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Oklahoma Losing Out on $150 Million in Tax Revenue

Filed by KOSU News in Business, Local News, News, Politics.
September 27, 2011

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In the past couple years, oil production in Oklahoma has largely held steady, sitting between 5 and 6 million barrels a month. Gross production taxes have either met or exceeded projections much of this year. But the state could be raking in more money.

Lately, the two crude oil prices accepted around the world have split like an atom. West Texas Intermediate is set at Cushing in Oklahoma. It’s stuck, more than 20 dollars lower than the other price, North Sea Brent. Because oil production is taxed at the crude price, Oklahoma’s missing out on hundreds of millions of dollars.

“This is a state that oil production benefits in so many ways, including with excise tax revenue,” said Brad Carson, head of the National Energy Policy Institute.

“Oil’s being sold at an artificially low price, while consumers might benefit with a lower price, the state collects less tax revenue, because of that too.”

Numbers are one thing, though; there’s a story behind every dollar spent by the state. Jenks Alternative Program gives teens a second chance at high school. Just before I spoke with Principal Amie Hardy she said a student came looking for a grief group. She had to tell the student it was a casualty of a smaller budget.

“As far as the emotional and guidance type services for their future, those are a big part of this program. So again, those have been cut down to half,” said Hardy.

“Will they be getting those services? We hope, but not through our program.”

Far away from the classroom is Mike Cantrell, who represents thousands of small time oil producers as  head of the Domestic Energy Producer’s Alliance.

“We wouldn’t be laying off teachers, we wouldn’t be laying off government employees. We would have more money for education, we wouldn’t be crowding the classrooms like we are right now to get by so it would mean a lot of things to everyday Oklahomans.”

Cantrell says a crude oil price in the triple digits at Cushing wouldn’t necessarily mean higher prices at the pump. The way he sees it, government could benefit without hurting businesses or consumers.

“It’s a big issue to these states. I don’t know if they realize it or not, you’d think with big budget shortfalls they’d think about that,” said Cantrell.

David Blatt, Director of the Oklahoma Policy Institute, wants Oklahoma to give the market a good examination because of the money at stake.

“You have to certainly look at the complexities of the pricing and why there is this differential between various prices of gas and figure out if there is a fair way to try to increase revenue collection,” said Blatt.

John Selmy says there isn’t any problem for the government to look into. He’s the chief economist at the Washington based American Petroleum Institute, which represents oil producers, refiners, and sellers, including oil companies housing their product at Cushing.

“The market giveth and the market taketh away. So sometimes you benefit from market outcomes, sometimes you don’t. So we’ll just have to see how the market unfolds, what types of infrastructure is developed and then let’s see what happens in the future,” said Selmy.

Selmy says his members aren’t manipulating the market. But it’s hard to ignore the 20 dollar plus price differential for a barrel of crude at Cushing. Without that spread, the state would see another 150 million dollars, money that could go to any number of programs. It might even be the diamond in the oil the students at Jenks need…

“The services that we provide, even just if it’s a few hours a week, could provide a lifetime of support for these kids.”

It’s hard to find meaning in a bunch of numbers on a piece of paper. But at Jenks Alternative, those  dollars come to life, giving students a better chance to succeed in the world.

3 Responses to “Oklahoma Losing Out on $150 Million in Tax Revenue”

  1. BigOilBilly says:

    This is one of the most retarded stories I have seen in a long time. Do these people not have any economic common sense or education at all?? If you think you can get the Brent crude price for your Oklahoma oil then try to find a buyer at this price. Why don't you ship it overseas and get the Brent price? And I don't believe that for one minute that this "extra money" if the state did receive it would go to education. That's a joke in OK where education comes last in funding. This story is so silly I have a hard time typing this response.

    • OKfrog says:

      You are incorrect. Oklahoma is 34th of 50 in education funding in 2010. That's nothing to brag about, but it's not dead last either.

      Oil's demand curve is almost perfectly inelastic, just like health care. Oil prices have gone up over 200% in the last 10 years, yet we are continually using and buying more and more oil. So, Oklahoma could get higher prices for their crude than what they are currently getting. Also Brent crude is a high grade crude but not as high grade as West Texas Intermediate crude. West Texas Intermediate is primarily used in the US, while Brent is used overseas in Europe. Given that WTI sells a superior product, it's reasonable to believe that WTI could charge the same or more than Brent per barrel.

      Maybe you should have been educated in Oklahoma like me and you'd understand these simple economic principles.

  2. Miles says:

    Well if they really can get this money, they should, and stop pushing other BS taxes on us. Okies need to stop the state from constantly finding new ways to take our money. Now the state Corporation commission is planning to increase a tax on us all by 47 mil dollars! Unacceptable! This could happen as early as Tuesday, and I feel like no one really knows about it. We need to stop this…if collecting money from oil revenues does the trick, then just do that!

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