If you hadn’t noticed the high price of oil right now — knock on wood — then you probably don’t work in the petroleum industry. Since October, the price of crude oil per barrel has climbed from $50 to more than $70.
Such a rebound in price has helped spur the United States’ highest rig count since March 2015. It has also helped shape the political landscape in Oklahoma over the three months since the Legislature raised gross production taxes on oil and gas wells.
In fact, it has affected Oklahoma’s political landscape in three distinct ways.
High price of oil good for yes-voting legislators
One of the most surprising parts of how the Oklahoma Legislature passed a record tax package this year was that it happened ahead of elections. Sure, Gov. Mary Fallin told lawmakers the public would largely understand how they were only raising taxes to fix the state’s budget woes and “give the teachers a pay raise,” but the election-year timing — forced by a mounting teacher walkout — still took many by surprise.
Yet, had the price of oil sagged and had Oklahoma’s rig count dropped over the past 90 days, legislators who raised the gross production tax would have faced far more blowback at the local economic level: more people out of work, more businesses struggling from fewer workers in town and fewer local investments, especially across western Oklahoma.
That, however, did not happen. Oklahoma’s rig count remained steady, even though it has not risen as much as two competing oil-flush states. In the past calendar year, New Mexico‘s combined oil and gas rig count has jumped from 59 to 99. In Texas, the number has gone from 463 to 525. North Dakota‘s has risen from 52 to 57, the same numerical increase as Oklahoma, which has gone from 136 to 141.
While the petroleum industry could attempt to thread this needle and argue that Oklahoma’s GPT uncertainty and its ultimate rate hike may have tempered an impending boom, such a message would likely be overlooked this fall when teachers’ paychecks begin to reflect the largest salary increase in state history.
As a result, the Oklahoma Oil and Gas Association (OKOGA) has gone a different messaging direction:
Oklahoma’s oil & gas industry has long been a supporter of public education. The increased GPT will raise an estimated $170 million from oil & natural gas production, which will help provide well-deserved raises for Oklahoma’s teachers. https://t.co/GjFpT7lRSF
— Oklahoma Oil & Gas (@OKOGA) July 3, 2018
Oklahoma Taxpayers Unite petition fizzled
Along the same lines, the high price of oil kept Oklahoma’s rig count steady and subsequently made it more difficult for Oklahoma Taxpayers Unite to cut political hay from the Legislature’s major tax package.
OTU was attempting to collect enough signatures to require a public vote on the revenue bill, but the Oklahoma Supreme Court ruled that the group had improperly described the measure in its referendum language.
Former U.S. Sen. Tom Coburn was the effort’s frontman, and last week he told Chris Casteel of The Oklahoman that there would be no second attempt at collecting the signatures. He blamed the court for having “slow walked” its decision, and he criticized the tax increase package, saying it “wasn’t needed.”
But Coburn’s diction highlights how difficult it was to sell such a petition without tangible negative consequences at which OTU could point clearly. Had a low price of oil resulted in fewer rigs and fewer petroleum-related jobs, it’s highly likely that Coburn et al would have harped on the Legislature’s tax package as a “job killer.”
Instead, the group had a difficult time elevating its narrative about tax hikes to the same volume of education advocates who are happy to see teacher raises enacted and some classroom funding restored.
The 57th #okleg could have additional revenue to disperse
So far in the state’s primary elections, six Republican incumbents have already lost their seats: four who voted in favor of the revenue package and two who opposed it, though the apparent reasons each lost can be complicated. Meanwhile, several other incumbents have been pulled into runoffs, and an even larger number were term limited or chose not to run at all.
Whatever the 57th Oklahoma Legislature ultimately looks like, members will quite possibly have a chance to continue making investments in core government services. Put a less fancy way, the state of Oklahoma appears to be collecting more revenue than ever.
The U.S. Supreme Court’s 5-4 decision in South Dakota v. Wayfair, Inc. will eventually mean more money for the state from online retailers, though Secretary of Finance Clark Jolley notes it likely won’t be much more than $20 million initially owing to Oklahoma’s previous advancements in online sales tax collection.
Still, if you combine that with surging petroleum prices and other numbers released by State Treasurer Ken Miller, Oklahoma collected a record amount of revenue last fiscal year, including a June record as well.
If revenue estimates continue to appear positive, that could be good news for education, health care and other advocates who argue that their areas of government need further investment from the state. Educators have pledged to return to the Capitol in 2019 to seek more classroom dollars, and many lawmakers are campaigning on a promise to keep their boots on the pedal.
But health care entities have also articulated a need to reverse provider rate cuts, and Democratic gubernatorial nominee Drew Edmondson has called for Oklahoma to accept federal dollars for the expansion of Medicaid to cover working adults living around the poverty level:
— Drew Edmondson (@DrewForOklahoma) July 6, 2018
If Edmondson prevails in November, any attempted Medicaid expansion would require state money even with federal payments.
If a supposed $150-per-barrel “super spike” were to occur, OKOGA might be able to issue numerous credit-taking tweets in 2019.