“When

Oklahoma
Volume 6, Issue 11 • November 30, 2016
Economic Report TM
News and analysis of Oklahoma’s economy
A publication of the Office of the State Treasurer • Treasurer Ken Miller, Ph.D.
As goes the oil patch . . .
Oklahoma and the energy industry are
inextricably linked. When oil and gas
prices rise, so do employment levels
and state revenue. When prices drop,
as they did most recently starting in
2014, the whole state feels the pain with
rising joblessness and plummeting tax
collections.
What some may not realize is the extent
to which the industry, the state economy,
and state government are bound
together.
A September 2016 report, commissioned
by the State Chamber of Oklahoma’s
Research Foundation and conducted
by RegionTrack, Inc. of Oklahoma
City, found the industry accounts for 17
percent of state gross
domestic product,
13 percent of state
household earnings,
and 6.5 percent of
total employment,
while paying 22
percent of total state
taxes.
Direct state
revenue effect
The industry directly pays gross
production, corporate income, sales
“When oil and gas
prices rise, so do
employment levels
and state revenue.
When prices drop,
the whole state
feels the pain.”
and motor vehicle taxes to the state.
However, specific measurement of the
industry’s direct
contributions to state
coffers can most
easily be seen in gross
production collections
since payments come
exclusively from oil
and gas companies.
State law prohibits
publicly releasing
what individual
companies pay, so
segregating energy company payments
SEE ENERGY PAGE 3
Inside
• Guest commentary by
Corporation Commissioner
Dana Murphy
• Incentive Evaluation
Commission issues
recommendations
• Year-to-date General
Revenue trails estimate
• Oil and gas tax collections rise
in October Gross Receipts
• State unemployment drops
Editor
Tim Allen, Deputy Treasurer for
Communications and Program
Administration
10.0%
7.5%
5.0%
2.5%
0%
Gross Production Collections as Percentage of
Gross Receipts to the Treasury
FY-10 FY-11 FY-12 FY-13 FY-14 FY-15 FY-16
Source: Office of the State Treasurer
State Capitol Building, Room 217 • Oklahoma City, OK 73105 • (405) 521-3191 • www.treasurer.ok.gov

Oklahoma Economic Report TM November 30, 2016
Guest Commentary
By Dana Murphy, Corporation Commissioner
The more things change . . .
On December 3, 1934, Oklahoma
Governor-elect E.W. Marland
met with the governors of Texas and
Kansas. On the agenda: A bold new
plan being pushed by Oklahoma to
bring states together in a cooperative
arrangement to foster the sound
development of oil and natural gas
resources. From these talks came
the Interstate Oil and Gas Compact
Commission.
Back then, the issue was what was
called “waste.” In part, this was the
result of a gold-rush mentality and
uncontrolled development, which was
itself brought about by advances in
drilling technology. “Waste” included
large amounts of oil spilled on the
ground, rather than making it to
market.
Nowadays we would categorize such
a problem as both environmental
and financial. Oklahoma was among
the first of the large producing
states to adopt “anti-waste” law,
laying the groundwork for modern
environmental regulation that seeks
to ensure that Oklahoma’s oil and
gas resources are developed in a safe,
economically beneficial manner.
The idea of bringing states together to
work on the problem to their mutual
benefit was very much “outside the
box” thinking, and represented a
fresh, creative approach to a new
problem.
Fast-forward more than 80 years
and one finds that “the more things
change, the more they stay the same.”
The sweep of technological change in
the oil and gas industry, particularly
over the past decade, cannot be
overstated.
“America has gone
from an oil and gas
‘has-been’ to being a
real threat to OPEC’s
and Russia’s market
dominance – so
much so that a price
war was launched
that in part targeted
U.S. producers.”
Horizontal drilling using the
technologies undreamed of only a
relatively short time ago has unlocked
oil and natural gas resources to an
extent that America has gone from
an oil and gas “has-been” to being a
real threat to OPEC’S and Russia’s
market dominance – so much so that
a price war was launched that in part
targeted U.S. producers.
But with all that change has
come new problems. Just as our
counterparts of 1934, we face a
changed world and the need for
fresh new approaches to solving the
challenges presented by that change.
Horizontal drilling has not only
unlocked huge amounts of oil
and natural gas; it also unlocked
vast amounts of water from the
formations that must be disposed of
without raising the risk for induced
earthquakes while still protecting our
precious fresh water.
The rules and laws that served to
protect the rights of mineral owners
and producers were written when
prominent development was through
vertical wells. Applying a vertical
regulatory scheme to one now
dominated by horizontal wells is the
proverbial square peg in a round hole.
The difficulties and complexities
created by this “horizontal world”
SEE MURPHY PAGE 3
www.treasurer.ok.gov • Page 2

Oklahoma Economic Report TM November 30, 2016
Murphy
FROM PAGE 2
seem overwhelming at times.
However, in order to tackle a
problem, one has to admit to its
existence.
Those who gathered in 1934 faced no
less daunting a set of circumstances.
They and others joined together to
meet the challenges. Oklahoma’s
oil and gas history has been a long
series of chapters of challenges and
changes.
I see that same effort every day in
countless ways, and it is largely
a cooperative one. Industry,
government, and researchers are
working to meet today’s challenges
with an eye toward the future’s
challenges.
The journey may be different, but
the goal is the same: Meeting the
energy needs of the nation in an
economically and environmentally
safe manner.
I am honored to have the opportunity
to be part of today’s and tomorrow’s
solutions for Oklahoma and the
nation.
Energy
FROM PAGE 1
into the other revenue streams is not
possible.
As shown in the graph on page 1, in
the past seven fiscal years – FY-10
through FY-16 – gross production taxes
accounted for between 9.6 percent and
3.3 percent of total Gross Receipts to
the Treasury. Collections ranged from
just more than $978 million in FY-11,
when the average price of benchmark
West Texas Intermediate Crude Oil sold
for $85.22 per barrel, to a low of $367
million in FY-16, when benchmark
crude sold for $43.71 per barrel.
$110.00
Crude Oil – Price vs. Gross Production Collections
$60
During those years, monthly natural gas
prices have ranged from $6 per million
Btu in February 2014 to $1.73 in March
2016.
Price per barrel
$82.50
$55.00
$27.50
$0
West Texas Intermediate Crude Oil Prices
Crude Oil Gross Production Tax Collections
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Sources: U.S. Energy Information Administration and Oklahoma Tax Commission
$45
$30
$15
$0
Gross Production collections in $ millions
Drilling activity has also varied greatly
for both oil and natural gas. Monthly rig
counts for oil have ranged from 199 in
October 2014 to 14 in June 2010. For
natural gas, rig counts from ranged from
140 in September and October of 2011
to 1 in May 2015.
The graph on this page shows the direct
link between benchmark crude prices
and oil gross production collections. A
comparison of natural gas prices to gas
gross production collections shows the
same linkage.
SEE ENERGY PAGE 4
Opinions and positions cited in the Oklahoma Economic Report TM
are not necessarily those of Oklahoma State Treasurer Ken Miller or
his staff, with the exception of the Treasurer’s Commentary, which of course, is the viewpoint of the treasurer.
www.treasurer.ok.gov • Page 3

Oklahoma Economic Report TM November 30, 2016
Energy
FROM PAGE 3
A cursory analysis of gross production
collections has yet to show the effect of
changes approved in tax rates in 2015.
All new production is now taxed at a
rate of 2 percent for the first 36 months
and then at a 7 percent rate. Previously,
certain types of well, such as those
horizontally drilled, were initially taxed
at a 1 percent rate.
Demonstrating the linkage
The claim that oil and gas activity
and prices have a profound effect on
the state economy is perhaps best
demonstrated by the graph at the bottom
of this page.
It compares Gross Receipts to the
Treasury to employment levels in the
Mining and Logging supersector, which
in Oklahoma equates to oil and gas jobs.
As the number of those employed in
the oil fields rises and falls, so, too, do
Oil & Gas Employment
gross state tax receipts within a two to
four month lag. For example, during
the Great Recession employment levels
turned downward in November 2008
and state gross receipts followed suit
in January 2009, two months later. The
recovery in gross receipts began four
months after employment levels began
to rebound.
The latest downturn in revenue
began three months after oil and gas
employment levels began to fall.
Total economic effect
The indirect impact of an industry
as large as oil and gas reaches deep
into nearly every sector of the state’s
economy.
The State Chamber report states that
in addition to $37.1 billion in average
annual output of goods and services, the
energy industry supports an estimated
$28.6 billion in spillover. The industry,
according to the report, is responsible
Gross Receipts to the Treasury/Oil & Gas Employment
January 2008 – October 2016
65.0
57.5
50.0
42.5
Shaded area denotes U.S. recession
$12.25
$11.50
$10.75
$10.00
12-Month Gross Receipts (in $ billions)
Oil & Gas Employment (in thousands)
35.0
$9.25
08 09 10 11 12 13 14 15 16 17
12-Month Gross Receipts
Sources: Bureau of Labor Statistics & State Treasurer
for $65.7 million in total state output.
When spillover is included, the report
says 27 percent, or $32.6 billion, of total
state household income is supported by
the energy sector.
In the labor market, almost 1 in 5
wage and salary workers and the selfemployed
are employed either directly
or indirectly by the energy industry in
Oklahoma, according to the report.
Even though employment levels have
decreased during the recent state
recession, the economic study shows
that on a five-year average the industry
has employed 133,800 self-employed
proprietors and wage and salary
workers. That has generated total annual
income of $15.35 billion, according to
the study.
The report estimates average annual
purchases of $11.3 billion from statebased
suppliers by the industry. Plus,
an estimated $1.7 billion in oil and gas
royalties were paid to Oklahomans in
2015.
As measured by the energy sector’s
share of state household income, the
Chamber report says Oklahoma remains
as sensitive to the energy sector as in
1982.
Learn more
Read the State Chamber’s Research
Foundation report: Economic
Impact of the Oil & Gas Industry on
Oklahoma.
Read the State Treasurer’s Gross
Receipts to the Treasury reports.
www.treasurer.ok.gov • Page 4

Oklahoma Economic Report TM November 30, 2016
Incentive Evaluation Commission issues recommendations
The Incentive Evaluation Commission
(IEC), established by the Legislature
in 2015 to make recommendations on
changes to Oklahoma’s tax incentives,
has issued its first annual report.
The first incentive on the chopping
block is the zero-emission tax credit
for the wind power industry. Current
law allows companies that come online
before the beginning of 2021 to claim
the credit, which IEC consultants say
could cost the state $100 million each
year through 2030.
The IEC agreed with the consultant’s
recommendation that the Legislature
reconfigure the credit to either establish
a program cap or accelerate closing
the window for eligibility. The project
team also recommended that facilities
claiming a credit be required to provide
monthly data relating to use of the
credit.
Year-to-date General Revenue trails estimate by 1.8 percent
After one-third of FY-17, allocations
to the General Revenue Fund (GRF)
trail the estimate by $30.5 million, or
1.8 percent, according to the Office of
Management and Enterprise Services
(OMES).
At the end of October, two of the GRF’s
four major revenue streams exceed the
estimate.
Net income tax and gross production tax
top the estimate by a combined $19.8
million. Sales tax and motor vehicle tax
allocations are less than the estimate by
a combined total of $46.6 million.
In the first four months of the current
fiscal year, GRF collections have been
less than the estimate three times.
In the 52 months since July 2012, the
beginning of FY-13, GRF allocations
have been less than the estimate 35
times, or in just more than two-thirds of
the months.
In each of the past four fiscal years,
total GRF collections have been below
the official estimate. Except for FY-16
when revenue failure was declared and
across-the-board cuts were ordered for
appropriated state agencies, total fiscal
year allocations have been within the 5
percent cushion established in the state
constitution.
Monthly General Revenue Fund Allocations vs. Estimate
(percentage difference)
40%
FY-13
-0.5%
FY-14
-4.8%
FY-15
-2.2%
FY-16
-9.4%
FY-17 YTD
-1.8%
20%
0%
-20%
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Source: Office of Management and Enterprise Services
www.treasurer.ok.gov • Page 5

Oklahoma Economic Report TM November 30, 2016
October Gross
Receipts &
General Revenue
compared
October Gross Receipts to the
Treasury totalled $886.2 million,
while the General Revenue
Fund (GRF), as reported by the
Office of Management and
Enterprise Services, received
$390.9 million, or 44.1%, of the
total.
The GRF received between
29.7% and 52.8% of monthly
gross receipts during the past
12 months.
From October gross receipts,
the GRF received:
• Individual income tax: 55.4%
• Corporate income tax: None
• Sales tax: 43.4%
Oil and gas tax collections rise in
October Gross Receipts to the Treasury
(Original release date: November 8,
2016.)
For the first time in almost two
years, October tax
collections from
the production of
oil and natural gas
topped collections
from the same month
of the prior year,
State Treasurer Ken
Miller announced
today as he released
the monthly Gross
Receipts to the
Treasury report.
While still significantly lower than
collections prior to the ongoing oil
price slump, October gross production
collections of $35.1 million were above
“It’s not yet time
to sing ‘Happy
Days Are Here
Again,’ but this
month’s gross
production number
is welcome news.”
October 2015 collections by $2.9
million, or 8.9 percent. The last time
monthly gross production collections
topped those of the prior year was in
December 2014, when
receipts totaled $72.1
million.
“It’s not yet time to
sing ‘Happy Days
Are Here Again,’ but
this month’s gross
production number is
welcome news,” Miller
said. “Since April,
we’ve seen monthly
gross production
collections generally rise along with
crude oil prices. Passing the prior year
threshold this month is encouraging.”
SEE REVENUE PAGE 7
• Gross production-Gas: 67.2%
• Gross production-Oil: 8.7%
• Motor vehicle tax: 27.1%
• Other sources: 37.6%
$50
$25
Monthly Gross Receipts vs. Prior Year
October GRF allocations are
below the estimate by $47.3
million, or 10.8%. Year-to-date
GRF revenue trail the estimate
by $30.5 million or 1.8%.
October insurance premium
taxes totaled $105,673, a
decrease of $279,671, or 72.6%,
from the prior year.
Tribal gaming fees generated
$11.2 million during the month,
up by $503,942, or 4.7%, from
last October.
$0
-$25
-$50
-$75
-$100
-$125
Nov-15
Income Tax
Sales Tax
Dec-15
Jan-16
Gross Production
Motor Vehicle
Feb-16
Dollar change (in millions) from prior year
Other
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Source: Office of the State Treasurer
www.treasurer.ok.gov • Page 6

Oklahoma Economic Report TM November 30, 2016
Revenue
FROM PAGE 6
October gross production collections
are based on production activity from
August when benchmark West Texas
Intermediate crude oil sold for $44.72
per barrel.
An apparent trough was reached last
April when gross production collections,
(in millions)
$100
$80
$60
$40
$20
based on February prices of $30.32
per barrel, dropped to a 17-year low of
$20.8 million.
Gross Production Tax Collections
November 2013 – October 2016
Current 12 months
Oil and gas tax collections
notwithstanding, all other major revenue
streams – income, sales, and motor
vehicle taxes – were lower in October
and total monthly Gross Receipts to
the Treasury continued a 20-month
contraction. October collections, at
$886.2 million, were down by 3.5
percent from October of last year. The
last time October collections were lower
was in 2011. Collections during the
past 12 months, at $10.9 billion, are the
lowest since March 2012.
About Gross Receipts to the
Treasury
Since March 2011, the Treasurer’s
Office has issued the monthly Gross
Receipts to the Treasury report, which
provides a timely and broad view of the
state’s macro economy.
FOR RELEASE: November 18, 2016
It is provided in conjunction with the
General Revenue Fund (GRF) report
from the Office of Management and
OKLAHOMA EMPLOYMENT REPORT
Enterprise Services,
– October
which provides
2016
information to state agencies for
Oklahoma unemployment rate down
budgetary
slightly
purposes.
in
The
October
GRF receives
One year prior Two years prior
about half of the state’s gross receipts
Oklahoma’s seasonally adjusted unemployment rate edged down with 0.1 the percentage remainder point paid in to rebates 5.2 percent and in
October, while the U.S. unemployment rate was little changed at refunds, 4.9 percent remitted in October. cities The and state’s counties, seasonal
adjusted unemployment rate Source: was Oklahoma up by 1.0 Tax percentage Commission point compared and placed to into October earmarks 2015. to other funds.
$0
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Unemp.
State unemployment notches October 2016 down slightly in October
rate*
Oklahoma’s seasonally-adjusted
unemployment rate fell by one-tenth
of one percentage points in October,
ending eight months of increases, figures
released by the Oklahoma Employment
Security Commission show.
In addition, September’s state jobless
rate was revised to 5.3 percent from
a preliminary 5.2 percent. October
marks the fourth consecutive month the
Oklahoma unemployment rate has been
higher than the national rate, which was
set at 4.9 percent.
Labor force* Employment* Unemployment*
Oklahoma 5.2% 1,815,604 1,720,628 94,976
United States 4.9% 159,712,000 151,925,000 7,787,000
* Data adjusted for seasonal factors
OKLAHOMA
Oklahoma Unemployment Report
October 2016
Unemp.
rate*
Labor force* Employment* Unemployment*
Oct '16 5.2% 1,815,604 1,720,628 94,976
Sept '16 5.3% 1,815,694 1,720,369 95,325
Aug '16 5.1% 1,821,459 1,729,204 92,255
July '16 5.0% 1,834,543 1,743,047 91,496
June '16 4.8% 1,850,770 1,761,046 89,724
May '16 4.7% 1,864,194 1,776,399 87,795
Oct '15 4.2% 1,845,974 1,768,887 77,087
* Data adjusted for seasonal factors
Source: OESC
In October, statewide www.treasurer.ok.gov seasonally adjusted employment • Page 7 grew by 259 persons (0.0 percent), and

Oklahoma Economic Report TM
November 30, 2016
Economic Indicators
11.0
Unemployment Rate
January 1980 – October 2016
65.0
Gross Receipts vs. Oil & Gas Employment
January 2008 – October 2016
$12.25
9.0
7.0
5.0
3.0
U.S.
Oklahoma
1.0
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
Shaded areas denote U.S. recessions
OK-5.2%
U.S.-4.9%
Source: Bureau of Labor Statistics
Oil & Gas Employment
57.5
50.0
42.5
12-Month Gross Receipts (in $ billions)
Oil & Gas Employment (in thousands)
35.0
$9.25
08 09 10 11 12 13 14 15 16 17
Shaded area denotes U.S. recession
$11.50
$10.75
$10.00
Sources: Bureau of Labor Statistics & State Treasurer
12-Month Gross Receipts
5.0
2.5
Leading Economic Index
January 2001 – October 2016
0
U.S.
8-2.5
10 12 14 16
-5.0
Oklahoma
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
This graph predicts six-month economic movement by tracking leading indicators,
including initial unemployment claims, interest rate spreads, manufacturing and earnings.
Numbers above 0 indicate anticipated growth.
Shaded areas denote U.S. recessions
Source: Federal Reserve
$70
$50
$30
Avg. = $43.17
Shaded area denotes U.S. recession
Oklahoma Stock Index
Top capitalized companies
January 2009 – November 2016
$43.70
$10
09 10 11 12 13 14 15 16 17
Source: Office of the State Treasurer
Oklahoma Natural Gas Prices & Active Rigs
January 2011 – November 2016
Oklahoma Oil Prices & Active Rigs
January 2011 – November 2016
200
$8
200
Price
$120
Active Rigs
150
100
50
Price
Active Rigs
$6
$4
$2
Price per MMBtu
Active Rigs
150
100
50
Active
Rigs
$90
$60
$30
Price per BBL
0
$0
11 12 13 14 15 16 17
Sources: Baker Hughes & U.S. Energy Information Administration
0
$0
11 12 13 14 15 16 17
Sources: Baker Hughes & U.S. Energy Information Administration
www.treasurer.ok.gov • Page 8