Oklahoma's oil and natural gas industry : economic impact and jobs report

              Oklahoma’s Oil and
Natural Gas Industry
Economic Impact and Jobs Report
Commisioned by:
Prepared by:
Russell Evans, Executive Director
Kyle Dean, Associate Director and Research Economist
Released June 2011
Page 1
The Economic Impact of Oil and Gas
Production and Drilling on the Oklahoma Economy
Introduction
As the nation emerges from a severe 18‐month recession, Oklahoma’s recovery is on a path
envious to many states. Led by a resumption of mining activities, Oklahoma’s key industries of oil
and gas production, agriculture, manufacturing, aerospace and
defense all seem poised to expand throughout 2011 and into 2012.
Of particular interest in this report is the experience of the oil and
gas production and drilling sectors through the recession and at
the early stages of recovery.
Oklahoma remains a key source of domestic energy needed
to feed U.S. economic activity. As the tier‐one energy status of
states ebbs and flows – most recently with the expanded activity in North Dakota, for example –
Oklahoma’s status as an energy state is constant (Snead, 2008). Oklahoma is estimated to have
produced and marketed 67.0 million barrels of oil in 2009 accounting for nearly 3.5% of all U.S.
production. A combination of improving economic conditions and a rebalancing of Oklahoma
producer’s fuel balance sheet towards oil is expected to contribute to increasing production in
2010 and 2011.
Table 1: U.S. Crude Oil Production By State (2009)
State Million Barrels Percent of Total Cumulative percent
Texas 403.8 20.64% 20.64%
Alaska 235.5 12.04% 32.67%
California 207.1 10.58% 43.26%
North Dakota 79.7 4.08% 47.33%
Louisiana 69.0 3.53% 50.86%
Oklahoma 67.0 3.43% 54.29%
New Mexico 61.1 3.13% 57.41%
Wyoming 51.3 2.62% 60.03%
Kansas 39.5 2.02% 62.05%
Colorado 28.3 1.45% 63.50%
Montana 27.7 1.42% 64.91%
Mississippi 23.2 1.19% 66.10%
Utah 22.9 1.17% 67.27%
Offshore (Gulf + CA) 590.9 30.20% 97.47%
Other onshore & Adjustments 49.4 2.53% 100.00%
U.S. 1,957 100.00%
Oklahoma accounts
for nearly 3.5% of all
U.S. oil production
and 8.6% of total
domestic natural gas.
Page 2
The development of natural gas fields in Oklahoma has been aided by advances in
technology (directional drilling, fracturing, etc.) and driven by the ongoing discussion of an
expanded role for natural gas in a climate‐change sensitive environment. Oklahoma is estimated
to have produced over 1.85 trillion cubic feet of gas (Tcf) in 2009, accounting for 8.6% of total
domestic gas production.
Table 2: U.S. Natural Gas Production by State (2009)
State Million Cubic feet Percent of Total Cumulative Percent
Texas 6,818,973 31.56% 31.56%
Wyoming 2,335,328 10.81% 42.37%
Oklahoma 1,857,777 8.60% 50.97%
New Mexico 1,383,004 6.40% 57.37%
Louisiana 1,548,607 7.17% 64.54%
Colorado 1,499,070 6.94% 71.48%
Alaska 397,077 1.84% 73.32%
Other onshore 3,335,406 15.44% 88.76%
Offshore (Gulf) 2,428,916 11.24% 100.00%
U.S. 21,604,158 100.00%
While the overall industry in Oklahoma continues to serve as a cornerstone of economic
activity, the distribution of the industry direct employment is shifting. In 2000, Oklahoma City
and Tulsa enjoyed roughly equal levels of wage and salary employment. Throughout the course of
the decade, however, Oklahoma City enjoyed employment growth at rates considerably higher
than those of Tulsa. By the conclusion of the decade, wage and salary employment in Oklahoma
City was nearly twice that of Tulsa. Combined, however, the two metro areas continue to account
for one‐half of all oil and gas payroll employees.
Page 3
Industry Trends
The oil and gas industry in Oklahoma continues to serve as a vital contributor to the
nation’s energy infrastructure and Oklahoma’s role is expected to expand as transitions to cleaner
burning fossil fuels lead to a substitution of natural gas for coal in many production processes.
The previous decade is rightly viewed as a mini oil and gas boom as employment and well
completions data all indicate a period of robust activity. Emerging
from the growth recession of 2001‐2002, the industry began an
aggressive expansion as technological advancements expanded the
role of unconventional resource plays in the industry’s production
portfolio. The mining, quarrying, and oil and gas extraction sector
(NAICS 21) enjoyed double‐digit year‐over‐year employment gains
through much of the decade as employment doubled from its 2002
trough of 26,898 to a peak of 54,071 in 2008. The ensuing recession
precipitated a significant fall in the price of commodities as fears of a
global economic catastrophe permeated markets both at home and abroad. The industry
responded with layoffs, shedding over 13,000 jobs from October 2008 to October 2009, before
adding back over 4,000 jobs since. In total however, the industry has posted employment growth
of 46.2% since emerging from the 2001‐2002 recession.
The industry has
posted employment
growth of 46.2%
since emerging from
the 2001‐2002
recession.
Page 4
Well completions data likewise show significant growth during the previous decade. Well
completions rose from just over 1,500 in 1999 to a peak of 3,722 in 2006. Even in the midst of
economic uncertainty, well completions totaled 2,027 in 2009. The industry also enjoyed the
fruits of technology and experience, increasing the success ratio of wells completed from 89.76%
in 1999 to 95.17% in 2009. The shift to oil exploration is not unexpected given price movements in
this market (discussed subsequently).
Total well completions fell by 1,490 peak to trough (2007 to 2009) and by 1,412 from the
previous year. The experience of both recent recessions underscores the responsiveness of
industry activity to fluctuating commodity prices and general economic conditions. While the
effects of contraction are felt industry‐wide, it is expected that the biggest reductions occur in
drilling activity (reflected by the well completion data above) and therefore disproportionately
impact the largely rural areas of the state. Indeed, this sentiment is reflected in the dispersion of
drilling activity across the state discussed below.
In 2009, Johnston County experienced the strongest growth in completions among the 77
Oklahoma counties. However, with only 21 (600% growth) total completions, growth in Johnston
and other counties wasn’t enough to stem the statewide decline of 26% or ‐1,412 year‐over‐year.
Major County saw the largest reduction in 2009, losing 110 completions (‐66%) followed closely by
Hughes (‐59%) and Woods (‐44%) at losses of 108 and 99 respectively. Over the ten‐year study
period, Carter County experienced the largest absolute growth in completions at 88 (+244%)
while Texas County saw the largest absolute decline of 72 (‐69%). Total completions and year‐over‐
year change in completions are detailed in Table 3.
In 2009, Johnston County experienced the strongest growth in completions among
the 77 Oklahoma counties.
Page 5
Table 3: Total Well Completions by County (1999‐2009)
Total Well Completions Annual Change in Well Completions
County 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 County
1999
to
2000
2000
to
2001
2001
to
2002
2002
to
2003
2003
to
2004
2004
to
2005
2005
to
2006
2006
to
2007
2007
to
2008
2008
to
2009
WOODS 54 46 69 81 55 76 94 118 228 224 125 JOHNSTON 1 ‐1 1 ‐1 0 0 3 ‐1 1 18
CARTER 36 51 80 54 27 36 66 72 123 128 124 POTTAWATOMIE 6 3 2 ‐1 14 ‐5 1 ‐11 ‐4 14
PITTSBURG 87 126 176 118 156 161 181 196 170 186 111 COTTON 1 ‐1 1 ‐1 2 ‐2 2 ‐2 0 12
COAL 4 13 13 25 21 10 21 46 110 79 90 COAL 9 0 12 ‐4 ‐11 11 25 64 ‐31 11
CANADIAN 33 44 73 66 43 57 70 77 71 72 78 PAWNEE 3 ‐1 ‐2 4 ‐2 2 2 2 0 8
HUGHES 18 21 32 29 30 19 70 77 142 182 74 BLAINE 2 18 ‐19 ‐10 ‐3 16 ‐13 ‐11 ‐10 7
WASHITA 40 48 63 38 43 56 54 59 60 93 60 JEFFERSON 0 0 5 3 3 2 1 ‐10 ‐4 7
MAJOR 62 95 123 84 42 61 89 99 164 167 57 PONTOTOC ‐4 3 9 25 ‐12 13 ‐13 ‐25 11 7
WOODWARD 58 82 124 92 102 116 207 214 201 146 57 CANADIAN 11 29 ‐7 ‐23 14 13 7 ‐6 1 6
WASHINGTON 11 6 35 24 59 47 138 162 64 55 53 OKFUSKEE 0 18 ‐20 ‐6 ‐1 0 17 1 ‐10 6
NOBLE 32 55 62 46 41 38 61 79 73 64 52 TULSA ‐28 3 ‐3 0 5 ‐5 14 8 ��12 4
ELLIS 35 56 65 48 63 43 57 81 94 91 51 TILLMAN 0 0 5 ‐4 3 1 ‐3 2 0 2
SEMINOLE 25 48 62 16 22 32 37 56 59 52 51 CRAIG 0 19 4 ‐14 ‐5 ‐4 ‐2 3 1 1
CADDO 27 43 56 49 64 68 92 88 71 60 49 GREER 0 0 0 0 0 0 3 2 ‐5 1
LATIMER 47 88 97 55 61 59 88 102 77 90 47 LOVE 4 ‐3 3 ‐6 ‐2 5 ‐4 2 ‐2 1
ROGER MILLS 40 54 86 87 101 107 216 216 147 96 46 ADAIR 0 0 0 0 0 0 0 0 0 0
STEPHENS 35 65 121 115 55 113 167 143 134 137 45 CHEROKEE 0 0 0 0 0 0 0 0 0 0
KINGFISHER 16 19 17 14 21 21 36 47 43 43 43 CHOCTAW 0 0 0 0 0 0 0 0 0 0
GARVIN 24 60 85 39 57 41 49 83 61 77 41 DELAWARE 0 0 0 0 0 0 0 0 0 0
BEAVER 89 123 193 126 79 76 81 90 70 90 38 HARMON 0 0 0 0 0 0 1 3 ‐4 0
LEFLORE 18 34 76 50 71 36 86 105 71 108 37 JACKSON ‐1 1 ‐1 2 ‐1 ‐1 0 5 ‐3 0
GRADY 65 91 124 82 54 49 85 102 73 53 36 KINGFISHER 3 ‐2 ‐3 7 0 15 11 ‐4 0 0
KAY 13 16 12 10 6 10 28 25 74 49 36 MARSHALL 1 3 ‐1 3 ‐4 2 10 9 ‐8 0
TEXAS 105 141 172 188 137 149 138 158 128 95 33 MCCURTAIN 0 0 0 0 0 0 0 0 0 0
BLAINE 52 54 72 53 43 40 56 43 32 22 29 OSAGE 0 0 0 0 0 0 0 0 0 0
WAGONER 1 1 1 0 1 0 1 26 23 96 29 OTTAWA 0 0 0 0 0 0 0 0 0 0
HARPER 32 52 55 38 38 27 27 34 57 67 28 BRYAN 0 7 ‐5 0 4 ‐4 8 0 ‐5 ‐1
PONTOTOC 13 9 12 21 46 34 47 34 9 20 27 KIOWA ‐8 ‐4 0 ‐1 3 3 ‐5 3 0 ‐1
BECKHAM 21 41 48 43 56 51 115 131 94 51 24 PUSHMATAHA 6 4 ‐10 ‐1 0 2 4 ‐3 1 ‐1
POTTAWATOMIE 5 11 14 16 15 29 24 25 14 10 24 SEMINOLE 23 14 ‐46 6 10 5 19 3 ‐7 ‐1
CUSTER 44 55 42 61 60 48 48 50 44 47 23 MUSKOGEE 0 2 0 2 ‐3 4 4 ‐4 ‐2 ‐2
MCCLAIN 6 23 20 18 13 15 33 36 33 26 23 WASHINGTON ‐5 29 ‐11 35 ‐12 91 24 ‐98 ‐9 ‐2
OKFUSKEE 18 18 36 16 10 9 9 26 27 17 23 CLEVELAND 0 4 ‐3 ‐2 5 1 ‐2 6 ‐3 ‐3
OKMULGEE 3 15 15 20 22 8 15 31 36 26 23 HASKELL 15 22 ‐27 42 ‐33 ‐12 3 ‐51 ‐14 ‐3
GRANT 10 12 20 30 42 24 26 51 45 26 21 MAYES 0 0 0 0 0 0 0 0 3 ‐3
JOHNSTON 0 1 0 1 0 0 0 3 2 3 21 MCCLAIN 17 ‐3 ‐2 ‐5 2 18 3 ‐3 ‐7 ‐3
CREEK 8 15 12 11 9 8 20 26 25 39 20 OKMULGEE 12 0 5 2 ��14 7 16 5 ‐10 ‐3
ROGERS 4 8 23 13 18 19 39 55 28 28 20 CARTER 15 29 ‐26 ‐27 9 30 6 51 5 ‐4
OKLAHOMA 10 20 21 25 15 9 23 27 23 31 19 GARFIELD 20 10 ‐25 ‐2 ‐4 2 16 14 ‐20 ‐4
DEWEY 50 56 59 45 52 33 41 27 22 32 18 GRANT 2 8 10 12 ‐18 2 25 ‐6 ‐19 ‐5
TULSA 32 4 7 4 4 9 4 18 26 14 18 MURRAY 0 ‐2 3 ‐2 ‐1 3 1 ‐2 4 ‐7
GARFIELD 10 30 40 15 13 9 11 27 41 21 17 PAYNE 11 ‐2 4 0 ‐4 5 ‐3 3 ‐3 ‐7
LINCOLN 62 97 76 38 25 21 27 38 56 52 16 CIMARRON 1 ‐4 ‐2 ‐1 4 4 14 ‐18 2 ‐8
MARSHALL 1 2 5 4 7 3 5 15 24 16 16 LOGAN 18 20 ‐25 ‐5 ‐5 ‐12 3 2 ‐6 ‐8
Page 6
Table 3 (Cont.): Total Well Completions by County (1999‐2009)
Total Well Completions
Annual Change in Well Completions
County 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 County
1999
to
2000
2000
to
2001
2001
to
2002
2002
to
2003
2003
to
2004
2004
to
2005
2005
to
2006
2006
to
2007
2007
to
2008
2008
to
2009
PAWNEE 0 3 2 0 4 2 4 6 8 8 16 ROGERS 4 15 ‐10 5 1 20 16 ‐27 0 ‐8
LOGAN 33 51 71 46 41 36 24 27 29 23 15 SEQUOYAH ‐3 4 ‐3 ‐4 ‐2 2 5 0 5 ‐10
HASKELL 72 87 109 82 124 91 79 82 31 17 14 CADDO 16 13 ‐7 15 4 24 ‐4 ‐17 ‐11 ‐11
ALFALFA 3 12 11 13 6 8 12 25 20 44 13 NOBLE 23 7 ‐16 ‐5 ‐3 23 18 ‐6 ‐9 ‐12
COTTON 0 1 0 1 0 2 0 2 0 0 12 OKLAHOMA 10 1 4 ‐10 ‐6 14 4 ‐4 8 ‐12
ATOKA 0 2 5 0 0 3 4 18 38 43 11 KAY 3 ‐4 ‐2 ‐4 4 18 ‐3 49 ‐25 ‐13
NOWATA 45 61 53 50 68 41 78 143 61 48 10 DEWEY 6 3 ‐14 7 ‐19 8 ‐14 ‐5 10 ‐14
PAYNE 6 17 15 19 19 15 20 17 20 17 10 COMANCHE ‐1 1 2 ‐3 ‐2 2 ‐3 6 10 ‐15
JEFFERSON 0 0 0 5 8 11 13 14 4 0 7 GRADY 26 33 ‐42 ‐28 ‐5 36 17 ‐29 ‐20 ‐17
TILLMAN 0 0 0 5 1 4 5 2 4 4 6 CREEK 7 ‐3 ‐1 ‐2 ‐1 12 6 ‐1 14 ‐19
CLEVELAND 2 2 6 3 1 6 7 5 11 8 5 CUSTER 11 ‐13 19 ‐1 ‐12 0 2 ‐6 3 ‐24
CRAIG 2 2 21 25 11 6 2 0 3 4 5 BECKHAM 20 7 ‐5 13 ‐5 64 16 ‐37 ‐43 ‐27
BRYAN 0 0 7 2 2 6 2 10 10 5 4 ALFALFA 9 ‐1 2 ‐7 2 4 13 ‐5 24 ‐31
LOVE 6 10 7 10 4 2 7 3 5 3 4 ATOKA 2 3 ‐5 0 3 1 14 20 5 ‐32
COMANCHE 6 5 6 8 5 3 5 2 8 18 3 WASHITA 8 15 ‐25 5 13 ‐2 5 1 33 ‐33
KIOWA 13 5 1 1 0 3 6 1 4 4 3 GARVIN 36 25 ‐46 18 ‐16 8 34 ‐22 16 ‐36
MCINTOSH 32 32 38 43 34 29 47 88 50 69 3 LINCOLN 35 ‐21 ‐38 ‐13 ‐4 6 11 18 ‐4 ‐36
PUSHMATAHA 1 7 11 1 0 0 2 6 3 4 3 NOWATA 16 ‐8 ‐3 18 ‐27 37 65 ‐82 ‐13 ‐38
SEQUOYAH 9 6 10 7 3 1 3 8 8 13 3 HARPER 20 3 ‐17 0 ‐11 0 7 23 10 ‐39
CIMARRON 10 11 7 5 4 8 12 26 8 10 2 ELLIS 21 9 ‐17 15 ‐20 14 24 13 ‐3 ‐40
JACKSON 1 0 1 0 2 1 0 0 5 2 2 LATIMER 41 9 ‐42 6 ‐2 29 14 ‐25 13 ‐43
MUSKOGEE 1 1 3 3 5 2 6 10 6 4 2 ROGER MILLS 14 32 1 14 6 109 0 ‐69 ‐51 ‐50
GREER 0 0 0 0 0 0 0 3 5 0 1 BEAVER 34 70 ‐67 ‐47 ‐3 5 9 ‐20 20 ‐52
ADAIR 0 0 0 0 0 0 0 0 0 0 0 TEXAS 36 31 16 ‐51 12 ‐11 20 ‐30 ‐33 ‐62
CHEROKEE 0 0 0 0 0 0 0 0 0 0 0 MCINTOSH 0 6 5 ‐9 ‐5 18 41 ‐38 19 ‐66
CHOCTAW 0 0 0 0 0 0 0 0 0 0 0 WAGONER 0 0 ‐1 1 ‐1 1 25 ‐3 73 ‐67
DELAWARE 0 0 0 0 0 0 0 0 0 0 0 LEFLORE 16 42 ‐26 21 ‐35 50 19 ‐34 37 ‐71
HARMON 0 0 0 0 0 0 0 1 4 0 0 PITTSBURG 39 50 ‐58 38 5 20 15 ‐26 16 ‐75
MAYES 0 0 0 0 0 0 0 0 0 3 0 WOODWARD 24 42 ‐32 10 14 91 7 ‐13 ‐55 ‐89
MCCURTAIN 0 0 0 0 0 0 0 0 0 0 0 STEPHENS 30 56 ‐6 ‐60 58 54 ‐24 ‐9 3 ‐92
MURRAY 3 3 1 4 2 1 4 5 3 7 0 WOODS ‐8 23 12 ‐26 21 18 24 110 ‐4 ‐99
OSAGE 0 0 0 0 0 0 0 0 0 0 0 HUGHES 3 11 ‐3 1 ‐11 51 7 65 40 ‐108
OTTAWA 0 0 0 0 0 0 0 0 0 0 0 MAJOR 33 28 ‐39 ‐42 19 28 10 65 3 ‐110
Statewide 3,600 4,267 4,980 4,343 4,246 4,162 5,129 5,728 5,524 5,447 4,036 Statewide 666 712 ‐638 ‐98 ‐85 966 598 ‐205 ‐78 ‐1412
Page 7
Market Activity and Price Volatility
The Oklahoma economy remains heavily influenced by commodity markets. As an
agricultural and energy state, commodity prices directly impact the profitability of our farmers
and energy producers. The state’s manufacturing sector, however, relies on commodities (steel,
copper, etc.) as key inputs to a production process. Fluctuations in commodity prices exert
opposing pressures on economic outcomes within our state. Both oil and gas prices rose
considerably previous to the recession as a domestic real estate bubble combined with fast growth
in developing countries to generate a nearly insatiable demand for energy. The collapse of the
housing market in the U.S. and its consequent ripple effects through the global financial sector
put the brakes on economic activity and oil and gas prices collapsed. The following figures show
real (inflation‐adjusted) price movements in these markets.
Crude oil prices rose steadily in real terms through much of the decade, reaching a peak
per barrel price of $134.41 in the fall of 2008. Real prices then fell nearly 70% in a period of only a
few months as the world sought to adjust to a new economic reality. Oil prices have since
recovered, driven by a combination of resurging activity in the developed world, continued strong
growth in developing economies (China, Brazil, and India in particular) and inflation concerns
stemming from monetary and fiscal policy driving excess liquidity into these markets. While it is
difficult to know for sure the extent of the impact of financial market plays into commodity
markets, estimates currently gauge the price impact to be in the range of $10 to $20 per barrel.
Page 8
Natural gas, in contrast, has experienced considerably more price volatility. During the
previous decade, market prices spiked and then dropped by at least 39% on four different
occasions. The most severe drop in prices occurred with the 2008‐2009 recession as wellhead
prices fell 72% from a peak of $10.71 per Mcf to $3.01 per Mcf on a real (inflation‐adjusted) basis.
Advancements in recovery methods including directional drilling and hydraulic fracturing
techniques combined with new field finds have increased dramatically estimates of recoverable
natural gas in the U.S. The effect of this increase in recoverable domestic supply is projected to
contribute to greater price stability in the future. The oil and gas
industry continues to exert a significant influence on aggregate
economic conditions as it does in other tier one energy states (e.g.
Texas, Louisiana, Wyoming, etc.) and continues to be an important
industry cluster around which the state can pursue its economic
development objectives. The importance of the industry and the
reality of fluctuating commodity prices underscore the important
role of the public sector in encouraging development of the
industry.
Estimates of
recoverable natural
gas have increased
dramatically due to
advancements in
recovery methods.
Page 9
Oklahoma Oil and Gas Production
Oklahoma continued to rank near the top in both Oil and Gas production in 2009.
Oklahoma ranked sixth in oil production only slightly behind Louisiana and third in natural gas
production, extracting nearly 9% of the U.S. total. Texas continued to lead both oil and gas
production by significant margins.
The western half of the state continued to dominate the production of oil as the top 9 oil
producing counties all lie in central to western Oklahoma. The top 5 producing counties
extracted 35% of the statewide total with over 51% of total production occurring in the top 9
counties. Carter County leads the state in oil production with over 10% of the statewide total.
Pontotoc was the largest producer in the eastern half of the state producing just over 3% of the
statewide total. The bottom 18 counties accounted for less than 1% of total oil production. Total
Oil and Gas production by county is shown in Table 4.
Statewide oil production declined by nearly 8% from 1999 levels. However, many counties
experienced large gains in oil production over this ten‐year period. Washita was the largest
gainer in oil production as total county production increased from 564 thousand to over 3.7
million barrels per year (+562%) in 2009. Grady County experienced the largest decline in
production from 4.8 to 2.9 million barrels (‐40.5%) in 2009.
Page 10
Production of Natural Gas in Oklahoma increased by 6% overall from 1999 to nearly 1.7
billion mcf in 2009. Extraction of gas was geographically less concentrated than oil as the top 3
producing counties reside in the eastern half of the state while many of the remaining top 10
reside in the west. Coal County experienced the largest gain in production from 4.7 million mcf
in 1992 to just under 102 million mcf in 2009 (+2,062%). Growth was spread throughout the state
as can be seen by the top 10 gainers in Figure 7 below.
Page 11
Table 4: Rankings of Oil and Gas Production by County (2009)
A. Crude Oil B. Natural Gas C. Barrel of Oil Equivalent Production
Barrels (bbls) Thousand Cubic Feet (mcf) (1 Barrel = 6 mcf)
Rank County Production % of
Total
Cumulative %
of Total Rank County Production % of
Total
Cumulative %
of Total Rank County Equivalent
Production
% of
Total
Cumulative %
of Total
1 CARTER 6,691,361 10.2% 10.2% 1 PITTSBURG 133,478,405 8.0% 8.0% 1 PITTSBURG 22,246,401 8.0% 8.0%
2 STEPHENS 4,861,562 7.4% 17.7% 2 LATIMER 115,004,062 6.9% 14.9% 2 LATIMER 19,167,344 6.9% 14.9%
3 OSAGE 3,843,401 5.9% 23.6% 3 COAL 101,957,030 6.1% 20.9% 3 COAL 16,992,838 6.1% 20.9%
4 TEXAS 3,787,282 5.8% 29.3% 4 ROGER MILLS 98,113,685 5.9% 26.8% 4 ROGER MILLS 16,352,281 5.9% 26.8%
5 WASHITA 3,741,352 5.7% 35.1% 5 WASHITA 96,442,025 5.8% 32.6% 5 WASHITA 16,073,671 5.8% 32.6%
6 GARVIN 3,217,860 4.9% 40.0% 6 HUGHES 88,432,556 5.3% 37.9% 6 HUGHES 14,738,759 5.3% 37.9%
7 GRADY 2,853,170 4.4% 44.4% 7 CADDO 74,059,379 4.4% 42.3% 7 CADDO 12,343,230 4.4% 42.3%
8 OKLAHOMA 2,399,806 3.7% 48.0% 8 BECKHAM 72,087,222 4.3% 46.6% 8 BECKHAM 12,014,537 4.3% 46.6%
9 WOODS 2,132,079 3.3% 51.3% 9 CANADIAN 66,242,468 4.0% 50.6% 9 CANADIAN 11,040,411 4.0% 50.6%
10 PONTOTOC 2,096,919 3.2% 54.5% 10 GRADY 62,850,081 3.8% 54.3% 10 GRADY 10,475,014 3.8% 54.3%
11 CREEK 1,946,728 3.0% 57.5% 11 WOODWARD 53,399,955 3.2% 57.5% 11 WOODWARD 8,899,993 3.2% 57.5%
12 ELLIS 1,862,637 2.8% 60.3% 12 MCCLAIN 49,379,118 3.0% 60.5% 12 MCCLAIN 8,229,853 3.0% 60.5%
13 SEMINOLE 1,845,419 2.8% 63.1% 13 CUSTER 48,214,813 2.9% 63.3% 13 CUSTER 8,035,802 2.9% 63.3%
14 MCCLAIN 1,806,751 2.8% 65.9% 14 WOODS 47,089,584 2.8% 66.1% 14 WOODS 7,848,264 2.8% 66.1%
15 CADDO 1,723,486 2.6% 68.5% 15 ELLIS 42,459,229 2.5% 68.7% 15 ELLIS 7,076,538 2.5% 68.7%
16 CANADIAN 1,294,723 2.0% 70.5% 16 TEXAS 38,193,653 2.3% 71.0% 16 TEXAS 6,365,609 2.3% 71.0%
17 POTTAWATOMIE 1,237,125 1.9% 72.4% 17 STEPHENS 35,698,921 2.1% 73.1% 17 STEPHENS 5,949,820 2.1% 73.1%
18 KINGFISHER 1,201,515 1.8% 74.3% 18 BEAVER 35,030,118 2.1% 75.2% 18 BEAVER 5,838,353 2.1% 75.2%
19 BEAVER 1,150,829 1.8% 76.0% 19 LEFLORE 33,300,616 2.0% 77.2% 19 LEFLORE 5,550,103 2.0% 77.2%
20 NOBLE 1,100,221 1.7% 77.7% 20 BLAINE 29,795,454 1.8% 79.0% 20 BLAINE 4,965,909 1.8% 79.0%
21 MAJOR 1,094,612 1.7% 79.4% 21 LINCOLN 27,126,943 1.6% 80.6% 21 LINCOLN 4,521,157 1.6% 80.6%
22 KAY 930,315 1.4% 80.8% 22 GARVIN 25,557,729 1.5% 82.1% 22 GARVIN 4,259,622 1.5% 82.1%
23 LINCOLN 911,346 1.4% 82.2% 23 KINGFISHER 24,977,884 1.5% 83.6% 23 KINGFISHER 4,162,981 1.5% 83.6%
24 ROGER MILLS 730,461 1.1% 83.3% 24 HASKELL 24,832,334 1.5% 85.1% 24 HASKELL 4,138,722 1.5% 85.1%
25 DEWEY 707,543 1.1% 84.4% 25 DEWEY 24,821,662 1.5% 86.6% 25 DEWEY 4,136,944 1.5% 86.6%
26 CUSTER 701,608 1.1% 85.5% 26 ATOKA 23,915,503 1.4% 88.0% 26 ATOKA 3,985,917 1.4% 88.0%
27 PAYNE 559,134 0.9% 86.3% 27 CARTER 18,357,958 1.1% 89.1% 27 CARTER 3,059,660 1.1% 89.1%
28 LOGAN 535,840 0.8% 87.1% 28 HARPER 17,803,974 1.1% 90.2% 28 HARPER 2,967,329 1.1% 90.2%
29 LOVE 525,252 0.8% 87.9% 29 OKLAHOMA 16,066,157 1.0% 91.1% 29 OKLAHOMA 2,677,693 1.0% 91.1%
30 GRANT 504,744 0.8% 88.7% 30 SEMINOLE 15,264,057 0.9% 92.0% 30 SEMINOLE 2,544,010 0.9% 92.0%
31 GARFIELD 496,403 0.8% 89.5% 31 GARFIELD 13,129,587 0.8% 92.8% 31 GARFIELD 2,188,265 0.8% 92.8%
32 CLEVELAND 470,759 0.7% 90.2% 32 MAJOR 12,016,123 0.7% 93.5% 32 MAJOR 2,002,687 0.7% 93.5%
33 HARPER 426,512 0.7% 90.8% 33 ALFALFA 9,629,111 0.6% 94.1% 33 ALFALFA 1,604,852 0.6% 94.1%
34 MCCURTAIN 410,834 0.6% 91.5% 34 OSAGE 9,545,358 0.6% 94.7% 34 OSAGE 1,590,893 0.6% 94.7%
35 BECKHAM 410,765 0.6% 92.1% 35 LOGAN 8,070,597 0.5% 95.2% 35 LOGAN 1,345,100 0.5% 95.2%
36 OKFUSKEE 397,870 0.6% 92.7% 36 MAYES 7,913,096 0.5% 95.6% 36 MAYES 1,318,849 0.5% 95.6%
37 PAWNEE 393,966 0.6% 93.3% 37 PUSHMATAHA 7,556,846 0.5% 96.1% 37 PUSHMATAHA 1,259,474 0.5% 96.1%
38 OKMULGEE 393,157 0.6% 93.9% 38 GRANT 6,338,905 0.4% 96.5% 38 GRANT 1,056,484 0.4% 96.5%
39 ALFALFA 366,806 0.6% 94.5% 39 POTTAWATOMIE 5,421,365 0.3% 96.8% 39 POTTAWATOMIE 903,561 0.3% 96.8%
40 WOODWARD 356,307 0.5% 95.0% 40 NOBLE 5,083,481 0.3% 97.1% 40 NOBLE 847,247 0.3% 97.1%
41 JEFFERSON 341,948 0.5% 95.5% 41 WASHINGTON 5,008,460 0.3% 97.4% 41 WASHINGTON 834,743 0.3% 97.4%
42 HUGHES 317,994 0.5% 96.0% 42 PAYNE 4,615,689 0.3% 97.7% 42 PAYNE 769,282 0.3% 97.7%
43 MURRAY 289,971 0.4% 96.5% 43 NOWATA 4,156,182 0.2% 97.9% 43 NOWATA 692,697 0.2% 97.9%
44 BLAINE 277,367 0.4% 96.9% 44 MCCURTAIN 4,138,899 0.2% 98.2% 44 MCCURTAIN 689,817 0.2% 98.2%
Page 12
Table 4 (Cont.): Rankings of Oil and Gas Production by County (2009)
A. Crude Oil B. Natural Gas C. Barrel of Oil Equivalent Production
Barrels (bbls) Thousand Cubic Feet (mcf) (1 Barrel = 6 mcf)
Rank County Production % of
Total
Cumulative %
of Total Rank County Production % of
Total
Cumulative %
of Total Rank County Equivalent
Production
% of
Total
Cumulative
% of Total
45 TULSA 266,654 0.4% 97.3% 45 KIOWA 3,488,107 0.2% 98.4% 45 KIOWA 581,351 0.2% 98.4%
46 COAL 238,414 0.4% 97.7% 46 CREEK 3,418,518 0.2% 98.6% 46 CREEK 569,753 0.2% 98.6%
47 WASHINGTON 207,820 0.3% 98.0% 47 KAY 3,363,386 0.2% 98.8% 47 KAY 560,564 0.2% 98.8%
48 JOHNSTON 168,565 0.3% 98.2% 48 COMANCHE 3,142,408 0.2% 99.0% 48 COMANCHE 523,735 0.2% 99.0%
49 COMANCHE 147,240 0.2% 98.5% 49 SEQUOYAH 2,386,463 0.1% 99.1% 49 SEQUOYAH 397,744 0.1% 99.1%
50 TILLMAN 142,499 0.2% 98.7% 50 OKFUSKEE 2,192,249 0.1% 99.2% 50 OKFUSKEE 365,375 0.1% 99.2%
51 BRYAN 140,994 0.2% 98.9% 51 JOHNSTON 1,687,986 0.1% 99.3% 51 JOHNSTON 281,331 0.1% 99.3%
52 CIMARRON 128,669 0.2% 99.1% 52 LOVE 1,534,250 0.1% 99.4% 52 LOVE 255,708 0.1% 99.4%
53 NOWATA 113,077 0.2% 99.3% 53 CLEVELAND 1,423,314 0.1% 99.5% 53 CLEVELAND 237,219 0.1% 99.5%
54 COTTON 109,727 0.2% 99.4% 54 ROGERS 1,390,454 0.1% 99.6% 54 ROGERS 231,742 0.1% 99.6%
55 JACKSON 94,122 0.1% 99.6% 55 OKMULGEE 1,379,460 0.1% 99.7% 55 OKMULGEE 229,910 0.1% 99.7%
56 KIOWA 84,536 0.1% 99.7% 56 CIMARRON 1,002,861 0.1% 99.8% 56 CIMARRON 167,144 0.1% 99.8%
57 MUSKOGEE 64,737 0.1% 99.8% 57 WAGONER 951,172 0.1% 99.8% 57 WAGONER 158,529 0.1% 99.8%
58 WAGONER 40,032 0.1% 99.9% 58 TULSA 725,949 0.0% 99.9% 58 TULSA 120,992 0.0% 99.9%
59 ATOKA 29,653 0.0% 99.9% 59 BRYAN 557,981 0.0% 99.9% 59 BRYAN 92,997 0.0% 99.9%
60 ROGERS 26,116 0.0% 100.0% 60 PONTOTOC 521,282 0.0% 99.9% 60 PONTOTOC 86,880 0.0% 99.9%
61 MCINTOSH 16,465 0.0% 100.0% 61 PAWNEE 460,859 0.0% 99.9% 61 PAWNEE 76,810 0.0% 99.9%
62 HARMON 4,577 0.0% 100.0% 62 MUSKOGEE 329,821 0.0% 100.0% 62 MUSKOGEE 54,970 0.0% 100.0%
63 MAYES 1,847 0.0% 100.0% 63 CRAIG 297,638 0.0% 100.0% 63 CRAIG 49,606 0.0% 100.0%
64 CRAIG 1,512 0.0% 100.0% 64 GREER 117,036 0.0% 100.0% 64 GREER 19,506 0.0% 100.0%
65 GREER 655 0.0% 100.0% 65 MURRAY 112,794 0.0% 100.0% 65 MURRAY 18,799 0.0% 100.0%
66 CHEROKEE 267 0.0% 100.0% 66 COTTON 52,085 0.0% 100.0% 66 COTTON 8,681 0.0% 100.0%
67 PUSHMATAHA 168 0.0% 100.0% 67 JEFFERSON 15,881 0.0% 100.0% 67 JEFFERSON 2,647 0.0% 100.0%
68 ADAIR 0 0.0% 100.0% 68 JACKSON 4,168 0.0% 100.0% 68 JACKSON 695 0.0% 100.0%
69 CHOCTAW 0 0.0% 100.0% 69 ADAIR 0 0.0% 100.0% 69 ADAIR 0 0.0% 100.0%
70 DELAWARE 0 0.0% 100.0% 70 CHEROKEE 0 0.0% 100.0% 70 CHEROKEE 0 0.0% 100.0%
71 HASKELL 0 0.0% 100.0% 71 CHOCTAW 0 0.0% 100.0% 71 CHOCTAW 0 0.0% 100.0%
72 LATIMER 0 0.0% 100.0% 72 DELAWARE 0 0.0% 100.0% 72 DELAWARE 0 0.0% 100.0%
73 LEFLORE 0 0.0% 100.0% 73 HARMON 0 0.0% 100.0% 73 HARMON 0 0.0% 100.0%
74 MARSHALL 0 0.0% 100.0% 74 MCINTOSH 0 0.0% 100.0% 74 MCINTOSH 0 0.0% 100.0%
75 OTTAWA 0 0.0% 100.0% 75 MARSHALL 0 0.0% 100.0% 75 MARSHALL 0 0.0% 100.0%
76 PITTSBURG 0 0.0% 100.0% 76 OTTAWA 0 0.0% 100.0% 76 OTTAWA 0 0.0% 100.0%
77 SEQUOYAH 0 0.0% 100.0% 77 TILLMAN 0 0.0% 100.0% 77 TILLMAN 0 0.0% 100.0%
Statewide 65,374,086 Statewide 1,673,132,396 Statewide 278,855,399
Page 13
Industry Structure and Economic Impacts, 2009
The present report serves as an update and extension to a previous report investigating
the economic impacts of the oil and gas sector to the state in 2007. It is informative to compare
the estimated economic impacts from a perspective of boom activity (2007) and recession activity
(2009) to underscore both the significance of the industry as well as the important role that
public sector support can provide in offsetting the natural economic consequences of the price
volatility explored previously.
The oil and gas industry accounted for 71,224 jobs in
Oklahoma in 2009 with 38% of those jobs coming in the form of
the self‐employed. Statewide, oil and gas related jobs directly
account for 2.8% of all wage and salary positions and almost 3.5%
of all positions (wage and salary plus the self‐employed). The
industry generated an estimated $7.6 billion in direct labor income
payments, representing almost 5.5% of total Oklahoma personal
income, for an average labor income of $107,259 per employee. The majority of these jobs are in
the oil and gas production sector – a gap that is exaggerated by the scarcity of activity occurring in
2009 relative to the 2007 report. The high compensation per worker and the significant share of
employment and income provided to the self‐employed stand out as hallmarks of this industry.
While a handful of firms dominate the national spotlight, it is worth noting that the industry
continues to serve as an important source of economic activity to small producers and the self‐employed
across the state.
Table 5: Oklahoma Oil and Gas Industry Employment and Income (2009)
Employment % Share
Total Labor
Income % Share
Avg.
Labor
Income
Employment by Type:
Wage and Salary 43,814 61.52% $4,218,850,060 55.22% $96,290
Self Employed 27,410 38.48% 3,420,564,940 44.78% 124,793
Total by Type 71,224 7,639,415,000 $107,259
Employment by Activity:
Production 65,629 92.14% $7,356,643,700 96.30% $112,094
Drilling 5,595 7.86% 282,771,300 3.70% 50,540
Total by Activity 71,224 100.00% 7,639,415,000 100.00% $107,259
Source: U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, Steven C. Agee Economic Research and Policy Institute internal calculations
More than 71,000 oil
and gas workers
comprise 3.5% of the
total Oklahoma
workforce.
Page 14
A comparison of the 2007 and 2009 industry structure reveals some interesting
recessionary realities. First, while the overall level of employment fell among both the wage and
salary workers and the self‐employed, the relative decline was much steeper among the self‐employed
(‐11%) than the wage and salaried (‐3%). Similarly, the relative drop in employment is
considerably steeper on the drilling side of the industry (‐33%) than for production (‐3.5%).
Overall, employment contracted just over 5,000 jobs and labor income payments fell from nearly
$8.9 billion to just over $7.6 billion. All industry changes are summarized in the following table.
Table 6: Oklahoma Oil and Gas Industry Employment and Income (2007 & 2009)
Employment
% Share
Total Labor Income
% Share
Avg. Labor
Income
2007 2009 2007 2009 2007 2009 2007 2009 2007 2009
Employment by
Type:
Wage and Salary 45,445 43,814 59.60% 61.52% 4,427,228,000 4,218,850,060 49.84% 55.22% 97,419 96,290
Self Employed 30,852 27,410 40.40% 38.48% 4,455,813,000 3,420,564,940 50.16% 44.78% 144,425 124,793
Total by Type 76,297 71,224 100.00% 100.00% 8,883,041,000 7,639,415,000 100.00% 100.00% 116,427 107,259
Employment by
Activity:
Production 67,998 65,629 89.10% 92.14% 8,414,221,706 7,356,643,700 94.72% 96.30% 123,742 112,094
Drilling 8,299 5,595 10.90% 7.86% 468,819,294 282,771,300 5.28% 3.70% 56,491 50,540
Total by Activity 76,297 71,224 100.00% 100.00% 8,883,041,000 7,639,415,000 100.00% 100.00% 116,427 107,259
Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Steven C. Agee Economic Research and Policy Institute
Page 15
Methodology
The estimates in this study derive from the IMPLAN Input‐Output (I‐O) model of the
Oklahoma economy developed by MIG, Inc., Hudson WI. The Input‐Output (I‐O) framework for
regional analysis was developed by Wassily Leontief in the late 1920s and early 1930s1 and
continues to garner wide use for a variety of regional studies throughout the world. I‐O models
are used frequently for impact analysis because of their underlying structure that captures the
interdependencies between industries and regions.
I‐O models use a fixed coefficient expenditure matrix to approximate dollar flows through
a local economy. The expenditure matrix is estimated from economic flows at a given period in
time. These flows between industries and institutions (households, government, and foreign
trade) provide a quantifiable measure of the inter‐industry linkages in the economy. Production
is assumed to occur in fixed proportions, so that an increase in the final demand from any
industry requires a proportional increase in the final demand of all supporting industries. For
example, Table 7 shows the inter‐industry linkages between mining and all other Oklahoma
industries. The first column shows the total expenditures by mining from each industry (millions
of U.S. dollars). The expenditure for each industry is divided by total Mining expenditures to
yield the dollar linkage between mining for every one dollar of mining expenditure (column 2).
For instance, for every dollar of mining expenditure, 12.65 cents goes directly to the Oklahoma
mining industry with the second largest expenditure of 8.81 cents going to Professional Services.
These initial linkages represent the direct effect of changes to Mining demand.
Table 7: 2009 Mining Direct Expenditures
Expenditure
in $Millions
Per Dollar
Expenditure
Agriculture $41.71 $0.0016
Mining $3,396.17 $0.1265
Utilities $379.70 $0.0141
Construction $234.32 $0.0087
Manufacturing $1,141.07 $0.0425
Wholesale Trade $301.48 $0.0112
Transportation & Warehousing $261.21 $0.0097
Retail Trade $35.04 $0.0013
Professional Services $2,364.30 $0.0881
Educational, Health and Recreation Services $60.15 $0.0022
Government $0.05 $0.0000
With the linkages modeled, prices assumed constant, and production assumed to occur in
fixed proportions, impact analysis proceeds by tracing the initial effect of a change in the demand
for a specific industry’s output through the system of inter‐industry relationships. Each industry
1 Leontief published his seminal work in The Review of Economics and Statistics in 1936.
Page 16
receiving additional income from the Mining expenditures also require additional inputs from
Oklahoma industries. Having a similar matrix for each industry, it is easy to see that each initial
expenditure from mining leads to multiple rounds of expenditure by the industries who provide
inputs to mining. These impacts are typically referred to as indirect effects. Additional impacts
occur as the owners and employees receive income from these industries. For every dollar
received in income, a share of that dollar is also spent with local industries and follows the same
path throughout the economy. These consumer expenditures are referred to as induced effects.
For any project, I‐O models measure the total impact as the sum of direct, indirect, and induced
effects.
Page 17
Results
Oil and gas activity within the state exerts an economic influence through the three channels
identified above, namely:
• Direct effects – employment, income, and production generated directly by the oil and gas
industry itself
• Indirect effects – employment, income, and production generated by firms in support of
oil and gas production and recovery
• Induced effects – employment, income, and production generated as a result of new
household consumer spending
The table below summarizes all estimated economic impacts in four distinct ways: total industry
impacts, impact per $1 million in final output, impact per 1,000 direct jobs, and impact per million
cubic feet of natural gas production.
Table 8: Economic Impact of Oklahoma Oil and Gas Industry (Total and impact per $1 Million in Final Output)
Part A. Total Impact
Production Drilling
Direct Indirect Induced Total Direct Indirect Induced Total
Output ($ Millions) $26,230 $10,689 $7,474 $44,393 $4,604 $1,993 $701 $7,298
Employment 65,629 44,151 166,519 276,299 5,595 10,768 6,677 23,040
Value Added ($
Millions)
Employee Compensation $3,877 $3,047 $2,165 $9,089 $240 $317 $134 $691
Proprietor's Income 3479 595 343 4417 43 112 23 178
Other Property Income 4848 1114 1033 6995 1241 365 146 1752
Indirect Business Taxes 1161 173 319 1653 36 13 20 69
Total Value Added $13,365 $4,929 $3,860 $22,154 $1,560 $807 $323 $2,690
Part B. Impact Per $1 Million in Final Output
Production Drilling
Direct Indirect Induced Total Direct Indirect Induced Total
Output $1,000,000 $407,508 $284,935 $1,692,443 $1,000,000 $432,815 $152,427 $1,585,242
Employment 2.5 4.6 3.4 10.5 1.2 2.3 1.4 4.9
Value Added
Employee Compensation $147,808 $116,163 $82,549 $346,520 $52,129 $68,947 $29,107 $150,183
Proprietor's Income $132,634 $22,677 $13,097 $168,408 $9,340 $24,346 $4,975 $38,661
Other Property Income $184,827 $42,474 $39,387 $266,688 $269,548 $79,387 $31,623 $380,558
Indirect Business Taxes $44,262 $15,631 $3,133 $63,026 $7,819 $2,761 $4,407 $14,987
Total Value Added $509,531 $196,945 $138,166 $844,642 $338,836 $175,441 $70,112 $584,389
Direct activity stemming from industry production within the oil and gas industry in 2009
is estimated to be $26.2 billion with drilling activities contributing another $4.6 billion.
Combined, production and drilling activity account for 20% of Oklahoma’s gross state product.
Page 18
Production activities generated an estimated $18.1 billion in multiplier effects (indirect plus
induced) representing additional production for other state industries. Drilling activities
generated an estimated additional $2.69 billion in state production. Combined, production and
drilling activities in the oil and gas industry support nearly $51.7 billion in Oklahoma state
production representing 33%, or one‐third of Oklahoma’s gross state product.
Part B (above) presents the impacts to the state of every $1
million in oil and gas production activity as well as every $1
million in drilling activity. On the production side of the
industry, $1 million in direct production output is estimated to
require 2.5 full‐time equivalent employees generating $280,000 in
labor compensation and self‐employment income. Estimates of
the multiplier impacts indicate that $1 million in production
activity supports nearly $1.7 million in Oklahoma production of
goods and services, requires 10.5 full‐time workers, and generates for Oklahomans $515,000 in
compensation and proprietor’s income. Similarly interpreted, $1 million in drilling activity
generates through all ripple economic effect $1.58 million in Oklahoma production of goods and
services, supports 4.9 FTE jobs, and generates almost $189,000 in Oklahoma income.
Table 9: Economic Impact of Oklahoma Oil and Gas Industry (Continued)
Part C. Impact Per 1,000 Jobs
Production Drilling
Direct Indirect Induced Total Direct Indirect Induced Total
Output $399,670,877 $162,869,080 $113,880,221 $676,420,178 $822,877,569 $356,153,755 $125,428,760 $1,304,460,084
Employment 1,000 1,835 1,375 4,210 1,000 1,925 1,193 4,118
Value Added
Employee Compensation $59,074,495 $46,426,941 $32,992,336 $138,493,772 $42,895,442 $56,734,928 $23,952,043 $123,582,413
Proprietor's Income $53,010,102 $9,063,402 $5,234,165 $67,307,669 $7,685,433 $20,033,773 $4,094,331 $31,813,537
Other Property Income $73,869,783 $16,975,424 $15,742,020 $106,587,227 $221,805,183 $65,325,397 $26,022,406 $313,152,986
Indirect Business Taxes $17,690,350 $6,247,241 $1,252,000 $25,189,591 $6,434,316 $2,272,240 $3,625,886 $12,332,442
Total Value Added $203,644,730 $78,713,008 $55,220,521 $337,578,259 $278,820,375 $144,366,338 $57,694,665 $480,881,378
Part D. Impact Per Million Cubic Feet Produced
Production Drilling
Direct Indirect Induced Total Direct Indirect Induced Total
Output $15,678 $6,389 $4,467 $26,534 $2,752 $1,191 $419 $4,362
Employment 0.0392 0.0264 0.0995 0.1651 0.0033 0.0064 0.0040 0.0138
Value Added
Employee Compensation $2,317 $1,821 $1,294 $5,433 $143 $189 $80 $413
Proprietor's Income $2,079 $356 $205 $2,640 $26 $67 $14 $106
Other Property Income $2,898 $666 $617 $4,181 $742 $218 $87 $1,047
Indirect Business Taxes $694 $103 $191 $988 $22 $8 $12 $41
Total Value Added $7,988 $2,946 $2,307 $13,242 $932 $482 $193 $1,608
Production and
drilling activities
account for 20% of
Oklahoma’s Gross
State Product
Page 19
Parts C and D of the impact tables (previous page) present the economic impacts of the oil
and gas industry per 1,000 industry jobs and per million cubic feet of natural gas produced
respectively. On the production side of the industry, every 1,000 jobs is estimated to support an
additional 3,210 jobs through multiplier effects while every 1,000 drilling jobs is estimated to
support 3,118 jobs. The combined effects of 1,000 production and 1,000 drilling jobs in Oklahoma
is nearly $2 billion in production of Oklahoma goods and services. Finally, note that for 2009 the
Oklahoma corporation commission estimates total natural gas production at 1,673,032 million
cubic feet (or 1.67 Tcf). Part D of the impact table suggests that a 10% increase in Oklahoma
natural gas production would be associated with an additional $4.4 billion in Oklahoma economic
activity as a result of production activity and an additional $775 million in Oklahoma goods and
services as a result of drilling activity.
The impact estimates presented all point to an oil and gas industry that remains the
defining industry in Oklahoma. The economic impacts, both direct and indirect, are substantial
and anticipated to be so for generations to come. Finally, note that in interpreting the ripple
effects, the methodology discussion offers some insight into the likely distribution of the impacts.
Namely, oil and gas activity is supported to a measurable degree by Oklahoma’s manufacturing
and professional services industries.
Page 20
Oklahoma State Gross Production Tax
Oklahoma production of oil and natural gas offers a vital revenue stream to the state. The
tax base against which oil and gas severance taxes are levied is the value of production, where the
value is a function of the marketed wellhead price and the quantity produced. Nationally, gross
production taxes account for only 1.5% of state tax collections and
offer no contribution to the many states without taxable production.
For energy states however, gross production taxes account for a
significant share of total state collections. Severance tax collections
account for over three‐fourths of total collections in Alaska and,
thanks to an expanded recovery of oil deposits, North Dakota
production accounts for over one‐third of total state tax collections.
Oklahoma reliance on gross production taxes accounts for over 10%
of total state collections. Gross production tax collections for major producing states are given in
table 10, with states ranked by the relative contribution to state totals in 2010.
Table 10: Severance Tax Collections by State ‐ Top 10 by % of Total Revenues
($ Thousands)
2008 2009 2010
State Severance Tax % Total Tax Severance Tax % Total Tax Severance Tax % Total Tax
AK $6,939,040.00 79.46% $3,829,564.00 77.27% $3,355,049.00 74.26%
ND $791,692.00 34.24% $827,417.00 34.27% $1,136,553.00 42.96%
NM $625,938.00 12.01% $931,812.00 19.30% $654,752.00 14.83%
MT $347,221.00 14.13% $349,714.00 14.53% $253,649.00 11.84%
OK $1,184,765.00 14.22% $1,067,182.00 13.03% $743,686.00 10.50%
WV $347,592.00 7.12% $376,677.00 7.87% $417,230.00 8.96%
LA $1,035,695.00 9.41% $911,433.00 8.93% $758,469.00 8.66%
TX $4,124,428.00 9.06% $2,295,177.00 5.49% $1,737,136.00 4.41%
KY $293,334.00 2.92% $355,985.00 3.65% $317,146.00 3.33%
NV $74,130.00 1.21% $145,450.00 2.59% $182,752.00 3.13%
US $17,808,329.00 2.27% $13,391,856.00 1.86% $11,071,812.00 1.57%
The history of price volatility discussed previously directly implies some correlated
volatility of the tax stream. Because the oil and gas industry in Oklahoma offers some insulation
against the nation’s economic business cycle, Oklahoma often lags the nation in entering
recessions. However, as production activity and prices fall (consistent with recessionary
experiences), severance tax collections respond. The figure below illustrates this response in the
most recent recession. While the national recession officially begins in January 2008, gross
production tax collections peak in Oklahoma during the summer of 2008. Tax collections reach
their trough one year later in the summer of 2009, coinciding with the official end of the national
recession. As would be expected, the contraction in this important source of funding occurred
simultaneously with a contraction in drilling activity as the weekly active rig count fell from peak
levels of over 200 to barely 75 active rigs in less than a year.
At peak activity
(2008), gross
production taxes
accounted for more
than 14% of total
state tax collections.
Page 21
Taking 15‐year perspective offers additional insights into both the magnitude and the
oscillating nature of the tax stream (see figure below). Annual gross production taxes were as low
as $249 million in 1999 and as high as $1.25 billion in 2008,
representing a 400% increase over the 10‐year period.2 After
contracting in fiscal years 2009 and 2010, collections are
estimated to grow modestly in fiscal year 2011 to just under $1
billion.
Market volatility largely beyond the control of Oklahoma
oil and gas producers drives fluctuations in economic activity and tax collections in the state. The
Oklahoma experience is not unlike the experience of other energy states and is the natural result
of the commodity endowment within the state. Oklahoma is by all accounts an oil and gas state.
Policies that mitigate fluctuations in economic activity serve can serve a vital role in preserving
the rural economic impacts of ongoing exploration activity while lessening the volatility of a
major tax source.
2 In response to unusually low prices and production in 1999, legislation was adopted to make the gross production
tax rate a function of the average monthly market price, with the rate varying from a low of 1% to a high of 7%.
Since 1999, annual
gross production taxes
have increased by
400%.
Page 22
Gross production tax revenue is apportioned according to a legislative formula and serves
state and local needs through support of county roads, local schools, higher education, rural
development, and general revenue. Table 11 provides a breakdown of the allocation of severance
tax by type.
Table 11: Distribution of Oklahoma Gross Production Tax Receipts
Gross Production Tax (Crude Oil) ‐ Actual
Apportionment (Oklahoma Tax Commission)
Fund (Crude Oil Distribution)
Statutory
Allocation FY‐2008 FY‐2009 FY‐2010
General Revenue Fund $139,905,067.00 $128,931,292.00 $154,288,977.00
County Highways 7.14% $27,540,502.00 $25,630,243.00 $28,518,043.00
Local School Districts 7.14% $27,540,502.00 $25,630,243.00 $28,518,043.00
County Bridge & Road Improvement 4.28% $15,235,679.00 $14,658,963.00 $14,430,618.00
Rural Economic Access Plan (REAP) 4.28% $7,883,103.00 $7,883,103.00 $7,883,103.00
OK Student Aid Revolving Fund 25.72% $47,372,299.00 $47,372,299.00 $47,372,299.00
Higher Education Capital Fund 25.72% $47,372,299.00 $47,372,299.00 $47,372,299.00
Common Education Technology Fund 25.72% $47,372,299.00 $47,372,299.00 $47,372,299.00
Statewide Circuit Fund $195,124.00
To Counties ‐ CBRIF $1,365,869.00
Total ‐ Crude Oil 100.00% $360,221,750.00 $344,850,741.00 $377,316,674.00
Gross Production Tax (Nat Gas) ‐ Actual
Apportionment (Oklahoma Tax Commission)
Fund (Natural Gas Distribution)
Statutory
Allocation FY‐2008 FY‐2009 FY‐2010
General Revenue Fund 85.72% $685,285,081.00 $598,340,774.00 $304,164,072.54
County Highways 7.14% $61,469,140.00 $54,477,942.00 $25,335,178.23
Local School Districts 7.14% $61,469,140.00 $54,477,942.00 $25,335,178.23
Total Natural Gas 100.00% $808,223,361.00 $707,296,658.00 $354,834,429.00
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Conclusion
After the significant oil and gas bust of the mid 1980’s, Oklahoma’s oil and gas industry
has enjoyed a modest boom two decades later. Oil and gas activity has increased, employment
has grown, rigs are operating with greater frequency, tank farms are expanding the capacity at the
Cushing transactions pipeline, and construction abounds in the Oklahoma City metro area. The
great recession of 2008 slowed the growth in the industry and dampened severance tax collections
but is unlikely to derail a continued industry expansion as rapidly growing emerging markets
(China, Brazil, India, etc.) demand access to energy to feed their economic experience and
technological advancements allow for greater rates of recovery. Energy and environmental
policies that encourage the consumption of natural gas as an alternative to coal or as a
transportation fuel will only heighten the demand for a valuable Oklahoma commodity. While
economic fluctuations are inherent to an energy state, it is nonetheless a concern many states
would welcome.
The oil and gas industry is estimated to employ over 71,000 workers – more than 3% of the
total state workforce. The industry generates over $7.6 billion in labor income, or just over
$107,000 per worker. The industry continues to serves as the defining industry in the state
offering well‐paying jobs to Oklahomans in both urban and rural areas of the state. In 2009 the
state produced over 1.67 trillion cubic feet of natural gas and 65 million barrels of oil. The oil and
gas industry is supported by other Oklahoma industries, most notably manufacturing and
professional services. Increases in Oklahoma oil and gas activity require additional support from
these industries and kick off multiplier economic impacts across the state.
An analysis of the structure of the industry and the state’s economic makeup in 2009
indicates an industry whose annual operations generate long run impacts to the state of $51.7
billion in Oklahoma goods and services – nearly one‐third of Oklahoma’s 2009 gross state
product. Industry activity (production and drilling) combine to support nearly 300,000 jobs in
the state and generate over $14.3 billion in Oklahoma income. Severance tax collections are
estimated to grow modestly in fiscal year 2011 to nearly $950 million. All data point to an industry
that remains the cornerstone of Oklahoma economic activity.