Drilling activities contributed 1.1
percent of overall employment and 3.1 percent of income.
Production and drilling activities had the smallest economic impact in District 4, the
southeastern portion of the state. The direct, indirect, and induced effects account for 10,039
total jobs with annual pay of $593.3 million. Production related employment contributes 4.0
percent of the District’s overall jobs and drilling at 0.7 percent.
Across all districts, production related activities have a much larger impact than drilling.
Production jobs contribute through multiplier effects approximately 9.0 percent of all jobs across
the regions and 18.3 percent of income, while drilling jobs contribute 0.6 percent of jobs and 1.0
percent of labor income. The state’s oil and gas firms directly hire an estimated 60,616 workers
(56,142 in production and 4,474 in drilling) earning $6.22 billion in labor income ($5.86 billion
in production and $357 million in drilling). These jobs support an estimated 132,484 additional
jobs paying labor income of $7.69 billion. Across the four regions, production and drilling
activities support an estimated 193,100 jobs and $13.9 billion in labor income statewide.
SUMMARY OF THE LOCAL ECONOMIC IMPACT
Oklahoma oil and gas production occurs statewide, but production remains concentrated in
a small number of counties. For crude oil, 78.4 percent of production occurs in 20 counties with
the highest county among the group producing over 6 million barrels and the lowest at around
800,000 barrels in 2005. Six counties account for 43.4 percent of total state production. Two
counties (Carter and Stephens) in the southwestern portion of the state produce 20.3 percent of
total state crude oil.
For natural gas, three counties produce 26.4 percent of the state total; one county is in the
northwest (Roger Mills), one in the southwest (Beckham), and the other in the southeast
(Latimer). Natural gas production overall is concentrated in the western half of the state and a
few counties in the southeast. Twelve counties in total produce 64.0 percent of the state’s total
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natural gas, with the highest producing over 148.5 billion cubic feet and the lowest at 46.2 billion
cubic feet.
Most Oklahoma counties experienced a steady decline in total oil and gas production over
the decade 1995 to 2005. More counties showed an increase in natural gas production than in
crude oil production. The statewide decline in crude oil production on a relative basis was more
than twice the decline for natural gas. Drilling activity across Oklahoma also reflects the
increased emphasis on natural gas production. Gas wells represented more than two-thirds of
total well completions in 2005, outnumbering oil well completions by 4 to 1 statewide. Drilling
activity was highest in District 2 (northwest), with natural gas wells outnumbering crude oil
wells by 7 to 1.
Despite production occurring across most areas of the state, both employment and income
are highly concentrated in Oklahoma and Tulsa Counties. Together, they accounted for 36
percent of state oil and gas industry employment and 56 percent of labor income in 2005. In
these counties, oil and gas employment and income is heavily weighted by professional and
technical workers employed within the headquarters and regional offices of oil and gas firms
rather than production and technical workers in the field.
The economic impact of oil and gas drilling and production differs greatly among the four
Oklahoma Corporation Commission Districts. District 1 and District 2 showed a larger
economic impact than Districts 3 and 4. District 1 encompasses the northeast quadrant of the
state, which includes Tulsa County, and has the smallest combined production of crude oil and
natural gas. However, it showed the second largest economic impact from employment (74,803
jobs) and earnings ($5.03 billion) among the four Districts. District 2 covers the northwest
quadrant of the state, including Oklahoma County, and has the largest employment impact
(88,214 jobs) and the largest total income impact ($6.9 billion). The greatest amount of drilling
activity is in District 2, along with the second largest crude oil production level and largest
natural gas production level.
District 3, the southwest quadrant of the state, is the largest crude oil producer and second
largest natural gas producer. The economic impacts, measured through employment and income
related to oil and gas production, trail behind Districts 1 and 2. However oil and gas production
and drilling in the District supports 20,044 jobs paying $1.4 billion in 2005. District 4
encompasses the southeast quadrant of the state and showed the lowest crude oil production and
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the third highest natural gas production. The smallest total employment (10,039 jobs) and
income ($593.3 million) impacts are shown in this District.
Through direct, indirect, and induced impacts, production and drilling activities support an
estimated 193,100 jobs and $13.9 billion in labor income statewide, or 9.5 percent of total
employment and 19.3 percent of state labor income. Production jobs contribute approximately
9.0 percent of all jobs statewide and 18.3 percent of labor income through multiplier effects,
while drilling jobs contribute 0.6 percent of jobs and 1.0 percent of income.
54
Footnotes
1 For an analysis of the economic impact of the oil and gas industry at the local level, see “The Local Impact of Oil
and Gas Production and Drilling In Oklahoma.” Dolores A. Willett and Mark C. Snead. December 2006. Center for
Applied Economic Research. Oklahoma State University.
2 Bureau of Economic Analysis (BEA) estimates of earnings for both wage and salary and self employed workers in
the Mining sector in Oklahoma increased substantially in 2004 and 2005. The largest gains are for self-employed
workers and raise the average earnings of these workers to more than $126,000 in 2005. The increase may be due in
part to distributions to oil and gas partnerships. The estimates are subject to future revisions which may push
average earnings below the estimates reported here. For a description of BEA’s method for estimating proprietor
income, see: http://www.bea.gov/bea/regional/definitions/nextpage.cfm?key=Nonfarm%20proprietors'%20income.
3 Snead, Mark C. “The Economics of Deep Drilling in Oklahoma.” Center for Applied Economic Research, Spears
School of Business, Oklahoma State University, February 2005.
4 Caution must be exercised when using input-output multipliers to estimate the total economic activity “supported”
by an existing industry or firm. Input-output multipliers are intended to predict the change in region-wide economic
activity that results from an incremental change in a given industry within a regional economy.
5 The Oklahoma State Econometric Model is developed and maintained by the Center for Applied Economic
Research in the Spears School of Business at Oklahoma State University. The Model is in its 26th year of
development and provides information on the probable performance of the Oklahoma economy in the upcoming
year.
6 Global Insight, Inc., Waltham, MA provides forecasts of national and international economic conditions that serve
as inputs into the Oklahoma State Econometric Model.
7 For an analysis of the economic impact of the oil and gas industry at the state level, see “The Economic Impact of
Oil and Gas Production and Drilling on the Oklahoma Economy.” Mark C. Snead and Dolores Willett. December
2006. Center for Applied Economic Research. Oklahoma State University.
8 Throughout the report, the production of both crude oil and condensate will be referred to simply as crude oil; the
production of both natural and casinghead gas will be referred to simply as natural gas. Condensate refers to the
hydrocarbon liquid recovered from natural gas wells, while casinghead gas is the natural gas extracted along with
crude oil from oil wells.
9 Preliminary 2005 data developed by the U.S. Department of Energy (DOE) shows Oklahoma ranking 2nd in natural
gas production among the states with onshore production. However, Oklahoma Tax Commission production data
shows 2005 state gas production 4.35% lower (1.6057 TCF) than the reported DOE figure (1.6787 TCF).
10 The reported economic impacts are generated from four county-level IMPLAN input-output models that are
aggregated to correspond to the four Oklahoma Corporation Commission Districts shown in Map 4. Because the
state is divided into four regions, the sum of the estimated impacts across the four regions will be less than the total
multiplier impacts expected for a state model comprising all four regions. For details, refer to IMPLAN
Professional: User's guide, analysis guide, data guide. Minnesota IMPLAN Group, 1998. Stillwater, MN.
11 Caution must be exercised when using input-output multipliers to estimate the total economic activity “supported”
by an existing industry or firm. Input-output multipliers are intended to predict the change in region-wide economic
activity that results from an incremental change in a given industry within a regional economy.