Volume 6, Issue 3 • March 31, 2016

Oklahoma

Economic Report

TM

News and analysis of Oklahoma’s economy
A publication of the Office of the State Treasurer • Treasurer Ken Miller, Ph.D.

Gone with the wind
A coalition of business and community
leaders are aggressively pushing for
changes in what they say are much-toogenerous tax incentives granted to the
wind power industry in Oklahoma as
policymakers search for ways to build a
balanced budget in the face of revenue
estimates almost 20 percent lower than
the current fiscal year estimate.
Armed with facts, figures and arguments
of unfair competitive advantages, the
Windfall Coalition is conducting a
campaign to end special tax treatment
granted to the wind power industry.

Chaired by Pete Delaney, former
Chairman and CEO of OGE Energy,
coalition members also include
Continental Resources Chairman and
CEO Harold Hamm, Oklahoma City
Mayor Mick Cornett, Oklahoma State
School Board Association Executive
Director Shawn Hime, and Oklahoma
Independent Petroleum Association
President Mike Terry, among others.

• State unemployment rate
ticks up slightly in February
Editor
Tim Allen, Deputy Treasurer
for Communications and
Program Administration

SEE WIND ATTACK PAGE 3

Oklahoma Wind Generation vs. Natural Gas Price
2001 – 2015

1,600

$16.00
Oklahoma Wind Generation

Thousand Megawatt Hours per Month

• February Gross Receipts
to the Treasury show
continued contraction

The wind industry benefits from a
federal production tax subsidy of
2.3-cents per kilowatt hour (kWh) of
generated power. In December of last
year, the federal production tax credit

Avg. Henry Hub Natural Gas Price
1,200

$12.00

800

$8.00

400

$4.00

0

$0
1

n-0

Ja

3

n-0

Ja

5

n-0

Ja

7

n-0

Ja

9

n-0

Ja

1

n-1

Ja

3

n-1

Ja

Henry Hub Natural Gas Price ($MMBtu)

• Monthly allocations from
General Revenue cut 18
percent

Federal benefits

Meanwhile, the American Wind
Energy Association reports Oklahoma
ranks fourth among the states for
installed wind capacity at 5,184

Inside
• Guest commentary by
Harold Hamm and Pete
Delaney

megawatts (MW), with 695 MW under
construction. The state has 34 wind
projects online with 2,790 turbines. The
wind association says almost 17 percent
of in-state power generation came from
wind in 2014.

5

n-1

Ja

Source: Energy Information Administration

State Capitol Building, Room 217 • Oklahoma City, OK 73105 • (405) 521-3191 • www.treasurer.ok.gov

 Oklahoma Economic Report

TM

March 31, 2016

Guest Commentary
By Harold Hamm and Pete Delaney

Wind Turbines: Symbiotic or Parasitic?

T

he industrial wind lobby will try
to convince you wind and natural
gas are symbiotic and complementary
in supplying the power grid, but they
are just talking their book.

of which Oklahoma is blessed to have
ample supplies, was used to generate
more than double the power of any of
the state’s other electricity sources.
The same report showed Oklahoma
electricity consumers enjoy the
lowest price in the nation at 7.01¢/
kilowatt hour.

In fact, the relationship is actually
much more parasitic for Oklahoma
taxpayers and the schools,
infrastructure and social programs
To ensure electric power reliability,
the state supports. The wind industry
the state’s utilities must build and
benefits while a
maintain adequate
host of traditional
generating
Besides potentially
baseload energy
baseload capacity,
suppliers and
as well as ondestabilizing the
taxpayers lose.
demand peaker
power
grid,
wind
This less glowing
plant capacity,
energy is a drain on
description of
to meet 100%
the wind/natural
of demand
state coffers.”
gas relationship
when wind
becomes clear
turbines are idle.
when two important factors are
Consequently, wind farms provide
included in the discussion: reliability
only energy, not capacity, such that
and revenue.
these subsidized wind farms are in a
sense redundant to the power grid.
Because wind power is inherently
unreliable and cannot be stored
As the amount of wind energy
commercially, electricity generators
grows in the system, utilities must
must rely on baseload supplies from
increasingly cycle baseload and
other sources to ensure Oklahomans
peaking capacity when the wind stops
have the power they need,
blowing, causing these core units
particularly on the hottest summer
to operate less efficiently and place
days.
more strain on equipment, which
drives up maintenance costs.
In its latest monthly report (Dec.
2015), the U.S. Energy Information
Besides potentially destabilizing the
Administration confirmed natural gas,
power grid, wind energy is a drain on

Harold Hamm

“

www.treasurer.ok.gov • Page 2

Pete Delaney
state coffers. Even after achieving and
surpassing its 2010 renewable energy
goal of 15% by 2015, Oklahoma
taxpayers continue to pay not only
federal, but also state tax dollars to
SEE HAMM & DELANEY PAGE 3

 Oklahoma Economic Report

TM

March 31, 2016

Hamm & Delaney
FROM PAGE 2

subsidize the industrial wind industry.
Furthermore, despite a shortfall and
budget emergency, Oklahomans
continue to rack up unfunded wind
industry liabilities in the form of state
tax subsidies and lost tax revenues
totaling in the hundreds of millions of
dollars.
With planned wind capacity in
Oklahoma set to double from 20152017, the damage wind industry
subsidies will inflict on the funding
of vital state services will be
catastrophic if they are not stopped
now.
Adding insult to injury, 93% of all
commercial wind generation capacity
in the state is owned by out-of-state
or foreign companies, and 63% of
Oklahoma’s existing wind capacity

is tied to long-term agreements with
customers in other states. This means
the tax subsidies and payments to
Big Wind will flow to beneficiaries
beyond our state’s borders.
A perfect example of this is unfolding
in the Arbuckle Mountains, where
vistas have been covered with wind
turbines owned by Spanish and Italian
companies that receive Oklahoma
state subsidies yet sell their
electricity to utilities in Nebraska
and Arkansas. Quite simply, the state
wind tax subsidies fail to provide
any significant economic benefits to
Oklahoma.
Oklahoma’s wind industry is a mature
one, with the first commercial farm
coming online in 2003. Thirteen years
later, the taxpayers of the state need

to stop giving away the farm to outof-state and foreign wind companies.
Europe, the birthplace of many
of the foreign wind companies,
scrapped its generous subsidies to
these companies once it realized the
industry’s role in failed budgets.
With a failed budget of its own, why
shouldn’t Oklahoma now eliminate
wind subsidies, tax wind production
and make wind compete fairly with
power generated from other sources?
Harold Hamm is Chairman and
CEO of Continental Resources
and a member of the Windfall
Coalition.
Pete Delaney is former Chairman
and CEO of OGE Energy and a
member of the Windfall Coalition.

Wind attack
FROM PAGE 1

was extended for an additional five years
– until the end of 2019. There is no cap
on the rebate.

Zero emissions credit, property
tax exemption, investment credit,
sales tax exemption

Because of the federal credit’s
continuation, the Windfall Coalition
maintains Oklahoma incentives are
unnecessary and terms the extension an
“unexpected windfall.”

The state 10-year zero emission tax
credit is 0.5-cents per kWh generated
and is refundable in cash for 85-percent
of its face value. This credit is scheduled
to sunset in 2020 and be paid out by
2030.

There are four Oklahoma wind
subsidies, which the coalition states
are costing state government more than
$316 million this year.

According to the Oklahoma Tax
Commission, the zero-emissions tax
credit totaled $27 million in 2013 and

$56 million in 2014. Projections show
the cost is expected to grow to $88
million this fiscal year and $123 million
the following year. Since the credit is
refundable, wind companies receive
payments from the state.
A 5-year ad valorem tax exemption
for wind farm construction is currently
scheduled to end next year with payout
by 2022.
SEE WIND ATTACK PAGE 4

Opinions and positions cited in the Oklahoma Economic ReportTM are not necessarily those of Oklahoma State Treasurer Ken Miller or
his staff, with the exception of the Treasurer’s Commentary, which of course, is the viewpoint of the treasurer.

www.treasurer.ok.gov • Page 3

 Oklahoma Economic Report

March 31, 2016

TM

Wind attack
FROM PAGE 3

A 15-year investment tax credit also
benefits the wind industry and is
based on up to 2-percent of qualified
depreciable property. This credit is set to
end next year, too, with payout ongoing
through 2032.
The wind industry
also qualifies for
the Manufacturers
Sales Tax
Exemption.
Changes made
last year

“

Legislature to level the playing field by
assessing a gross production tax on wind
power generation to make the situation
more equitable.
Add oversight

The coalition is further proposing the
state institute regulation
of the wind industry.
The coalition says The state currently has
state subsidies for
no way to verify the
production numbers
wind are costing
state government on which subsidies are
currently paid.

more than $316

During the 2015
The solution, they
million this year.”
legislative session,
recommend, would be
a bill was passed
to install a wind turbine
and signed into law ending the ad
metering system.
valorem tax exemption in 2017. When
Outsiders
signing the legislation, Governor Mary
Fallin said, “Wind energy is here to
One of the avenues of attack by the
stay. It no longer needs the same level
Windfall Coalition is pointing out that
of support and encouragement from the
93 percent of wind companies doing
state.”
business and receiving wind subsidies
When the measure was passed, Senator
Mike Mazzei, R-Tulsa, said it could
save the state $500 million over the next
10 years.
More to do
Members of the Windfall Coalition
aren’t satisfied with last year’s changes.
Further, they say the wind industry is
directly competing with natural gas used
to generate electricity.
The coalition is pushing for the
Legislature to eliminate the four current
subsidies for the wind industry.
Unlike the oil and natural gas industry,
there is no state production tax on
wind. The coalition is calling on the

in Oklahoma are out of state and foreign
owned.
More than half, 56 percent, of the
companies are domestic but not based
in Oklahoma, while 37 percent are from
foreign nations.
Further, almost two-thirds – 63 percent
– of wind power generated in Oklahoma
is tied to out-of-state contracts.
As pressure grows on the Legislature to
find ways to generate additional revenue
for the state, members of the Windfall
Coalition are hoping changes with the
way the wind power industry is taxed
and regulated will be seen as a way to
crank out more dollars, or at least help
stop the drain on the treasury.

www.treasurer.ok.gov • Page 4

Members of the
Windfall Coalition
Pete Delaney
Chairman of the Windfall
Coalition
Mick Cornett
Mayor of Oklahoma City
Harold Hamm
CEO, Continental Resources
Shawn Hime
OSSBA
(Oklahoma State School
Boards Assoc)
Ethan House
EnergyNet
Jeff McDougall
JMA Energy
Frank Robson
Claremore Public Schools
Foundation/Robson
Properties
Bobby Stem
Oklahoma Roads & Bridges
Bill Schonacher
IBC Banks
Jonathan Small
OCPA
(Oklahoma Council of
Public Affairs)
Mike Terry
OIPA
(Oklahoma Independent
Petroleum Assoc)

 Oklahoma Economic Report

TM

March 31, 2016

Monthly allocations from General Revenue cut 18 percent
In March, with state government already
agencies. The monthly cuts were
under a constitutional revenue failure,
increased three-fold upon receipt of
state finance officials ordered further
February revenue reports.
reduction in monthly apportionment
Revenue failure is declared when GRF
to appropriated
allocations fall more
state agencies as
than 5 percent below
February General
. . . the most
the estimate. The state
Revenue Fund
responsible way
budget is built on
(GRF) allocations
out
of
this
is
by
estimated collections
were reported as
less a 5-percent cushion.
adding stable,
falling 18 percent
below the monthly
recurring revenues In a news release
estimate.
issued by the Office
into the next

“

–

of Management and
Enterprise Services,
Doerflinger Preston Doerflinger,
Cabinet Secretary for
Finance, made a call for
the Legislature to increase state revenue.

Beginning in January, officials ordered
across-the-board cuts of 6 percent to
monthly allocations to appropriated

“March’s deepened midyear revenue
failure reduction was necessary because
the rest of the year is projected to look a

Through February,
fiscal year-todate (YTD) GRF
allocations stand at
8.9 percent, or $327
million, below the estimate.

budget . . .”
 

(in millions)

Estimate
Collections

Sales tax GRF allocations stand at $1.27
billion, lower than the YTD estimate by
$163.1 million, or 11.3 percent.

-11.3%

+3.6%
$1,000

-10.6%
-67.1%
Net Income

Gross Prod

-13.2%
Sales Tax

About General Revenue
As state government’s main operating
fund, the GRF is the key indicator of
state government’s fiscal status and the
predominant funding source for the
annual appropriated state budget.

$2,000

Total GR

FY-16 allocations to the GRF from gross
production taxes on oil and natural gas
extraction stand at $69.3 million. This is
$141.1 million, or 67.1 percent, below
the YTD estimate.

Other sources of GRF revenue totaled
$433.5 million, which is $51.5 million
or 10.6 percent less than the YTD
estimate.

-8.9%

$3,000

$0

Net income tax, a combination of
individual income and corporate income
collections, is the only revenue stream
that exceeds the YTD estimate for FY16. Allocations of $1.42 billion are
$49.5 million, or 3.6 percent, higher
than the YTD estimate.

Motor vehicle allocations for FY-16
are $136.1 million, less than the YTD
estimate by $20.7 million, or 13.2
percent.

FY-16 Year-to-date Collections vs. Estimate
$4,000

lot like February,” Doerflinger said. “It
bears repeating that the most responsible
way out of this is by adding stable,
recurring revenues into the next budget
as the governor proposed and is actively
discussing with Legislature.”

Motor Veh

Other

Source: Office of Management and Enterprise Services

www.treasurer.ok.gov • Page 5

GRF collections are revenues that
remain for the appropriated state budget
after rebates, refunds and mandatory
apportionments.

 Oklahoma Economic Report

Gross Receipts &
General Revenue
compared
February Gross Receipts to the
Treasury totalled $758.48 million,
while the General Revenue
Fund (GRF), as reported by the
Office of Management and
Enterprise Services, received
$225.6 million, or 29.7% of the
total.

February Gross Receipts to the Treasury
show continued contraction
Monthly Gross Receipts to the Treasury
in February continued the trend of
falling revenue collections for a 10th
consecutive month,
State Treasurer Ken
With oil
Miller announced.

“

some 70 percent and our state’s anchor
industry in the midst of correction,
we have apparently not yet found the
bottom and continue to
see the spillover effect
prices off
in all major revenue
2014 peak by streams,” Miller said.

their
some 70 percent
and our state’s
anchor industry
in the midst of
correction, we
have apparently
not yet found the
bottom.”

• Corporate income tax: 34.8%

February receipts
of $758.5 million
are down by almost
$90 million, or
more than 10
percent, compared
to February of last
year. It is the lowest
February total
since 2011 as the
Oklahoma economy
was recovering from
the Great Recession.

• Sales tax: 43.8%

“With oil prices off their 2014 peak by

The GRF received between
29.7% and 53.6% of monthly
gross receipts during the past
12 months.
From February gross receipts,
the GRF received:
• Personal income tax: 11.2%

March 31, 2016

TM

Twelve-month Gross
Receipts to the
Treasury shrank by
more than 5 percent
compared to the
previous 12-month
period, and – at $11.4
billion – is the lowest
12-month total since
October 2013.

Monthly collections from oil and
natural gas production taxes have been
SEE REVENUE PAGE 7

• Gross production-Gas: 34.6%
• Gross production-Oil: 3%
• Motor vehicle tax: 27.6%

Monthly Gross Receipts vs. Prior Year
$60

• Other sources: 33.3%
February GRF allocations are
below the estimate by $49.4
million or 18%. Fiscal year-todate collections are less than
the estimate by $327 million or
8.9%.
February insurance premium
taxes totaled $12.22 million,
an increase of $4.57 million, or
59.8%, from the prior year.
Tribal gaming fees generated
$9.49 million during the month,
up by $398,838, or 4.4%, from
last February.

$40
$20
$0
-$20
-$40
-$60
Income Tax
Sales Tax

-$80
5

r-1

Ma

5

r-1

Ap

Gross Production
Motor Vehicle

5

y-1

Ma

5

n-1

Ju

5

l-1

Ju

Dollar change (in millions) from prior year

www.treasurer.ok.gov • Page 6

Other

15

g-

Au

15

p-

Se

5

t-1

Oc

5

v-1

No

5

c-1

De

6

n-1

Ja

16

b-

Fe

Source: Office of the State Treasurer

 Oklahoma Economic Report

March 31, 2016

TM

Revenue
FROM PAGE 6

lower than the same month of the prior
year for one year and two months.
February gross production collections
are more than 45 percent lower than last
February. Monthly receipts are based
on production activity from December
when the average price of benchmark
West Texas Intermediate crude oil was

$37.19 per barrel. Average oil prices
were below that level in both January
and February.
Other indicators
The Oklahoma’s Business Conditions
Index remained below growth neutral
for a 10th consecutive month. The

index from a monthly survey of supply
managers fell to 39.4 in February
from 48.3 in January. Numbers below
50 indicate economic contraction is
expected during the next three to six
month.
About Gross Receipts to the
Treasury

Since March 2011, the Treasurer’s
Office has issued the monthly Gross
March 2014
O K –L February
A H O M2016
A E M P L O Y M E N T S E Receipts
C U R I to
T the
Y Treasury
C O M M
I S Swhich
I O N
report,
provides a timely and broad view of the
state’s macro economy.
Prior 12 months
…Bringing Oklahoma’s Labor Market to Life!
It is provided in conjunction with the
General Revenue Fund (GRF) allocation
report from the Office of Management
FOR RELEASE: March 25, 2016
and Enterprise Services, which provides
important information to state agencies
Most recent 12
months
OKLAHOMA
EMPLOYMENT REPORT
– February
2016
for budgetary
planning purposes.

Gross Production Tax Collections

$90
$80

(in millions)

$70
$60
$50
$40

Economic Research & Analysis

The GRF receives just less than half

$30
$20
Mar

Oklahoma’s jobless rate slightly up
in state’s
February
of the
gross receipts with the

Apr

May

remainder
paid in rebates and refunds,
Jun Oklahoma’s
Jul
Aug
Sep
Oct
Nov
Dec
Jan rate
Febrose by 0.1
seasonally
adjusted
unemployment
percentage point to 4.2 percent in February,

remitted
cities andadjusted
counties,
and
while the U.S. unemployment
rate held steady at 4.9 percent. The
state’sto
seasonally
unemployment
Source: Oklahoma Tax Commission
rate was also up by 0.1 percentage point compared to Februaryplaced
2015. into other state funds.

Unemp.
Labor force*
Employment*
Unemployment*
Oklahoma unemployment
rate
up slightly
in February
February
2016 ticks rate*

Oklahoma’s seasonally-adjusted
unemployment rate was set at 4.2
percent in February, up by one-tenth
of one percentage point from January,
according to the Oklahoma Employment
Security Commission (OESC).
The number of those listed as
unemployed has increased by 1,966
since February 2015, while the labor
force as increased by 31,517.
The national unemployment rate was set
at 4.9 percent in February.

Oklahoma

4.2%

1,861,902

1,784,183

77,719

United States

4.9%

158,890,000

151,074,000

7,815,000

Oklahoma Unemployment Report

* Data adjusted for seasonal factors

February 2016

Unemp.
rate*

Labor force*

Feb '16

4.2%

1,861,902

1,784,183

77,719

Jan '16

4.1%

1,853,975

1,778,448

75,527

Dec '15

4.1%

1,847,602

1,771,229

76,373

Nov '15

4.1%

1,846,833

1,770,218

76,615

Oct '15

4.2%

1,845,974

1,768,887

77,087

Sept '15

4.2%

1,845,077

1,767,297

77,780

Feb '15

4.1%

1,830,385

1,754,632

OKLAHOMA

* Data adjusted for seasonal factors

Employment*

Unemployment*

75,753

Source: OESC

In February, statewide seasonally adjusted employment rose by 5,735 persons (+0.3 percent), and
unemployment rose at the same time by 2,192 persons (+2.9 percent). Over the year, seasonally adjusted
unemployment grew
by 1,966 persons (+2.6•percent).
www.treasurer.ok.gov
Page 7

 Oklahoma Economic Report

March 31, 2016

TM

Economic Indicators
Oklahoma 12-Month Gross Receipts

Unemployment Rate

January 2008 – February 2016
(in billions)
Feb-15

January 2001 – February 2016
11.0

$12.1

$12.25
9.0

U.S.
Oklahoma

7.0

Dec-08
$11.28

$11.25

Feb-16
$11.4

4.9%

5.0

4.2%

3.0

$10.25

Feb-10
$9.36

$9.25

1.0
01

02

03

04

05

06

07

08

09

10

Shaded areas denote U.S. recessions

11

12

13

14

15

16

08

17

Source: Bureau of Labor Statistics

09

70

11

12

13

Shaded area denotes U.S. recession  

Oklahoma Mining Supersector (Oil & Gas) Jobs
January 1990 – February 2016
(in thousands)

10

14

15

16

Source: Office of the State Treasurer

Oklahoma Stock Index

Top 23 capitalized companies
January 2009 – February 2016

Nov-14
63.7

$70

$50

50

Avg = $43.41

Feb-16
47.8

$33.49

$30

30

Jul-99
25.3

$10

10
90

92

94

96

98

00

17

02

04

06

Shaded areas denote U.S. recessions

08

10

12

14

09

16

Source: Bureau of Labor Statistics

10

11

13

14

15

16

17

Source: Office of the State Treasurer

Oklahoma Oil Prices & Active Rigs

Oklahoma Natural Gas Prices & Active Rigs

January 2011 – March 2016

January 2011 – March 2016

200

12

Shaded area denotes U.S. recession  

$8

200

$120

Price
$6

Active Rigs

$4

50

0

Active Rigs
11

12

$2

$0
13
14
15
16
17
Sources: Baker Hughes & U.S. Energy Information Administration

100

$90

$60

Active
Rigs

50

0

Price per BBL

100

150
Price per MCF

Price

Active Rigs

150

$30

11

12

www.treasurer.ok.gov • Page 8

$0
13
14
15
16
17
Sources: Baker Hughes & U.S. Energy Information Administration