By Brook A. Simmons
Oklahoma Treasurer Randy McDaniel announced Oklahoma collected a record amount of tax revenue from oil and gas production in June.
The state received $1.5 billion from oil and gas production in the fiscal year, with $171 million coming in June. That was a record in monthly collections and a record for any 12-month period from an industry that has long been the backbone of Oklahoma’s economy.
The state has collected more than $1 billion in gross production tax revenue just four other times: the 2005-06 fiscal year, 2007-08, 2008-09 and 2018-19. What do those four years have in common? Increased natural gas prices.
In 2005, natural gas prices averaged more than $8 for the year. In 2008, the yearly average was close to $9 and averaged a high of $12 in June of that year. But supply outran demand when the shale revolution unlocked vast quantities of natural gas around the nation, and gas prices fell below the $3 mark for the better part of a decade until the close of 2018 when they passed $4 for two months.
Today, natural gas prices are the highest they’ve been since the close of 2008, and it is Oklahoma’s tax coffers that are seeing the biggest reward. With 25 percent of all taxes paid in the state coming from the oil and natural gas industry, Oklahoma lawmakers will have more money to fund education, healthcare, transportation infrastructure and other core government services in the year ahead, all thanks to natural gas.
Oklahoma is defined as an oil state, and it is the price of crude oil that hogs headlines. But it is natural gas that determines our state’s economic success. Western Oklahoma is, in simple terms, a giant natural gas field, and the state’s oil and natural gas producers have made Oklahoma the fourth largest producer of natural gas in the nation, trailing only Texas, Pennsylvania and Louisiana.
But Oklahoma uses just 30 percent of its production in the state, sending the remainder to non-energy producing states for electricity generation, as feedstock for the chemical industry, to power manufacturing centers or for residential and transportation use.
Oklahoma’s abundant supply of affordable and clean natural gas should be our state’s No. 1 tool in recruiting new business and industry to the Sooner State. By using more Oklahoma natural gas in Oklahoma, the jobs created and tax revenue generated where our natural gas is now being used would bolster our state’s economy, not just state coffers.
The oil and natural gas industry is and will continue to be Oklahoma’s defining industry, and increased local demand for Oklahoma natural gas will benefit all Oklahomans. For our state to continue to prosper, we must find new ways to utilize the affordable energy sources available.
— Brook A. Simmons is president of The Petroleum Alliance of Oklahoma.