Tony Wohlers Associate Professor, Ph.D.

Cameron University October 28, 2010

Production of 5.7 million barrels of oil in 2010 One of the top natural gas-producing States More than a dozen of the 100 largest natural gas fields Five petroleum refineries with a combined capacity of roughly 3 percent of the total U.S. distillation capacity Cushing, Oklahoma, is the designated delivery point for NYMEX crude oil futures contracts.

State Legislature created the Commission on Marginally Producing Oil and Gas Wells in 1992 to keep State production decline to a minimum. Peaks: Oil – 221.3 million in 1967 Gas – 2.3 TCF in 1990 Sources: U.S. Energy Information Administration Oklahoma’s Energy Future

The Discovery and Development of Oil and Gas

• Discovery of oil and gas in Kansas about 1882 sparked interest among the Five Civilized Tribes in Indian Territory • Formation oil and refining companies associated with some of the Civilized Tribes (Choctaw and Cherokee) • Principal development of oil fields in Oklahoma began in 1904 • Fields at Coody’s Bluff and Cleveland, Glenn Pool near Tulsa, and Osage Indian Territory • By 1920, Oklahoma is the leading oil producer in the country • More than a billion barrels a year, while wasting most of the natural gas to get at the more valuable crude oil • Overtaken by California in 1923, oil boom ends by 1930

The Policy Setting

• History of Oklahoma is marked by the boom and bust cycle of oil and gas • Key to state in terms of economic development and export commodities • As a result of the Arab oil embargo of 1973, Oklahoma became a major benefactor • Oil and gas industry in the driver ‘s seat coupled with massive migration to the state’s oil patches, especially to the Anadarko Basin area • As average incomes almost reaches national average for the first time in statehood, policymakers trim the tax base and provide substantial increase in salaries to educators and public employees • As the Arab nations’ petroleum cartel came apart in 1982, Oklahoma suffered • Oil prices fell and gas production in the Anadarko Basin became unprofitable • Missed opportunity in the 1970s to diversify and modernize its economy

The Policy Setting

• The “bust” following the boom was the final blow to the “Era of Good Feeling” • Depressed petroleum industry coupled with a sagging agricultural, bank failures, and hundreds of bankruptcies • State government entered period of fiscal retrenchment as oil-based gains for education and infrastructure evaporated • By the end of the 1980s and since the 1990s • Significant efforts towards economic modernization and diversification • Known that extracting the vast remaining oil and gas will require economically attractive wellhead oil and natural gas prices as well as improved recovery techniques

Recent Federal and State Policies

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Federal

• Energy Policy Act of 2005 • First major overhaul of national energy policy since the Energy Policy Act of 1992 • • Emphasized greater production and use of oil, natural gas, and coal , and boosted federal support for nuclear power Some tax cuts or credits for energy efficiency improvements and energy production based on renewable energies

Recent Federal and State Policies

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State

• • HB 1949 • Extends existing tax credits until 2015 for investments made in qualified clean-burning and electric motor vehicle property.

HB 2973 • Creates the Oklahoma Wind Energy Development Act • SB 1326 • Recreates the Oklahoma Geologic Storage of Carbon Dioxide Task Force until December 1, 2010 • SB 840 • Creates a legislative task force to study the availability of retail natural gas service in Oklahoma.

Problem Stream Declining Production Climate Change International Competition Policy Stream Improved Technology Lower Costs Politics Stream Policymakers and Industry Mix of Energy Resources Window of Opportunity Efficient Sites Economic Development Policy Change

• Dan T. Boyd (2002). Oklahoma Oil: Past, Present, and Future. Oklahoma Geology Notes 62 (3): 97-106.

• Michael Kraft and Scott Furlong (2008). Public Policy: Politics, Analysis, and Alternatives. CQ Press.

• Mark Meo (2006). The Oklahoma Wind Rush: A Collaborative Approach to Sustainable Energy Development. Workshop on Energy, Environmental Impacts. And Sustainability. Kansas State University (January 4-6, 2006) • David R. Morgan, Robert England, and George Humphreys (1991). Oklahoma Politics and Policies. University of Nebraska Press.

• Robert Sullivan (2002). Oklahoma’s Energy Future. A Strategy for the Next Quarter Century. Presented to Governor Frank Keating (December 12, 2002).

• Oklahoma Geological Survey. (http://www.ogs.ou.edu/oilgasfaq.php).

• Oklahoma House of Representatives. 2009 and 2010 Sessions in Review.

Crude Oil Production in 2006

Source: Oklahoma Geological Survey

Source: Oklahoma Geological Survey