Two years of low commodity prices have strained budgets in Oklahoma; however, the oil and natural gas industry continues to be a significant funder of public education in the state.
Funds for Oklahoma education come from a variety of taxes and royalties paid by the oil and natural gas industry. Several school districts also have oil and natural gas producing properties. As a result, local districts receive millions of state and local tax dollars derived from oil and natural gas development. In fact, over the last 10 years, school districts have received $2.1 billion in tax dollars from the oil and natural gas industry.
The largest use of dedicated severance tax revenue (gross production tax) comes off the top for education. In 2015, a year that experienced some of the lowest commodity prices in a decade, $224 million in gross production taxes went directly to education.
A recently released economic impact report by the State Chamber shows the oil and natural gas industry continues to be the largest source of tax revenue for the entire state, making up 22 percent of all tax revenue paid by oil and gas companies, owners and employees.
The industry generated $542.1 million in net severance taxes in FY2015. Of that amount, $328 million went to dedicated uses, with education’s $224 million being the largest amount.
Other tax payments the industry accounted for in 2015 included:
- $81.9 million was returned to counties for roads.
- $22.8 million was allocated across a range of other dedicated uses.
- $213.4 million was directed to the state’s General Revenue Fund.
- Income tax payments by companies equaled $658 million.
- Sales and use tax on industry purchases and sales amounted to $284 million.
- Personal income tax and sales taxes paid by employees equaled $397 million.
The future is looking brighter for the oil and natural gas industry as commodity prices make a modest recovery. Legislation passed in 2014 provides the state a 100 percent gross production tax increase from new oil and natural gas development, and wells producing since July of 2015 are being taxed at this rate. After 36 months, those new wells will be taxed at a 600 percent increase.
Also, Oklahoma is home to the nation’s second biggest oil and natural gas development play in the SCOOP and the STACK. Companies are reporting significant results that show great promise for the future of Oklahoma oil and natural gas development.
As long as the state provides a stable and certain tax and regulatory environment, oil and natural gas will continue to be the most important contributor to economic growth in Oklahoma.