Taxation & Economic Impact | Oklahoma Oil & Gas Association

Taxation & Economic Impact

How oil and natural gas production is taxed in Oklahoma:

The oil and natural gas industry drives Oklahoma’s economy forward. In fact, the industry and its employees provide one-quarter of the tax revenue in the state. The industry has contributed mightily in several ways:

  • In 2017, five of the most active drillers in Oklahoma pledged $5.5 billion in capital investments in Oklahoma. Those investments are expected to support 30,000 energy jobs and 165,000 indirect jobs while generating millions more in state revenue.
  • From January 2017 to August 2017, the oil and natural gas sector created roughly 5,000 Oklahoma jobs.

As of August 2017, the state collections from the gross production tax had increased for 11 consecutive months due to an increase in production.

Although the energy industry has been Oklahoma’s largest taxpayer for decades, the Oklahoma Legislature has consistently tried to squeeze more and more revenue from oil and gas companies.

From 2016 through 2018, the Legislature enacted more than $600 million in new taxes on the industry. These changes took the form of caps on rebates, ending incentives and repeatedly increasing the gross production tax on new wells.

Because of these burdens, Oklahoma is not a low-tax state for oil and natural gas producers. While the state gross production tax (GPT) – which is also called a severance tax – is lower than some other energy-producing states, GPT is not the only tax oil and natural gas companies pay.

A 2017 economic study by Dr. Mark Snead of RegionTrack looked at tax rates in the top 16 energy-producing states. The study looked at the four most important types of taxes:

  • GPT/severance taxes
  • Ad valorem taxes
  • Personal income taxes
  • Sales taxes