Oklahoma Oil & Gas Activity & Tax Contribution

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Oklahoma Oil and Gas Activity and Tax Contribution RegionTrack, Inc. (regiontrack.com) is an Oklahoma City-based economic research firm specializing in regional economic forecasting and analysis. Principal authors of the report are RegionTrack economists Mark C. Snead, Ph.D. and Amy A. Jones, M.A.

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Oklahoma Oil and Gas Activity and Tax Contribution i | P a g e Table of Contents I. Introduction and Executive Summary ........................................................................................ 1 II. State Taxes in the Recent Oil and Gas Contraction ............................................................... 10 State Tax Loss in the Recent Recession ............................................................................. 10 Earnings and Employment Multiplier Effects During State Recession ............................ 12 Linkage from Oil and Gas Activity to State Tax Revenue ................................................. 14 III. Why Such Large Tax Effects from Oil and Gas in Oklahoma? ............................................. 16 Oil and Gas Contribution to State GDP ................................................................................ 16 Oil and Gas Share of Household Earnings .......................................................................... 18 Role of Oil and Gas Proprietor Income ................................................................................ 20 IV. Oklahoma Oil and Gas Tax Contribution ................................................................................. 22 Measuring Tax Contribution .................................................................................................. 22 Forming State Oil and Gas Tax Policy ................................................................................. 22 V. Tax Contribution - Production View.......................................................................................... 24 Recent Gross Production Tax Legislation ........................................................................... 24 Effective Severance Tax Rate ............................................................................................... 28 Combined Ad Valorem and Severance Tax Rate ............................................................... 33 Idaho Report on Production Taxation .................................................................................. 35 VI. Tax Contribution - Corporate View ........................................................................................... 41 Data on Business Taxes ......................................................................................................... 41 Oklahoma Oil and Gas Business Taxes ............................................................................... 42 Oil and Gas-Related Business Taxes Across the Producing States ................................ 47 Business Tax Effective Rate ................................................................................................... 48 Corporate vs. Production Taxes in Oklahoma .................................................................... 50 VII. Tax Contribution - Industry View ............................................................................................... 51 Income and Sales Tax Payments in the Recent State Recession .................................... 51 Personal Income and Sales Tax Contribution of Oil and Gas........................................... 53 Personal Income Tax Contribution Across the Producing States .................................... 54 Oil and Gas-Related Sales Tax .............................................................................................. 57 Combined Effective Rates ...................................................................................................... 61 VIII. How are Oklahoma oil and gas severance tax revenues used? .......................................... 64 IX. Appendix A: Severance and Ad Valorem Tax Data and Methodology ............................... 83 X. Endnotes ....................................................................................................................................... 92

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Oklahoma Oil and Gas Activity and Tax Contribution ii | P a g e Table of Figures Figure 1. Total State Tax Revenue in Recent Energy Recession – Oklahoma ........................... 11 Figure 2. Estimated Multiplier Effects in Energy Recession - Oklahoma ..................................... 13 Figure 3. Estimated Oil and Gas Sector Spillover Effects - Oklahoma ........................................ 15 Figure 4. Industry Level Contributions to Real GDP Growth – Oklahoma ................................... 16 Figure 5. Contribution of Mining Sector to State Real GDP Growth............................................. 17 Figure 6. Share of Total Household Earnings Derived from Oil and Gas Sector - Oklahoma .. 18 Figure 7. Share of Total Household Earnings from Oil and Gas Sector (2003-17 Average) .... 19 Figure 8. Share of Total State Household Earnings from Oil and Gas - Oklahoma ................... 20 Figure 9. Oil and Gas Share of Total Non-Farm Proprietor Earnings (2003-17 Average) ........ 21 Figure 10. Oklahoma Severance Tax Revenue Projections by Tax Rate (FY2019) ................... 24 Figure 11. Monthly Gross Production Tax Receipts – Oklahoma ................................................. 25 Figure 12. Net Oil and Gas Gross Production Tax Receipts – Oklahoma (Fiscal Year) ............ 26 Figure 13 Refunds of Oil and Gas Severance Taxes – Oklahoma (Fiscal Year) ........................ 26 Figure 14. Oklahoma Severance Tax – Source of Annual Changes (Fiscal Years) ................... 27 Figure 15. Effective Severance Tax Rate – Oklahoma (Fiscal Year) ............................................ 28 Figure 16. Effective Severance Tax Rate - 16 Largest Producing States (FY2018) ................. 29 Figure 17. Effective Severance Tax Rate – 16 Major Producing States ...................................... 30 Figure 18. Oil and Gas-Related Ad Valorem Tax Payments and Effective Rate - Oklahoma ... 31 Figure 19. Effective Ad Valorem Tax Rate – 16 Largest Producing States ................................ 32 Figure 20. Combined Severance & Ad Valorem Effective Tax Rate – Oklahoma ...................... 33 Figure 21. Combined Effective Severance & Ad Valorem Tax Rates .......................................... 34 Figure 22. Federal, State, & Local Tax Payments – Oklahoma ..................................................... 43 Figure 23. Taxes as Share of State Gross Domestic Product by Industry - Oklahoma ............. 45 Figure 24. Mining Sector Share of Total State Business Tax Payments – Oklahoma ............... 46 Figure 25. Business Taxes on Production and Imports - Oil and Gas Sector ............................. 47 Figure 26. Business Tax Share of Production Value – 16 Largest Producing States (2016) ... 48 Figure 27. Oil and Gas Business Tax Share of State GDP – Major Producing States (2016) .. 49 Figure 28. Total Personal Income Tax Revenue in Recent Energy Recession – OK ................ 52 Figure 29. State/Local Sales and Use Tax Revenue in Recent Energy Recession – OK ......... 53 Figure 30. Personal Income Tax Contribution of Oil & Gas Sector .............................................. 55 Figure 31. Effective Personal Income Tax Rate on Oil and Gas Production (2017)................... 57 Figure 32. Sales Tax Contribution of Oil & Gas Sector (2017) ..................................................... 59 Figure 33. Effective Sales Tax Rate on Oil and Gas Activity (FY2017) ........................................ 61 Figure 34. Combined Effective Tax Rate – Oil and Gas-Related Taxes ....................................... 62 Figure 35. Overall Combined Effective Production Tax Rate – 16 Largest Producing States .. 62 Figure 36. Distribution of Oklahoma Gross Production Taxes ...................................................... 65 Figure 37. Gross Production Tax Revenue Returned to School Districts .................................... 66 Figure 37. (Cont.) Gross Production Tax Revenue Returned to School Districts ..................... 67 Figure 38. Gross Production Tax Distribution by County/District ................................................. 70

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Oklahoma Oil and Gas Activity and Tax Contribution 1 | P a g e I. Introduction and Executive Summary This report provides state policymakers with an update of activity in Oklahoma’s oil and gas sector. The recent oil and gas-driven recession at the state level produced large swings in both the oil and gas industry and the broader Oklahoma economy. The primary focus of the report is an evaluation of the industry’s ongoing tax contribution at the state level. Most evaluations of oil and gas taxation continue to focus solely on production- related taxes, primarily severance and ad valorem taxes, and ignore the broader tax contribution of the industry. The newly increased severance tax rate on production in Oklahoma is expected to produce far higher tax revenue paid by the industry. An underlying concern for policymakers is that oil and gas tax burden measured solely from the ‘production’ view may be wholly inconsistent with findings based on a broader view of the tax contribution of the industry. The collapse in total state tax revenue in the recent state slowdown highlighted the close ties between industry activity and total state tax revenue. Oil and gas firms in Oklahoma make substantial business tax payments across nearly every state tax stream. This ‘business tax’ view of the industry is often ignored in forming tax policy concerning the industry. Similarly, personal income tax payments and sales tax payments tied to oil and gas activity, including the earnings of employees and self-employed proprietors, play a large role in the tax contribution of oil and gas activity. This ‘industry’ view becomes especially relevant when doing cross-state comparisons of oil and gas tax policy because of widely differing tax structures across the states. The report provides a comprehensive evaluation of oil and gas industry tax payments from all three tax perspectives – production, business, and industry – in order to better understand the various linkages between oil and gas activity and overall state tax collections. Valid comparisons of oil and gas taxation in Oklahoma to other producing states must also include a range of producing states with varying tax structures. In this pursuit, we evaluate the three views of oil and gas taxation in Oklahoma relative to the sixteen largest producing states. Recent Oil and Gas-Driven Statewide Recession The need to focus on the wider tax contribution of the industry became increasingly evident during the recent energy-driven statewide recession. The slowdown provided a rare opportunity to isolate the effects of fluctuations in the oil and gas sector on both state tax revenue and the broader state economy. This recessionary period provided a near-controlled experiment for gauging the economic influence of the oil and gas sector. The steep collapse in state tax revenue in the slowdown revealed two key pieces of information about the overall tax contribution of the oil and gas sector. First, state tax collections and the overall economy remain highly sensitive to changes in oil and gas industry activity. Second, the severity of the collapse in taxes underscored the importance of examining more than simply production taxes when forming oil and gas tax policy in Oklahoma. After peaking in the 3rd quarter of 2014, the state began a steady, cumulative decline of $1.5 billion (15.4%) in total state tax revenue. However, when compared to forecasts in place prior

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Oklahoma Oil and Gas Activity and Tax Contribution 2 | P a g e to the onset of the oil price collapse and subsequent recession, the net decline in total expected state tax revenue reached an estimated $2.25 billion (23.7% decline) from the peak to the trough in activity in the oil and gas sector. It is the oversized $2.25 billion (nearly 25%) net decline in total state tax revenue in response to the oil and gas slowdown that makes in-depth analysis of oil and gas taxation in Oklahoma and other top-tier energy producing states so necessary. A summary of the estimated effects during the recent oil and gas recession from late 2014 through late 2016 is as follows: o Direct Effects: Employment in the state’s oil and gas industry declined by 21,500 wage and salary workers; earnings by oil and gas workers and self-employed proprietors declined by $8.9 billion; and GDP in the oil and gas sector declined by $22.1 billion. o Total Effects: The state subsequently lost a total of 69,800 jobs, household earnings declined by $30.9 billion, and state GDP contracted by $51.8 billion from peak to trough based on counterfactual forecasts in place prior to the downturn. o Tax Effect: As a result, total state taxes declined by $2.25 billion (23.7%) on a net basis in the downturn from peak to trough over the recession cycle as a result of the oil and gas slowdown. o Spillover Effects: Estimated economic multipliers suggest that oil and gas activity accounts for about 30% of the direct economic change in employment and household earnings during the recession; oil and gas directly accounts for about 43% of the statewide decline in GDP. o The findings suggest that a $1 billion reduction in oil and gas industry GDP equates to an average reduction of $102 million in total state tax revenue. Policy Findings from the Recent Slowdown The behavior of state tax revenue during the recent oil and gas-driven recession clearly illustrates several key policy findings about the overall tax contribution of the oil and gas sector in Oklahoma: o The state remains a top-tier energy state with overall economic conditions highly sensitive to activity in the oil and gas sector; o An extended energy sector slowdown is capable of producing a net 25% decline in total state tax revenue below budget projections; o Overall state tax revenue remains highly sensitive to changes in activity in the oil and gas sector, with total state tax losses equal to 10% of the amount of GDP lost in the sector; o The size of the reduction in taxes during the slowdown confirms that multiple tax streams beyond severance taxes play a major role in determining the total tax contribution of the oil and gas sector; and o Other state taxes such as personal and corporate income tax, sales and use tax, motor vehicle, motor fuel, and other taxes are the greatest source of direct and spillover tax contributions traced to the industry.

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Oklahoma Oil and Gas Activity and Tax Contribution 3 | P a g e Why are the Oil and Gas Tax Effects So Large in Oklahoma? The high sensitivity of state tax revenue to oil and gas industry activity is tied to the large share of total state economic growth generated by the industry in recent years: o During the period of reemergence of the oil and gas sector in the 2003 to 2017 period, the Oklahoma economy posted average real GDP growth of 2.41% annually. o The state’s mining sector contributed nearly 40% (0.96% annually) of all real growth in the state in the period. o All other sectors combined contributed only 1.45% annually to real GDP growth in the period. o The nearly 1% annual contribution of mining activity to state real GDP growth in Oklahoma is the 2nd largest among the sixteen top producing states, trailing only North Dakota (1.38%) in the period. o Only Alaska (40.9% share) exceeded Oklahoma’s 40.0% share of total state economic growth derived from the mining sector in the period. o If Oklahoma had merely matched the national average GDP contribution of mining (0.08% annually), real GDP growth in the state would have trailed the nation by 0.2% annually. Households in the state also receive an outsized share of their total earnings from the oil and gas sector: o The share of earnings in Oklahoma derived from oil and gas activity reached a peak of 15.6% in 2008 and averaged 9.3% of total statewide household earnings in the full 2003 to 2017 reemergence period. o Oklahoma’s 9.3% average share of household earnings derived from the oil and gas sector leads all sixteen major producing states in the period. o The state’s share is 2 full percentage points above second ranked Texas and 3 to 4 percentage points above Wyoming, Alaska, and Louisiana, three of the largest traditional energy-producing states. o It is important to note that a majority of earnings paid by the oil and gas industry to the household sector in Oklahoma now typically accrues to self-employed proprietors. Since 2003, slightly more than half (55%) of all household earnings from oil and gas activity in Oklahoma was received by self-employed proprietors, with the remainder (45%) received as compensation by wage and salary workers. In the 2003 to 2017 period, Oklahoma has the highest share (24.2%) of total proprietor earnings derived from the oil and gas sector among the sixteen largest producing states. Measuring the Tax Contribution of Oil and Gas in Oklahoma The ongoing debate over oil and gas tax policy in Oklahoma remains hampered by the use of differing approaches for measuring the industry’s tax contribution. There are three common approaches used to measuring the tax contribution of the oil and gas sector – production, corporate, and industry views. Each provides useful information on tax policy but can be wholly misleading when used in isolation.

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Oklahoma Oil and Gas Activity and Tax Contribution 4 | P a g e Proponents of higher severance taxes in Oklahoma focus almost exclusively on the ‘production’ view of oil and gas taxation (severance and ad valorem taxes) in advocating for tax policy changes. This approach ignores the broader business tax contribution of oil and gas firms in the state, implying that other taxes are either not relevant or are roughly equivalent across the producing states. Relatively little research has been produced describing the overall business, or ‘corporate,’ tax burden faced by oil and gas firms in Oklahoma and most other producing states. This information is essential to policymakers in determining whether overall business tax payments are comparatively low in Oklahoma or not. From a state budgetary perspective, tax contributions from the ‘industry’ view are far more important in explaining overall movements in total state tax revenue. In Oklahoma, the tax contribution of the oil and gas industry extends well beyond both the production and corporate contributions of the sector. The tax payments associated with compensation paid to oil and gas industry workers and the earnings of self-employed proprietors operating in the industry comprise an outsized share of total state tax revenue. Production Tax View – Severance and Ad Valorem The recent increase in the severance tax rate in Oklahoma will result in much higher production taxes paid by the industry. Gross production tax rates in Oklahoma increased in 2018 under House Bill 1010XX. Beginning July 1, 2018, production of crude oil and natural gas from all new wells and all existing wells taxed at the previous 2% rate will be taxed at a new 5% rate for the first 36 months of production. All production then reverts to a 7% rate. o Under the old tax rate, Oklahoma’s FY2018 effective severance tax rate of 4.0% ranks 8th among the sixteen largest producing states, slightly below the 16-state average of 4.4% in the period. o Recent monthly severance tax receipts highlight the expected effect of the new 5% tax rate. The current pace of receipts equates to annualized collections of approximately $1.25 billion at current crude oil and natural gas prices. o The new 5% rate is expected to increase the state’s effective severance tax rate to 5.1% in FY2019, ranking 5th among current rates for the sixteen largest producing states. o The state would also move well above the overall average rate of 4.4% across the top sixteen producing states. While oil and gas reserves in the ground are exempt from ad valorem taxes in Oklahoma, substantial quantities of equipment used above ground are subject to local ad valorem taxes. o The state’s effective ad valorem tax rate was 1.4% in FY2016 based on $157.6 million in property tax payments and $11.4 billion in oil and gas production value. o Oklahoma’s 1.4% effective ad valorem tax rate ranks 9th among the 16 major producing states. Oklahoma’s combined effective severance and ad valorem tax rate will rise under the new 5% severance tax rate.

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Oklahoma Oil and Gas Activity and Tax Contribution 5 | P a g e o Under the old severance tax rate, Oklahoma’s combined effective rate of 5.4% ranked 11th among the 16 largest producing states. o The combined effective rate is projected to rise to 6.4% in the current fiscal year (FY2019) following the recent severance tax rate increase to 5%. o The new 5% severance tax rate will push the state’s rank to 8th among the sixteen largest producing states. Relative to the other top producing states: o Oklahoma’s FY2019 combined rate of 6.4% in FY2019 will be approximately equal to the 6.5% average combined rate across the major producing states. o Oklahoma’s FY2019 combined rate will rank 8th and be roughly equal to the combined rate levied by traditional producers Texas, Colorado, Louisiana, and Kansas. o Oklahoma’s combined rate will remain 0.6% below dominant-producer Texas but will have a higher effective severance tax rate coupled with a lower effective ad valorem tax rate (as mandated by law). o Relative to the legacy oil-producing states of Alaska and California, the combined FY2019 rate in Oklahoma falls 1.3% below Alaska but 4.6% above the rate in California. o Relative to the new emerging natural gas producing states of Pennsylvania and Ohio, Oklahoma’s combined effective rate in FY2019 will be 4-5 percentage points higher. Corporate, or Business, Tax View The ‘production’ view of oil and gas taxes provides only limited information about the overall business tax contribution of firms comprising the state’s oil and gas industry. We evaluate the total business tax contribution of the state’s oil and gas sector using tax data from the Bureau of Economic Analysis (BEA) state-level gross domestic product (GDP) dataset which underlies most commonly used regional economic models. The dataset is unique in that it divides total state tax payments into the industry sectors making the payments. The data is of further value because approximately 90% of the taxes are paid to state and local governments, with only about 10% going to federal government. Key findings on the overall business tax contribution of oil and gas include: o Based on the BEA dataset, Oklahoma establishments in the oil and gas sector paid a total of $2.43 billion in business taxes in 2016. o This suggests that tax payments by the oil and gas industry accounted for 21.2% of total business taxes paid by all firms statewide in 2016. o The tax contribution share is roughly double the oil and gas industry’s 10% share of total state GDP. o While 2016 is the most recent year of data available, it is highly conservative in that it reflects tax payments by the industry at the depths of the recent state recession.

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Oklahoma Oil and Gas Activity and Tax Contribution 6 | P a g e The business tax contribution of Oklahoma’s oil and gas industry is high relative to the sixteen largest producing states: o The $2.43 billion in taxes paid by firms in Oklahoma’s oil and gas sector in 2016 trailed only dominant producer Texas with $15.54 billion. o Oklahoma firms paid 7.8% of total oil and gas-related business taxes paid nationally in 2016 and accounted for 7.5% of the value of national oil and gas production in FY2016. o In Oklahoma, $2.43 billion in total taxes paid by the oil and gas sector represents 20.7% of the $11.76 billion in total market value of crude oil and natural gas production in FY2016. o This ranks the Oklahoma oil and gas sector as having the third highest overall business tax burden as a share of production value, following only Texas (25.2%) and Alaska (28.6%). o Oil and gas business taxes in Oklahoma totaled 1.3% of total state GDP of $181.5 billion in 2016. This share ranks Oklahoma 4th among the sixteen largest producing states trailing only Alaska, Wyoming, and North Dakota. Oklahoma oil and gas firms also contributed a significant share of total business taxes paid statewide: o As a share of the $10.37 billion in average annual taxes paid the past decade by all business entities operating in the state, the mining sector paid an average of $2.53 billion annually, or 24.4% of the total business taxes paid. o Actual tax payments made by the industry the past decade represent a 10.5% share of total GDP produced by the industry. o For comparison, all other sectors combined paid business taxes averaging only 5.5% of total GDP produced, roughly half the share of the oil and gas sector. o The mining sector pays a higher share than the state’s key sales tax conduit sectors, Wholesale Trade (18.5%) and Retail Trade (17.3%), both of which collect significant taxes but produce relatively little GDP (their combined GDP is less than the mining sector). o The share of total statewide business taxes paid is far lower in six of the state’s other key high-tax-share sectors, including Utilities ($419 million, 4.0% share), Insurance Carriers ($310 million, 3.0% share), Broadcasting and Telecommunications ($271 million, 2.6% share), Amusement, Gambling, and Recreation ($162 million, 1.6% share), Accommodations ($127 million, 1.2% share), and Air Transportation ($92 million, 0.9% share). o Combined, these six high-tax industries paid an average of only $1.38 billion in taxes annually the past decade, or 13.3% of total statewide business taxes paid the past decade, only slightly more than half the 24.4% average share paid by the mining sector.

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Oklahoma Oil and Gas Activity and Tax Contribution 7 | P a g e Key policy finding on the business tax contribution of oil and gas in Oklahoma: o While the production view of oil and gas taxation in Oklahoma places Oklahoma in the middle of the producing states, the broader corporate view of taxes consistently places the state among those with the highest overall tax burden. Industry Tax View The report also extends the analysis to the tax contribution of the broader industry itself. This primarily includes the personal income tax and sales tax contributions made by employees and self-employed proprietors within the oil and gas sector. This approach captures the two largest tax sources in Oklahoma and accounts for key differences in the tax structure in other producing states (e.g. leading-producer Texas has no personal income tax). The findings illustrate that personal income tax payments as a share of production in Oklahoma are high relative to other producing states: o Across the sixteen largest producing states, the effective income tax payments traced to household earnings from oil and gas equals 0.52% of production value. o Oklahoma’s rate of 1.05% ranks 6th highest among the sixteen largest producers but is approximately double the overall average rate. o Colorado has the highest effective rate at 2.9%, nearly triple Oklahoma’s rate. Only Montana, Kansas, and California have effective rates above 2%, while Louisiana’s rate falls just below 2%. o All other major producing states have an effective income tax rate below 1%. o In Texas, Wyoming, and Alaska, the effective income tax rate is 0%. Sales tax payments as a share of production value in Oklahoma are proportionately high as well: o Oklahoma’s estimated total sales tax contribution of $591 million is second highest among the sixteen states, behind only the $3.77 billion estimate for Texas. o Much of the sales tax contribution reflects sales tax-intensive drilling activity, with Oklahoma the second most drilling-active state. o Oklahoma’s effective sales tax rate on production of 4.1% is 4th highest among the 16 states and one percentage point below Texas, a historically high-sales tax state with active drilling. o Oklahoma’s effective rate is 0.7% above the average rate of 3.4% across all 16 states. o However, the top four states – Louisiana, Texas, Ohio, and Oklahoma – contribute a far higher share of sales tax revenue as a percentage of production value than the remaining dozen states. When the effective personal income tax and sales tax rates are combined with effective severance and ad valorem tax rates, the relatively broad tax contribution of Oklahoma’s oil and gas industry relative to the other producing states is clear:

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Oklahoma Oil and Gas Activity and Tax Contribution 8 | P a g e o Combined effective tax rates as a share of production across the four tax categories average 10.4% and range from a low of 3.7% in Pennsylvania to a high of 13.6% in Louisiana. o Oklahoma’s combined effective rate of 10.6% based on the FY2018 severance tax rate ranks 5th among the sixteen largest producing states, just above the overall average rate of 10.4%. o The state’s combined rate rises to 11.7% in FY2019 under the new 5% severance tax rate. Oklahoma will remain 5th among the sixteen largest producing states but will exceed the average by more than a full percentage point. o Relative to the average for the group of sixteen states, Oklahoma has a similar effective rate for severance taxes, a lower effective ad valorem tax rate, and a higher than average effective rate for both sales and income taxes. How are Severance Taxes Used in Oklahoma? Severance taxes paid by state oil and gas producers totaled $682 million in FY2018. Over the past decade, the state’s oil and gas sector has contributed $6.6 billion in gross production taxes ($655 million annually) to the funding of Oklahoma state government. Gross production revenue is first apportioned by statute for several dedicated purposes, primarily local government and public education, with the remainder deposited in the general revenue fund. Of the $6.6 billion in gross production revenue paid the past decade, $3.1 billion (47%) went to dedicated uses, with the remaining $3.5 billion (53%) transferred to the state’s general revenue fund. General revenue fund contributions from severance taxes (after allocations to dedicated uses) averaged $349 million annually the past decade. Education-Related Funding A total of $226 million of total severance tax revenue was apportioned to education-related dedicated funds in FY2018. Over the past decade, $2.11 billion in gross production tax revenue was apportioned for educational purposes, an average of $211 million annually. Common education is the largest traditional direct beneficiary of gross production taxes. A portion of the gross production tax generated from oil and gas production in each county is allocated back to the county for distribution on an average daily attendance basis among the county’s independent school districts. Since some counties have large amounts of oil and gas production and others very little, there is substantial variation in the revenues received. Over the past decade, gross production revenue received by local school districts and the common education technical fund totaled $1.16 billion – $116 million annually. Common education’s share of gross production taxes reached $131 million in FY2018, the largest amount received the past decade. In total, school districts in 27 of the state’s 77 counties received more than $1 million or more annually from oil and gas severance taxes from FY2008 to FY2017. School districts in only fourteen counties received less than $50,000 annually in gross production revenue in the ten- year period.

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Oklahoma Oil and Gas Activity and Tax Contribution 9 | P a g e By individual school district, twelve received more than $1 million annually in gross production revenue between FY2008 and FY2017. Thirty additional districts received between $500,000 and $1 million annually in the period. Thirty-eight districts received between $250,000 and $500,000 annually. Eighty-nine districts received between $100,000 and $250,000 annually. Fifty-four districts received between $50,000 and $100,000 annually. In total, 223 individual districts received $50,000 or more annually in gross production revenue between FY2008 and FY2017. Contributions of gross production taxes to higher education totaled $902 million the past decade, or $90 million annually.

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Oklahoma Oil and Gas Activity and Tax Contribution 10 | P a g e II. State Taxes in the Recent Oil and Gas Contraction An important element of the ongoing policy debate over oil and gas taxation in Oklahoma is determining the degree to which the state’s oil and gas industry contributes to total state tax collections. The industry contributes direct tax payments across a variety of tax streams as well as indirect tax revenue through spillover activity generated through interaction with other industries in the state economy. Tax Experiment in Recent Oil and Gas Recession. Determining the size of the tax contribution of the industry was aided by the recent oil and gas-driven recession in Oklahoma. The energy slowdown in the state provided a rare opportunity to isolate the effects of fluctuations in the oil and gas sector on state tax revenue and the broader state economy. The state economy was in a strong, steady economic expansion in late 2014 when rapidly declining oil prices struck the state’s oil and gas sector. The resulting oil and gas slowdown subsequently produced a significant state-level recession that extended approximately two years from late 2014 through late 2016. This recessionary period provides a near-controlled experiment for gauging the economic influence of the oil and gas sector. The sharp contraction in the sector became the dominant influence on statewide economic growth in the period. The usefulness of the period is enhanced by the fact that the national economy provided a highly stable national backdrop throughout the slowdown and the state had relatively stable tax policy in the period. These unique circumstances allow for much more reliable measurement of the economic ties between the state’s oil and gas industry, the statewide economy, and state tax revenue. Typically, economic models must be used to derive estimates of these effects using historical relationships based on average responses. The experiment afforded by the recent state oil and gas-driven recession allows for estimates that are both more reliable and timelier. In the remainder of this section of the report, we first detail the significance of the downturn in state tax revenue during the recent oil and gas-driven recession. Multipliers reflecting the employment, earnings, and output response in the broader state economy are then estimated. The relative responsiveness of total state tax revenue to economic changes in the oil and gas sector is then evaluated using the estimated multiplier effects. State Tax Loss in the Recent Recession Figure 1 illustrates the path of total state tax revenue during the recent oil and gas-driven shock starting in the third quarter of 2014 and extending through the fourth quarter 2016. After peaking in the 3rd quarter of 2014, the state began a steady, cumulative decline of $1.5 billion (15.4%) in total state tax revenue. These estimates use the comprehensive measure of total state taxes provided by the Census Bureau. Our forecast for state tax revenue from July 2014 serves as a highly useful counterfactual comparison case to the actual path of revenue for determining the net effect of the pullback in oil and gas activity on expected total state tax revenue.1 The expected outlook prior to the collapse in oil prices was for average growth in total tax revenue of 4.6% annually through FY2018.

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Oklahoma Oil and Gas Activity and Tax Contribution 11 | P a g e Figure 1. Total State Tax Revenue in Recent Energy Recession – Oklahoma Source: Census Bureau and RegionTrack forecast (July 2014) Based on the forecast shown in Figure 1, the net decline in total expected state tax revenue reached an estimated $2.25 billion (23.7% decline) from peak to trough in activity in the oil and gas sector. The $2.25 billion estimated tax revenue decline reflects the net difference between the initial expected outcome and the actual outcome through the 4th quarter of 2016. In other words, the $1.46 billion decline in actual revenue represents a static estimate of the tax effect, while the $2.25 billion decline provides a much more representative dynamic estimate of the net state tax response based on prior expectations. The dynamic estimate is also more reflective of the budget shortfall legislators were forced to adapt to in setting budget policy in the period. There was also little expectation at the start of the recession that a slowdown in the oil and gas sector could produce a state tax revenue shortfall of nearly 25% below projected amounts. Rarely is it possible, as in this case, to isolate the effect of a downturn in a single industry sector on the future path of overall state tax revenue. While the oil and gas downturn does not account for all movement in tax revenue during the downturn, it is believed to have accounted for the great majority of the movement based on the timing of the downturn, the absence of other identifiable factors, and the similarity of the pattern in other major producing states. It is the oversized $2.25 billion (nearly 25%) net decline in total state tax revenue in response to the oil and gas slowdown that makes in-depth analysis of oil and gas taxation in Oklahoma and other top-tier energy producing states so necessary. The oversized effect is traced to both a large direct effect as the industry is buffeted directly by changes in energy prices and large spillover effects transmitted to other areas of the state economy. Measurements of both the direct effect taking place within the industry and the estimated spillover effects exerted on the statewide economy are detailed in the following section. 6 7 8 9 10 11 12 10 11 12 13 14 15 16 17 18 $Billions at annual rate Actual Total State Taxes Counterfactual Total State Tax Forecast $2.25 billion estimated total state tax effect Peak of oil and gas expansion: 2014Q3 End of oil and gas contraction: 2016Q4

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Oklahoma Oil and Gas Activity and Tax Contribution 12 | P a g e Earnings and Employment Multiplier Effects During State Recession The recent state recession provides a near ideal case to examine the expected spillover (or economic multiplier) effects resulting from direct changes in activity in the oil and gas industry. These effects are examined using three common measures: 1) household earnings, 2) wage and salary employment, and 3) state gross domestic product (GDP). This provides broad evidence of the overall influence oil and gas activity has on statewide economic activity in Oklahoma. Figure 2 illustrates estimated net multiplier effects based on changes in all three economic measures within the oil and gas sector as they were transmitted to the broader economy in 2015 and 2016. The simulations use our state-level forecasts in place prior to the oil and gas downturn as counterfactual comparisons for evaluating the shift in the expected path of the state economy following the downturn in oil prices beginning in 2014. All data reflect activity within the oil and gas components of the NAICS mining sector, with non-mining activity excluded. Household Earnings. In the case of household earnings in Panel A of Figure 2, the oil and gas sector posted a cumulative direct decline of $8.9 billion in earnings paid by the industry between the 4th quarter of 2014 and the 4th quarter of 2016. This reflects a 55% decline, from $16.2 billion to $7.3 billion. This direct effect had a clear spillover effect on overall state household earnings. Statewide household earnings dropped $13.5 billion ($128.5 billion to $115.0 billion), or 10.5%, from peak to trough during the oil and gas recession. However, using a counterfactual comparison based on our July 2014 forecast of 6.4% annual growth for household earnings through FY2018, the net decline in earnings statewide reached an estimated $30.9 billion from peak to trough from its pre-recession path. This equates to an effective earnings multiplier of 3.47, whereby a one-dollar direct decline in household earnings in the oil and gas industry equates to a loss of 2.47 dollars (multiplier minus 1 to account for the direct effect) in lost spillover earnings in other industry sectors across the state. The estimated multiplier effect is considerably higher than recent static Type-2 earnings multipliers of approximately 2.2 produced by the Bureau of Economic Analysis (BEA) using historical input-output relationships.2 Wage and Salary Employment. In the case of employment in Panel B, the oil and gas sector posted a direct decline of 21,500 (34%) wage and salary jobs between November 2014 and August 2016. In response to the oil and gas slowdown, statewide employment subsequently fell by 30,800 jobs, a 1.9% decline. Using a counterfactual comparison based on our July 2014 wage and salary job forecast of 1.3% annual growth for wage and salary employment, the net decline in employment statewide reached an estimated 69,800 workers from peak to trough. This equates to an effective employment multiplier of approximately 3.23, whereby a decline of one job in the oil and gas industry equates to a loss of 2.23 jobs (multiplier minus 1 to account for the direct effect) in lost spillover employment in other industry sectors across the state. The estimated multiplier effect is consistent with recent static Type-2 oil and gas sector earnings multipliers of approximately 3.2 produced by BEA.

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Oklahoma Oil and Gas Activity and Tax Contribution 13 | P a g e Figure 2. Estimated Multiplier Effects in Energy Recession - Oklahoma (A) Household Earnings Effect (B) Wage & Salary Employment Effect (C) Gross Domestic Product (Value Added) Effect Notes: Counterfactual forecasts are from RegionTrack July 2014 Oklahoma State & Local Economic Outlook. Net changes are measured peak-to- trough. Source: U.S. Census Bureau, U.S. EIA, Bureau of Labor Statistics, Bureau of Economic Analysis, and RegionTrack forecasts and calculations. 80 90 100 110 120 130 140 150 160 10 11 12 13 14 15 16 17 18 $Billions at annual rate Actual Household Earnings Counterfactual Household Earnings Forecast $30.9 billion estimated total earnings effect Peak of oil and gas earnings expansion: 2014Q4 End of oil and gas earnings contraction: 2016Q4 Estimated mining earnings multiplier = 3.47 Direct earnings effect: $8.9 billion decline in mining sector earnings (2014Q4-2016Q4) 1.50 1.55 1.60 1.65 1.70 1.75 10 11 12 13 14 15 16 17 18 Millions Actual Wage & Salary Employment Counterfactual W&S Employment Forecast Peak of oil and gas job expansion: 2014Nov Estimated mining employment multiplier = 3.23 69,800 job estimated total employment effect End of oil and gas job contraction: 2016Aug Direct employment effect: 21,500 job decline in mining sector employment (2014Nov-2016Aug) 125 150 175 200 225 250 275 10 11 12 13 14 15 16 17 18 $Billions at annual rate Actual State GDP Counterfactual State GDP Forecast Estimated mining GDP multiplier = 2.34 Direct GDP effect: $22.1 billion GDP decline in mining sector output (2014Q3-2016Q3) Peak of oil and gas GDP expansion: 2014Q3 $51.8 billion estimated total GDP effect End of oil and gas GDP contraction: 2016Q3

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Oklahoma Oil and Gas Activity and Tax Contribution 14 | P a g e State Gross Domestic Product. A similar exercise for state gross domestic product in Panel C shows the effect of the $22.1 billion direct decline in state GDP in the state’s oil and gas sector from the third quarter of 2014 to the third quarter of 2016.3 Using a counterfactual comparison derived from our July 2014 forecast of 6.5% annual growth for state GDP, the net effective decline in GDP statewide reached $51.8 billion (10.9% decline) from peak to trough. This equates to a GDP multiplier of 2.34, whereby a decline of one dollar of GDP in the oil and gas industry equates to a loss of 1.34 dollars (multiplier minus 1 to account for the direct effect) in lost spillover GDP in other industry sectors across the state. The estimated multiplier effect is higher than recent static Type-2 earnings multipliers of approximately 1.8 produced by BEA. Linkage from Oil and Gas Activity to State Tax Revenue The large estimated multiplier effects in the recent recession reflect the extensive economic interlinkages between the oil and gas industry and most other industry sectors in Oklahoma. They also underlie the high sensitivity of the overall state tax base to changes in the oil and gas industry. In the case of both earnings and employment, the size of the estimated multipliers suggests that the direct decline in activity in the oil and gas sector accounts for approximately 30% (1 divided by the multiplier) of the total economic response, with the remaining 70% due to spillover effects in other industries. In the case of GDP, the estimated multiplier suggests that the direct loss in activity in the oil and gas sector accounts for approximately 43% of the total state GDP lost in the period, with the remaining 57% attributed to spillover effects. A summary of the estimated effects during the recent oil and gas recession from late 2014 through late 2016 is as follows (see Figure 3): o Direct Effects: Employment in the state’s oil and gas industry declined by 21,500 wage and salary workers; household earnings by oil and gas workers and self- employed proprietors declined by $8.9 billion; and GDP in the oil and gas sector declined by $22.1 billion. o Total Effects: The state subsequently lost a total of 69,800 jobs; household earnings declined by $30.9 billion; and state GDP contracted by $51.8 billion from peak to trough based on counterfactual forecasts in place prior to the downturn. o Tax Effect: As a result, total state taxes declined by $2.25 billion in the downturn from peak to trough over the recession cycle as a result of the oil and gas slowdown. o Estimated economic multipliers suggest that oil and gas activity accounts for 30% of the direct economic change in employment and household earnings during the recession; oil and gas directly accounts for 43% of the statewide decline in GDP. o The findings suggest that a $1 billion reduction in oil and gas industry GDP equates to an average of $102 million dollars lost in total state tax revenue; or, an average of 10.2% of the total reduction in mining industry GDP is traced to diminished total state tax revenue. o These estimates of the estimated economic and tax effects are most applicable in a period of rapid expansion or contraction in the industry.

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Oklahoma Oil and Gas Activity and Tax Contribution 15 | P a g e Figure 3. Estimated Oil and Gas Sector Spillover Effects - Oklahoma Economic Measure Direct Effect Total State Effect Net Multiplier Evaluation Period Total State Taxes n/a -$2.25 billion n/a 2014Q3-2016Q4 Total Household Earnings -$8.9 billion -$30.9 billion 3.47 2014Q4-2016Q4 Total Wage and Salary Employment -21,500 jobs -69,800 jobs 3.23 2014Sep-2016Dec Total Gross Domestic Product -$22.1 billion -$51.8 billion 2.34 2014Q3-2016Q3 Direct vs. Spillover Effects. There is no generally accepted method for apportioning the exact share of the total $2.25 billion estimated tax loss to either direct losses from industry payments or spillover tax losses from other sectors of the broader state economy. However, we can use the multipliers estimated from state data during the recession to gauge the approximate size of the tax response to each. Based on the estimated multipliers, the estimated 30% share of earnings and employment lost directly in the oil and gas sector likely sets an absolute floor on the share of the tax revenue decline traced directly to the oil and gas industry. This suggests that at least $675 million of the $2.25 billion tax loss was a direct reduction in payments by the oil and gas sector, with the remaining $1.58 billion of the tax loss due to spillover effects in the remainder of the state economy. The estimated 43% direct share of GDP lost directly in the oil and gas sector suggests $968 million of the tax revenue decline is traced directly to the oil and gas sector, with $1.28 billion due to spillover tax losses. Policy Conclusions. The behavior of state tax revenue during the recent oil and gas-driven recession clearly illustrates several key policy findings about the overall tax contribution of the oil and gas sector in Oklahoma: o The state remains a top-tier energy state with overall economic conditions highly sensitive to activity in the oil and gas sector; o An extended slowdown in the sector was capable of producing a net 25% decline in total state tax revenue below projections; o Overall state tax revenue remains highly sensitive to changes in activity in the oil and gas sector, with total state tax losses equal to 10% of the amount of GDP lost in the sector; o The size of the reduction in taxes during the slowdown suggests that multiple tax streams beyond severance taxes play a major role in determining the total tax contribution of the oil and gas sector; and o Other state taxes such as personal and corporate income tax, sales and use tax, motor vehicle, motor fuel, and other taxes are the greatest source of direct and spillover tax contributions traced to the industry.

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Oklahoma Oil and Gas Activity and Tax Contribution 16 | P a g e III. Why Such Large Tax Effects from Oil and Gas in Oklahoma? The outsized economic contribution of oil and gas to the Oklahoma economy and state tax revenue can be illustrated in several additional ways. The contribution is possibly best captured by measuring the share of state economic growth attributable to the industry in recent years. Since the reemergence of the domestic oil and gas industry beginning in 2003, the oil and gas sector (mining) has been the largest contributor to economic growth in Oklahoma across all major sectors, by far. The state also has the largest share of total household earnings derived from the oil and gas sector among all major producing states since 2003. A related factor underlying the high household earnings share is Oklahoma’s high share of household earnings derived from self-employed proprietors in the oil and gas sector. Each of these factors is evaluated in the following sections. Oil and Gas Contribution to State GDP Figure 4 summarizes BEA industry-level measures of the contribution of each major NAICS sector to real GDP growth in Oklahoma from 2003 through 2017. This period stretches back to the initial stages of the reemergence of the industry in 2003 and extends through the most recently available data. The mining sector is used in this section to represent oil and gas activity because BEA makes these calculations readily available only for major NAICS sectors; however, oil and gas represents nearly all mining sector GDP in Oklahoma. Figure 4. Industry Level Contributions to Real GDP Growth – Oklahoma Average annual percent change in the 2003–2017 period Source: Bureau of Economic Analysis 2.41% 2.28% 0.12% 0.96% 0.21% 0.20% 0.14% 0.14% 0.11% 0.09% 0.08% 0.08% 0.07% 0.07% 0.04% 0.04% 0.03% 0.02% 0.02% 0.01% 0.00% 0.00% -0.03% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Total Private Government (1) - Mining (2) - Real estate and rental and leasing (3) - Transportation and warehousing (4) - Health care and social assistance (5) - Wholesale trade (6) - Retail trade (7) - Administrative and support (8) - Professional services (9) - Information (10) - Manufacturing - Durable goods (11) - Manufacturing - Nondurable goods (12) - Utilities (13) - Ag., forestry, fishing, & hunting (14) - Management of companies (15) - Finance and insurance (16) - Arts, entertainment, and recreation (17) - Construction (18) - Accommodation and food services (19) - Educational services (20) - Other services

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Oklahoma Oil and Gas Activity and Tax Contribution 17 | P a g e Across the full period, the Oklahoma economy posted average real GDP growth of 2.41% annually. Remarkably, the mining sector contributed nearly 40% (0.96% annually) of all real growth in the state in the period. All other sectors combined contributed only 1.45% annually to real GDP growth in the period. Again, the state’s mining sector accounted for approximately 40% of the total increase in real economic output in Oklahoma during the reemergence of the oil and gas sector in the 2003 to 2017 period. The state’s mining sector far outpaced the contribution of all other major sectors. The gain from mining exceeded the contribution of the 2nd and 3rd ranked sectors - Real Estate (0.21% annually) and Transportation and Warehousing (0.20% annually) - by a factor of more than four. Each of the remaining sectors contributed less than 0.15% annually, with many industries contributing negligible amounts to overall state real GDP growth across the period. GDP Contribution Across the Producing States The contribution of oil and gas to state GDP growth is outsized in other major producing states as well. Figure 5 details the contribution to real GDP from both the mining and non- mining sectors in the 2003 to 2017 period for the sixteen top oil and gas-producing states measured by production value. Figure 5. Contribution of Mining Sector to State Real GDP Growth Mining Sector Non-Mining Sectors Region Total Real GDP Growth % Annual Real GDP Growth % Share of Total Growth Annual Real GDP Growth % Share of Total Growth Average annual percent change in real state GDP in the 2003-2017 period United States 1.74 0.08 4.8% 1.66 95.2% North Dakota 4.98 1.38 27.8% 3.60 72.2% Oklahoma 2.41 0.96 40.0% 1.45 60.0% Alaska 1.39 0.57 40.9% 0.82 59.1% Texas 3.07 0.54 17.5% 2.54 82.5% Wyoming 1.91 0.50 26.2% 1.41 73.8% West Virginia 0.99 0.39 39.3% 0.60 60.7% New Mexico 1.35 0.34 25.2% 1.01 74.8% Colorado 1.91 0.30 15.5% 1.62 84.5% Pennsylvania 1.54 0.22 14.2% 1.32 85.8% Arkansas 1.54 0.16 10.6% 1.38 89.4% Ohio 0.95 0.14 14.3% 0.81 85.7% Montana 2.27 0.09 4.2% 2.17 95.8% Utah 3.07 0.07 2.3% 3.00 97.7% California 2.43 0.01 0.5% 2.42 99.5% Kansas 1.61 0.00 0.0% 1.61 100.0% Louisiana 0.72 -0.33 -45.8% 1.05 145.8% Source: Bureau of Economic Analysis and RegionTrack calculations The nearly 1% annual contribution of mining activity to state real GDP growth in Oklahoma is the 2nd largest among the sixteen top producing states, trailing only North Dakota (1.38%) in the period. Alaska (0.57% annually) and Texas (0.54% annually) are the only other states

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Oklahoma Oil and Gas Activity and Tax Contribution 18 | P a g e where mining contributed a half percentage point or more to annual real GDP growth. The dependence of total economic growth in Oklahoma upon mining sector activity is further evidenced by the share of total state GDP growth that originated in the mining sector in the period. Only Alaska (40.9% share) exceeded Oklahoma’s 40.0% share of total state economic growth derived from the mining sector in the period. North Dakota’s mining sector posted a larger absolute contribution to annual growth (1.38%) than Oklahoma but contributed only 27.8% of total state growth. West Virginia (39.3% share) similarly posted a high share of total growth from mining. However, both West Virginia and Alaska posted very slow overall growth in the period resulting from very weak growth in their non-mining sectors.4 Oklahoma vs. U.S. GDP Growth. Oil and gas also played a large role in the state’s performance relative to the nation in the period. Oklahoma outpaced the U.S. in real GDP growth by 0.67% annually since the reemergence of the oil and gas industry in 2003. However, if the state had merely matched the national average contribution of mining (0.08% annually), real GDP growth in the state would have trailed the nation by 0.2% annually. Oklahoma also posted the 5th fastest total real GDP growth rate among the sixteen largest producing states in the period, trailing only North Dakota, Texas, Utah, and California. Oil and Gas Share of Household Earnings The influence of oil and gas activity on total state taxes is also traced to the high share of total household earnings derived directly from the state’s oil and gas sector. Figure 6 illustrates the share of total statewide household earnings paid by the oil and gas industry directly to Oklahoma households the past two decades. The share includes only the oil and gas components of the mining sector and excludes other forms of mining. Household earnings includes both the compensation paid to wage and salary workers and income received by self-employed proprietors and participants in oil and gas partnerships. Figure 6. Share of Total Household Earnings Derived from Oil and Gas Sector - Oklahoma Notes: Household earnings is defined by Bureau of Economic Analysis as employee compensation plus proprietors’ income. Proprietor’s income consists primarily of the income of sole proprietors and partnerships. The share of household earnings in each state derived from oil and gas activity is calculated as the sum of NAICS 201 (Oil and gas extraction) plus a share of NAICS 203 (Support activities for mining). The share of NAICS 203 included is determined by the ratio of NAICS 201/(NAICS 201 + NAICS 202 (Mining – except oil and gas) ). 3.3% 2.9% 3.0% 3.0% 2.7% 5.1% 7.8% 10.7% 12.6% 10.5% 15.6% 7.9% 9.0% 9.7% 10.6% 11.1% 11.2% 7.3% 4.8% 5.0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

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Oklahoma Oil and Gas Activity and Tax Contribution 19 | P a g e The share of earnings in Oklahoma derived from oil and gas activity reached a peak of 15.6% in 2008 and averaged 9.3% of total statewide household earnings in the full 2003 to 2017 reemergence period. The 15.6% share in Oklahoma during 2008 is the highest recorded share in any oil and gas-producing state in recent decades, including the previous-record 13.5% peak share in Wyoming during the 1982 Oil Boom period. During the recent oil and gas recession of 2015 and 2016, household earnings received from the oil and gas sector in Oklahoma collapsed to only about 5% of statewide earnings in 2016 and 2017. This decline in household income weighed heavily on other state tax streams, particularly personal income tax and sales tax collections. Household Earnings Share Across the Producing States Oklahoma is one of only a handful of energy-producing states that can experience substantial swings in statewide household earnings and total state taxes in response to changes in the oil and gas sector. Figure 7 illustrates the average share of statewide household earnings derived from the oil and gas industry for the top sixteen producing states since the industry reemerged in 2003. Oklahoma’s 9.3% average share of household earnings derived from the oil and gas sector leads all sixteen major producing states. The state’s share is 2 full percentage points above second ranked Texas and 3 to 4 percentage points above Wyoming, Alaska, and Louisiana, three of the largest traditional energy-producing states. It is important to note that Texas, Wyoming, and Alaska have no state personal income tax, and these oil and gas household earnings go largely untaxed in these states. The oil and gas share of household earnings in Oklahoma is 2.5-3 times the share received by households in Colorado, North Dakota, and New Mexico in the period. Figure 7. Share of Total Household Earnings from Oil and Gas Sector (2003-17 Average) Notes: Household earnings is defined by Bureau of Economic Analysis as employee compensation plus proprietors’ income. Proprietor’s income consists primarily of the income of sole proprietors and partnerships. The share of household earnings in each state derived from oil and gas activity is calculated as the sum of NAICS 201 (Oil and gas extraction), NAICS 213111 (Drilling oil and gas wells), and NAICS 213112 (Support activities for oil and gas operations) divided by total household earnings from all sectors. 9.3% 7.3% 6.4% 5.8% 5.4% 3.8% 3.6% 3.1% 2.0% 1.7% 1.3% 0.7% 0.5% 0.4% 0.3% 0.3% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% OK TX WY AK LA CO ND NM KS WV MT AR PA UT CA OH

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Oklahoma Oil and Gas Activity and Tax Contribution 20 | P a g e The potential influence of oil and gas related household earnings on state tax revenue is quite limited in the eight remaining producing states in the comparison. The share over the period falls between 1.0% and 2.0% of household earnings for Kansas, West Virginia, and Montana. The share is less than 1% in Arkansas, Pennsylvania, Utah, California, and Ohio. In contrast to Oklahoma, these eight states are unlikely to experience meaningful fluctuations in state economic activity or state tax revenue because of changes in household earnings derived from the oil and gas sector. Role of Oil and Gas Proprietor Income It is important to note that a majority of earnings paid by the oil and gas industry to the household sector in Oklahoma now typically accrues to self-employed proprietors (see Figure 8).5 Since 2003, slightly more than half (55%) of all household earnings from oil and gas activity in Oklahoma was received by self-employed proprietors, with the remainder (45%) received as compensation by wage and salary workers. The volatility of the two household earnings streams in Figure 8 is quite different as well, leading to different roles in the volatility of state tax revenue. Compensation received by oil and gas wage and salary workers has remained in a mostly stable uptrend since 2003, rising from 2.8% of total state household income in 2003 to 4.6% in 2017. In contrast, wage and salary compensation produced only limited volatility in state tax revenue in the period. The highly volatile proprietor income share of oil and gas earnings introduced most of the excessive volatility into state tax revenue. This component of earnings reflects approximately 85,700 individual non-corporate business entities in Oklahoma engaged in business activity in Figure 8. Share of Total State Household Earnings from Oil and Gas - Oklahoma Notes: Household earnings is defined by Bureau of Economic Analysis as employee compensation plus proprietors’ income. Proprietors’ income consists primarily of the income of sole proprietors and partnerships. The share of household earnings in each state derived from oil and gas activity is calculated as the sum of NAICS 201 (Oil and gas extraction) plus a share of NAICS 203 (Support activities for mining). The share of NAICS 203 included is determined by the ratio of NAICS 201/(NAICS 201 + NAICS 202 (Mining – except oil and gas) ). 2.8% 2.6% 2.5% 2.9% 2.6% 2.8% 3.0% 3.2% 4.6% 4.4% 4.7% 4.3% 4.4% 5.3% 5.6% 5.4% 5.3% 5.2% 4.3% 4.6% 0.5% 0.3% 0.5% 0.1% 0.1% 2.3% 4.8% 7.5% 8.0% 6.0% 10.9% 3.6% 4.6% 4.4% 5.0% 5.6% 5.9% 2.1% 0.5% 0.3% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Proprietors' Income Share Compensation Share

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Oklahoma Oil and Gas Activity and Tax Contribution 21 | P a g e the oil and gas sector. This also reflects a relatively recent shift in the taxation of oil and gas industry earnings from corporate income to personal income tax rates. The share of statewide household earnings derived from self-employed oil and gas proprietors increased more than four-fold from 2.3% in 2003 to 10.9% in 2008. The share collapsed to 3.6% in 2009 following the most recent national recession then increased steadily to 5.9% of statewide household earnings by 2014. Following the state recession, oil and gas earnings by proprietors in the state dropped to less than one percent of total statewide earnings in both 2016 and 2017. In dollar terms, oil and gas proprietor earnings declined from $7.5 billion in 2014 to a low of only $405 million in 2017. The collapse in earnings accruing to self-employed oil and gas industry participants weighed heavily on total state tax collections from 2015 through 2017. A high share of total proprietor earnings generated across all industries in Oklahoma is derived from the oil and gas sector (see Figure 9). In the 2003 to 2017 period, Oklahoma has the highest share (24.2%) of total proprietor earnings derived from the oil and gas sector among the sixteen largest producing states. Texas and Colorado have a similar share (23%). Most producing states have a share of 15% or less, with many of the newer producing states such as Arkansas, Ohio, and Pennsylvania having a far less developed oil and gas proprietor sector. Figure 9. Oil and Gas Share of Total Non-Farm Proprietor Earnings (2003-17 Average) Notes: Proprietor’s income consists primarily of the income of sole proprietors and partnerships. The share of household earnings in each state derived from oil and gas activity is calculated as the sum of NAICS 201 (Oil and gas extraction), NAICS 213111 (Drilling oil and gas wells), and NAICS 213112 (Support activities for oil and gas operations) divided by total nonfarm proprietor earnings from all sectors statewide. 24.2% 23.1% 23.1% 16.3% 13.9% 13.1% 13.0% 12.2% 10.6% 6.8% 4.2% 2.7% 2.4% 2.0% 1.0% 0.9% 0% 5% 10% 15% 20% 25% 30% OK TX CO LA WY KS NM ND WV MT AR PA AK OH UT CA

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Oklahoma Oil and Gas Activity and Tax Contribution 22 | P a g e IV. Oklahoma Oil and Gas Tax Contribution Measuring Tax Contribution The ongoing debate over oil and gas tax policy in Oklahoma remains muddled by the use of differing approaches to measuring the industry’s tax contribution. There are three common approaches to measuring the tax contribution of the oil and gas sector – production, corporate, and industry. 1. Production – The ‘production’ view is the most commonly used and typically focuses on the direct costs of production as measured by combined severance and ad valorem tax payments. This narrow view reflects the targeted nature of these taxes toward production and the historical link between severance and ad valorem taxes in many states. 2. Corporate – A broader ‘corporate’ view extends the ‘production’ approach to include a wider range of business taxes paid by oil and gas firms. This approach typically includes additional taxes paid by oil and gas business establishments such as corporate income, motor fuel, motor vehicle, franchise, and sales and use taxes. These additional taxes can far exceed the amount of severance and ad valorem tax payments in many producing states. 3. Industry – The ‘industry’ view extends both the ‘corporate’ and ‘production’ approaches to reflect the full range of tax revenue generated by the presence of the oil and gas ‘industry’ itself. This approach recognizes the range of taxes paid by workers and self-employed proprietors within the oil and gas sector. This approach is most applicable in producing states such as Oklahoma with significant oil and gas production, active exploration activity, a large concentration of white-collar workers, an extensive base of self-employment in oil and gas, and a broad base of corporate oil and gas establishments. It is also highly relevant when evaluating Oklahoma relative to those producing states with no personal income tax (e.g. Texas, Wyoming, and Alaska). Forming State Oil and Gas Tax Policy Proponents of higher severance taxes in Oklahoma focus almost exclusively on the ‘production’ view of oil and gas taxation (severance and ad valorem taxes) in advocating for tax policy changes. This approach ignores the broader corporate tax contribution of oil and gas firms in the state, implying that other taxes are either not relevant or are roughly equivalent across the producing states. Relatively little research has been produced describing the overall business, or ‘corporate,’ tax burden faced by oil and gas firms in Oklahoma and most other producing states. This information is essential to policymakers in determining whether overall business tax payments are comparatively low in Oklahoma or not. Only by forming tax contribution estimates from a corporate viewpoint can the relative size of production taxes in Oklahoma be evaluated in context with the broader tax contribution of the industry.

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Oklahoma Oil and Gas Activity and Tax Contribution 23 | P a g e From a state budgetary perspective, tax contributions from the ‘industry’ view are far more important in explaining overall movements in state tax revenue. In Oklahoma, the tax contribution of the oil and gas industry extends well beyond both the production and corporate contributions of the sector. The extreme sensitivity of total state tax revenue to changes in oil and gas activity demonstrated in the recent oil and gas-driven recession suggests that state tax policy must consider the broad range of tax payments tied to the industry – both direct and indirect. As discussed earlier in the report, estimates derived from the recent state recession suggest that each $1 billion decline in oil and gas sector GDP equated to a $102 million decline in total state tax revenue. Differences in the overall tax structure in other major producing states can result in far different ‘industry’ tax burdens as well. The other oil and gas-producing states levy a widely varying range of taxes, including various levels of personal income and sales taxes. For example, the three major producing states of Alaska, Texas, and Wyoming levy no personal income tax. Household earnings in these states accrue to wage and salary workers, self- employed proprietors, royalty owners, and others in the oil and gas sector, but these earnings do not contribute to total state tax revenue through personal income tax payments. In Oklahoma, personal income taxes have comprised almost one-third of total state tax revenue the past two decades. Even among energy states that do levy an income tax, tax rates differ greatly. Not all states collect sales taxes either, with rates highly variable among those that do. Alaska and Montana, two traditionally high severance tax states, have only small local sales taxes. In fact, Alaska has long relied predominately on production taxes from oil and gas to fund state government and is the only state that does not collect state sales tax or levy an individual income tax on personal income. The underlying concern for policymakers is that oil and gas tax policy conclusions based solely on the ‘production’ tax burden of the industry may be wholly inconsistent with the ‘corporate’ and/or ‘industry’ views. Consequently, sound comparisons of oil and gas taxation in Oklahoma relative to other producing states requires an evaluation of all three approaches. The following sections of the report provide a detailed evaluation of the three basic approaches to measuring the tax contribution of the oil and gas sector in Oklahoma. For comparative purposes, much of the analysis is extended beyond Oklahoma to include the sixteen largest oil and gas-producing states.

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Oklahoma Oil and Gas Activity and Tax Contribution 24 | P a g e V. Tax Contribution - Production View This section of the report focuses on the ‘production’ view of oil and gas taxation. Estimates of the combined effective severance and ad valorem tax rates are provided for the sixteen largest oil and gas-producing states, including Oklahoma. The recent increase in severance tax rates in Oklahoma is discussed along with changes in total severance tax payments though FY2018, the most recently completed fiscal year, and Oklahoma Tax Commission (OTC) forecasts for FY2019. Effective tax rates are calculated first for severance taxes and then for ad valorem taxes in the sixteen largest producing states. The individual rates are then combined to form a measure of the combined effective severance and ad valorem tax rate for each state. The section concludes by examining a widely cited report produced for the state of Idaho evaluating the level of production taxes in Oklahoma and eight other states. Recent Gross Production Tax Legislation Gross production tax rates in Oklahoma increased in 2018 under House Bill 1010XX. Beginning July 1, 2018, production of crude oil and natural gas from all new wells and all existing wells taxed at the previous 2% rate will be taxed at a new 5% rate for the first 36 months of production. All wells revert to a 7% rate after 36 months of production. No general oil and gas production incentives remain available to Oklahoma producers. OTC Forecast. The new 5% severance tax rate will lead to a substantial increase in state severance tax collections. Fiscal projections by the OTC suggest that total gross production revenue will reach $907 million in FY2019 (see Figure 10). The tax rate change was projected to raise at least $170 million annually in new severance tax revenue. These estimates include both severance taxes and the 0.095% petroleum excise tax levied by the state. Figure 10. Oklahoma Severance Tax Revenue Projections by Tax Rate (FY2019) Tax Rate Crude Oil Natural Gas Total Amount Share Amount Share Amount Share 1% 0 0.0% 0 0.0% 0.0% 2% 79,493,000 16.6% 56,897,000 13.3% 136,390,000 15.0% 5% 99,365,000 20.7% 71,120,000 16.7% 170,485,000 18.8% 7% 301,409,000 62.8% 298,711,000 70.0% 600,120,000 66.2% Total $480,267,000 100.0% $426,728,000 100.0% $906,995,000 100.0% Source: Oklahoma Tax Commission. State of Oklahoma FY19 Gross Production Forecast Reflecting HB 1010 XX Estimated Impact. Petroleum excise tax payments of 0.095% are included in the projections. Lag in Reporting at 2% Rate. OTC estimates suggest that fully 85% of FY2019 severance tax payments will be made at either the current 7% rate or the new 5% rate in FY2019. Two- thirds of total severance tax in FY2019 will be made at the 7% rate. Less than 20% will be received at the new 5% tax rate. Following the tax rate rise, 15% ($136.4 million) of total oil and gas severance tax in Oklahoma will still be paid at the 2% rate in FY2019 (see Figure 10). These 2% receipts

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Oklahoma Oil and Gas Activity and Tax Contribution 25 | P a g e reflect the reporting and payment lag extending from the month of production to month of tax payment. Payments at the 2% rate will occur in the first few months of FY2019, but none are expected after the first three months of the fiscal year. The lag in payments at the new 5% rate also leads to an understatement of the new trend rate of annual severance tax revenue that will be collected at the new rate. If the expected 15% share of total FY2019 production taxed at 2% was instead taxed at the new 5% rate, annualized total severance tax collections would reach $1.12 billion in the current fiscal year. This represents the best estimate of the new annual trend rate of severance taxes paid by the industry at the new tax rate given current energy prices and production levels. Bounce in Revenue Underway. FY2019 gross production receipts are likely to far exceed the OTC forecast of $907 million. The projection is based on a conservative price outlook of $53.08 per barrel of oil that is well below market prices during the first half of the current fiscal year. The outlook also assumes a price of $2.99 per mcf for natural gas that is well below current market prices. In assessing the likelihood that OTC tax revenue forecasts are realized, the combination of strong growth in state crude oil and natural gas production and unexpectedly high prices for crude oil and natural gas in recent months suggest that gross production taxes should easily exceed $1.0 billion in FY2019. Recent monthly severance tax receipts highlight the expected effect of the new 5% tax rate. Figure 11 illustrates the leading edge of the sharp rise underway in severance tax collections. Collections in September and October of 2018 capture payments received primarily at either 7% or the new 5% severance tax rate and averaged approximately $104 million per month. This pace equates to annualized collections of approximately $1.25 billion at current crude oil and natural gas prices. Figure 11. Monthly Gross Production Tax Receipts – Oklahoma Source: Oklahoma Tax Commission online report: https://oktap.tax.ok.gov/OkTAP/Web/_/ Notes: Includes both severance taxes and the 0.095% petroleum excise tax. 0 20 40 60 80 100 120 12 13 14 15 16 17 18 $Millions Initial collections at new 5% severance tax rate

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Oklahoma Oil and Gas Activity and Tax Contribution 26 | P a g e Gross Production Revenue Responds to Rising Production, Prices, and Tax Rates The state will post a third consecutive year of sharply rising gross production revenue in FY2019 (see Figure 12). Severance tax revenue bottomed at $331 million in FY2016 following the collapse in oil prices before more than doubling to nearly $700 million through FY2018, the most recently completed fiscal year. OTC projections suggest that gross production taxes will increase another 30% in FY2019 to $907 million. Gross production revenue continues to rise as a result of higher tax rates, increased production, and rebounding energy prices. This is the opposite set of circumstances faced by the state in FY2015 and FY2016. Figure 12. Net Oil and Gas Gross Production Tax Receipts – Oklahoma (Fiscal Year) Source: Oklahoma Tax Commission document (Gross Production Forecast FY-19 Reflecting HB 1010XX Impact) Notes: Includes both severance taxes and the 0.095% petroleum excise tax. Refunds. Total gross production receipts in Figure 12 are stated net of refunds, including refunds tied to state tax incentives. Figure 13 details the payment of refunded severance taxes on an annual basis since FY1999. Refunds peaked in FY2013 at $199 million and have moved steadily to near zero in FY2018. Because refunds are typically paid in arrears, they are tracked in the tax year in which they are paid rather than the year of production. Figure 13 Refunds of Oil and Gas Severance Taxes – Oklahoma (Fiscal Year) Source: Oklahoma Tax Commission Notes: Includes refunds of both oil and natural gas severance taxes. 244 386 711 364 547 655 778 1,058 941 1,183 1,069 741 828 849 516 679 557 331 422 698 907 0 200 400 600 800 1,000 1,200 1,400 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 $MILLIONS 9 24 34 53 53 46 97 110 61 83 105 128 150 48 199 181 141 36 20 2 0 50 100 150 200 250 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 $MILLIONS

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Oklahoma Oil and Gas Activity and Tax Contribution 27 | P a g e Severance Tax Gains - Tax Rate vs. Production Gains The sharp increase in severance tax collections since the recent bottom in collections in FY2016 can be apportioned to either a change in the effective tax rate or a change in the taxable value of production. Annual changes in gross production taxes since 2000 are apportioned to changes in effective tax rates and changes in production value in Figure 14. Most recently, of the cumulative $576 million projected rise in annual severance taxes from FY2016 to FY2019, two-thirds ($374 million) is attributed to a rise in the effective gross production tax rate while the remaining one-third ($202 million) is traced to increased production value of crude oil and natural gas. This is in sharp contrast to conditions from 2014 to 2016 when changes in severance tax collections were tied almost exclusively to production changes with little change resulting from tax rate changes. Figure 14. Oklahoma Severance Tax – Source of Annual Changes (Fiscal Years) (A) Annual Severance Tax Change (B) Annual Change Apportioned to Production Value and Effective Tax Rate Changes Source: Oklahoma Tax Commission and RegionTrack calculations 142 325 -347 184 107 124 280 -118 242 -114 -328 86 21 -333 163 -123 -226 91 276 209 -400 -300 -200 -100 0 100 200 300 400 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Millions 132 268 -321 225 70 162 303 -159 329 -314 -227 89 -25 168 175 -110 -206 67 112 22 10 57 -26 -41 37 -38 -23 41 -87 200 -100 -2 46 -501 -12 -13 -20 24 164 187 -600 -500 -400 -300 -200 -100 0 100 200 300 400 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Millions Value of Production Change Effective Severance Tax Rate Change

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Oklahoma Oil and Gas Activity and Tax Contribution 28 | P a g e Effective Severance Tax Rate Figure 15 provides updated historical effective severance tax rates for oil and gas production in Oklahoma from FY1999 through FY2018, along with a projection for the current fiscal year (FY2019) based on OTC estimates. See Appendix A for a detailed overview of the methodology used and data sources underlying the estimates. Effective Rate Calculation. The effective rate is calculated as total gross production tax receipts (net of refunds) divided by the market value of crude oil and natural gas production. Production quantities of both crude oil and natural gas are based on Energy Information Administration (EIA) estimates. The price of crude oil is based on the state level series of first purchaser prices produced by EIA. The price of natural gas is based on the average spot price reported at major natural gas trading hubs across Oklahoma as provided by NGI.6 The use of NGI spot prices reflects the general lack of standardized gas pricing data at the state level and widely different pricing methods followed by the producing states. All effective rate calculations are based on the state’s fiscal year beginning July. The value of production is similarly tabulated on a matching fiscal year basis. Figure 15. Effective Severance Tax Rate – Oklahoma (Fiscal Year) Source: Oklahoma Tax Commission, Energy Information Administration, and RegionTrack calculations Sharply Rising Effective Rates. The effective severance tax rate on production in Oklahoma has increased sharply from a recent low of 2.9% in FY2016 to 4.0% in FY2018. The effective rate is projected to increase again by more than a full percentage point in FY2019 as a result of the new 5% tax rate. Assuming flat state oil and gas production from FY2018 to FY2019, the effective tax rate is expected to reach 5.1% in FY2019. Effective rates in Oklahoma in FY2019 will approach the average rates in place over much of the past two decades. The estimated FY2019 rate is less than one percentage point below the 6.0% average rate in effect from FY1997 to FY2012 period. The effective rate is expected to approach 5.5% in FY2020 as all production moves out of the historical 2% production bracket. 5.9% 6.1% 6.6% 6.2% 5.7% 6.1% 5.8% 5.7% 5.9% 5.5% 6.8% 6.0% 6.0% 6.3% 3.2% 3.2% 3.1% 2.9% 3.1% 4.0% 5.1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

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Oklahoma Oil and Gas Activity and Tax Contribution 29 | P a g e Oklahoma Has 5th Highest Severance Tax Rate in FY2019 For a state-to-state comparison, updated effective severance tax rates for the sixteen largest producing states are detailed in Figure 16. Oklahoma’s FY2018 effective rate of 4.0% ranks 8th among the sixteen states, slightly below the 16-state average of 4.4% in the period. Effective rate calculations for the sixteen states in the FY2012 to FY2018 period are detailed in Appendix A. The new 5% severance tax rate in Oklahoma is expected to increase the state’s effective rate to 5.1% in FY2019, ranking 5th among the sixteen largest producing states. The state would also move well above the overall average rate of 4.4% across the top producing states. Figure 16. Effective Severance Tax Rate - 16 Largest Producing States (FY2018) Source: Refer to Appendix A for estimation details and links to electronic sources. *The 2018 estimate for AK is based on estimated production tax only. Pennsylvania assesses no severance tax but includes the state impact fee. Notes: All data are stated on a fiscal year basis. The effective rate is calculated as total severance taxes divided by the total value of oil and gas production. Montana (9.4%) and North Dakota (7.8%) currently have the highest effective severance tax rates. Montana has the highest effective rate but is the smallest producer, by far, among the sixteen states. North Dakota has the second highest effective rate and second highest value of output but allows no ad valorem taxes on oil and gas activity. A second tier including large producers New Mexico (6.6%) and Alaska (6.1%) has effective rates above 6% in FY2018. A third tier including Oklahoma, Wyoming, Texas, and Louisiana follows just behind this group with effective rates between 4% and 5%. Oklahoma’s effective severance tax rate is expected to move from just below the rate in these states in FY2018 to just above them in FY2019. The eight lowest-rate states – West Virginia, Kansas, Arkansas, Pennsylvania, Utah, Colorado, California, and Ohio – all have effective severance tax rates of 3.0% or less in FY2018. 9.4% 7.8% 6.6% 6.1% 5.1% 5.0% 4.7% 4.2% 4.0% 3.0% 2.4% 1.8% 1.5% 1.2% 1.0% 0.9% 0.9% 4.4% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% MT ND NM AK OK WY TX LA OK WV KS AR PA UT CO CA OH 16-States Rank: 8th FY18 Rank: 5th FY19 Under Current Tax Law

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Oklahoma Oil and Gas Activity and Tax Contribution 30 | P a g e Four of the low-tax but major producing states – Colorado, Pennsylvania, California, and Ohio – assess minimal, or no, traditional severance-type production taxes. In these four states: • Sixth-ranked producer Colorado’s low effective severance tax rate is due to an offsetting credit based on ad valorem tax payments; • Second-ranked gas producer Pennsylvania has no direct severance tax on production, however it’s estimate does include the state’s annual well impact fee; • Major oil producer California also has no statewide severance tax on production, with its estimate based on the state’s assessment fee of approximately 55 cents per barrel of oil and mcf of natural gas produced; and • Emerging gas producer Ohio assesses only a fixed tax of 10 cents per barrel of oil and 2.5 cents per mcf of natural gas produced. Severance Taxes Lower Across the Producing States. The average effective severance tax rate across the producing states has declined sharply in recent years. The downtrend in the average rate from 7.2% in FY2012 to a recent bottom of 4.1% in FY2017 has since rebounded slightly to 4.4% in FY2018 (see Figure 17). The recent rise largely reflects an increase in the effective rate in Alaska. Oklahoma’s rate should exceed the overall average of the sixteen states by almost a full percentage point in FY2019. Figure 17. Effective Severance Tax Rate – 16 Major Producing States Source: Oklahoma Tax Commission and various state tax reporting agencies. Calculations by RegionTrack. Notes: Sources available in electronic form are detailed in the notes to the report. Effective Ad Valorem Tax Rate While oil and gas reserves in the ground are exempt from ad valorem taxes in Oklahoma, substantial quantities of equipment used above ground are subject to ad valorem taxes. Ad Valorem Tax Payments. The only statewide source of oil and gas property valuation data is a series of reports produced by the Oklahoma Tax Commission at two-year intervals. Valuations are currently available for the 2012, 2014, and 2016 tax years. Values for 2013 and 2015 are interpolated as the midpoint between the adjacent reported years. 6.3% 3.2% 3.2% 3.1% 2.9% 3.1% 4.0% 5.1% 7.2% 5.8% 5.1% 4.7% 4.2% 4.1% 4.4% 0% 1% 2% 3% 4% 5% 6% 7% 8% 2012 2013 2014 2015 2016 2017 2018 2019e Fiscal Year Oklahoma 16-State ex OK - Weighted Avg. n/a

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Oklahoma Oil and Gas Activity and Tax Contribution 31 | P a g e There is no standard approach available for determining the oil and gas-related assets that should be included in a calculation of the effective ad valorem tax rate on production in a given state. For Oklahoma, we use two categories of oil and gas-related equipment in the estimates – 1) Refineries, Gas Plants, Gathering, and Compression and 2) Other Oil, Gas, and Mining Property. Because refineries are part of the downstream oil and gas sector and are not strictly related to production, the value of major refineries in the four counties where they are present (Carter, Garvin, Kay, and Tulsa) is removed from the total. Centrally assessed transmission pipelines are excluded as well. It is important to note that the totals also exclude the substantial amount of taxable property owned by oil and gas firms in the form of buildings, other structures, and business personal property. For example, Devon Tower in downtown Oklahoma City is assigned a depreciation- adjusted market value of approximately $500 million in FY2017. Accounting for this real property would produce substantially higher effective ad valorem tax rates for the industry but would overstate the share attributable to production. Figure 18 illustrates annual Oklahoma property tax payments related to oil and gas production and effective ad valorem tax rates from FY2012 to FY2016. Payments totaled $157.6 million in FY2016, up 42% from $110.7 million in FY2012. The state’s effective ad valorem rate was 1.4% in FY2016 based on $157.6 million in property tax payments and $11.4 billion in oil and gas production value. Ad Valorem Tax Payments Effective Ad Valorem Tax Rate Source: Oklahoma Tax Commission and RegionTrack calculations. Notes: Oklahoma levies a severance tax in lieu of ad valorem tax on production. All data are for fiscal years. Payments in 2013 and 2015 are interpolated as the midpoint between adjacent years. The effective rate is calculated as ad valorem tax payments divided by the total value of oil and gas production. Over the FY2012 to FY2015 period, property taxes averaged slightly less than 1% of production value. The effective rate increased sharply in FY2016 because of both higher tax payments and falling production value. State-Level Ad Valorem Comparison. Figure 19 details updated estimates of the effective ad valorem tax rate for the sixteen largest producing states. Ad valorem taxes are levied on a mix of production, reserves, and business personal property across the states. The estimates are 110.7 128.6 146.6 152.1 157.6 0 20 40 60 80 100 120 140 160 180 2012 2013 2014 2015 2016 $Millions 0.8% 0.8% 0.7% 0.8% 1.4% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 2012 2013 2014 2015 2016 Figure 18. Oil and Gas-Related Ad Valorem Tax Payments and Effective Rate - Oklahoma

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Oklahoma Oil and Gas Activity and Tax Contribution 32 | P a g e derived from the measure of oil and gas property as determined within each state. See Appendix A for a description of the methodology used and a detailed list of data sources. The most recent year for which ad valorem taxes on oil and gas activity are generally available across most states remains either FY2016 or FY2017.7 The estimates are based on the most recently available year for each state, with production value matched to the year of the ad valorem data. States using FY2017 data include Alaska, California, Kansas, Louisiana, Montana, New Mexico, Utah, West Virginia, and Wyoming. States with FY2016 data include Colorado, Oklahoma, and Texas. Estimates for Arkansas and Ohio are based on FY2015 data.8 North Dakota and Pennsylvania levy no ad valorem taxes on oil and gas-related property. Oklahoma’s 1.4% effective ad valorem tax rate ranks 9th among the 16 major producing states (see Figure 19). The state’s rate is 0.7% below the 2.1% average across the sixteen largest producing states. Again, Oklahoma’s limited reliance on oil and gas ad valorem taxes is due to the state’s mandate that severance taxes on production be levied in lieu of local property taxes on reserve value and production equipment. Nevertheless, substantial ad valorem taxes are still levied at the local level on the value of personal property used in exploration and production of oil and natural gas, including drilling rigs and gathering systems. Colorado’s 6.0% effective ad valorem rate is the highest among the group, but the state generally allows the offset of most severance taxes with ad valorem tax payments. Figure 19. Effective Ad Valorem Tax Rate – 16 Largest Producing States Notes: Data are collected from various state reporting agency. Sources available in electronic form are detailed in the notes to the report. Estimates reflect the most recently available fiscal year. States using FY2017 data include Alaska, California, Kansas, Louisiana, Montana, New Mexico, Utah, West Virginia, and Wyoming. States with FY2016 data include Colorado, Oklahoma, and Texas. Estimates for Arkansas and Ohio are based on FY2015 data. North Dakota and Pennsylvania levy no ad valorem taxes on oil and gas-related property. 6.0% 4.2% 4.0% 2.5% 2.3% 2.1% 2.1% 1.5% 1.4% 1.3% 1.0% 0.9% 0.9% 0.4% 0.0% 0.0% 2.1% 0% 1% 2% 3% 4% 5% 6% 7% CO WY KS WV TX LA UT AK OK NM AR CA OH MT ND PA 16- States

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Oklahoma Oil and Gas Activity and Tax Contribution 33 | P a g e A second tier of states includes Wyoming and Kansas with effective ad valorem tax rates of approximately 4% of production. Wyoming levies relatively high severance taxes, while Kansas has relatively low severance taxes. Four additional states - West Virginia, Texas, Louisiana, and Utah – form a fourth tier and have effective ad valorem rates in the 2.0-2.5% range. All but Utah are also middle- to low-tier severance tax states. A fourth tier including Alaska, Oklahoma, New Mexico, and Arkansas has relatively low ad valorem rates in the 1.0-1.5% range. California, Ohio, and Montana have very low effective ad valorem tax rates below 1%. Along with low ad valorem taxes in these states, California has no statewide severance tax and Ohio has very low effective severance taxes. Montana has the lowest ad valorem tax rate among the states that levy the tax but has the highest severance tax rate among the sixteen states. Large producers North Dakota and Pennsylvania levy no direct ad valorem taxes on oil and gas activity. North Dakota has no ad valorem tax but levies among the highest severance taxes. Pennsylvania has no severance tax or ad valorem tax – only a state impact fee. Combined Ad Valorem and Severance Tax Rate The recent increase in severance tax rates has also pushed up Oklahoma’s combined effective severance and ad valorem tax rate from a recent low of 3.8% in FY2014 to 5.4% in the recently completed 2018 fiscal year (see Figure 20). The combined rate is projected to rise another full percentage point to 6.4% in FY2019 as the effective severance tax component rises to 5.1%. Figure 20. Combined Severance & Ad Valorem Effective Tax Rate – Oklahoma Source: Oklahoma Tax Commission, Energy Information Administration, and RegionTrack calculations. Notes: The combined effective ad valorem tax rate in FY2017, FY2018, and FY2019 are based on the effective ad valorem rate for FY2016, the most recently avaiable data. Severance tax receipts used in FY2019 are estimates from the Oklahoma Tax Commission. Value of crude oil and natural is calcluated as the total market value of crude oil and natural gas production on a fiscal year basis. The effective rate is calculated as the sum of the effective severance tax rate and effective ad valorem tax rate. 7.1% 4.0% 3.8% 3.9% 4.3% 4.5% 5.4% 6.4% 0% 1% 2% 3% 4% 5% 6% 7% 8% 2012 2013 2014 2015 2016 2017 2018 2019 Severance Ad Valorem

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Oklahoma Oil and Gas Activity and Tax Contribution 34 | P a g e Largest Producing States. Figure 21 provides updated estimates of the combined effective severance and ad valorem tax rate for each of the sixteen largest producing states. The estimates are derived by summing estimates for the effective severance tax rate (see Figure 16) and effective ad valorem tax rate (see Figure 19) in each state as detailed in prior sections of the report. Figure 21. Combined Effective Severance & Ad Valorem Tax Rates Notes: Estimates reflect the sum of the effective rate estimates for each state shown in Figures 16 and 19. Oklahoma’s combined effective rate of 5.4% based on the old FY2018 severance tax rate ranks 11th among the 16 largest producing states. The combined effective rate is projected to rise to 6.4% in in the current fiscal year (FY2019) following the recent severance tax rate increase to 5%, pushing the state’s rank to 8th among the sixteen largest producing states. Montana and Wyoming have combined effective rates above 9%. Montana levies primarily severance taxes while Wyoming has relatively high severance and ad valorem taxes. New Mexico, North Dakota, Alaska, Texas, and Colorado have effective rates between 7.0% and 8.0%. Texas has relatively high rates for both severance and ad valorem taxes, while New Mexico, North Dakota, and Alaska assess high severance taxes and little or no ad valorem taxes. Conversely, Colorado assesses primarily ad valorem taxes. Oklahoma (under the new 5% tax rate), Kansas, and Louisiana have combined effective rates in the 6.0-7.0% range. Oklahoma assesses primarily severance taxes, while Kansas and Louisiana levy a more balanced mix of both taxes. Oklahoma (under the old FY2018 tax rate) and six other states - West Virginia (5.5%), Utah (3.3%), Arkansas (2.7%), California (1.8%), Ohio (1.7%), and Pennsylvania (1.5%) - have a combined effective tax rate below 6%. 9.4% 5.0% 6.6% 7.8% 6.1% 4.7% 1.0% 5.1% 2.4% 4.2% 3.0% 4.0% 1.2% 1.8% 0.9% 0.9% 1.5% 4.4% 0.4% 4.2% 1.3% 0.0% 1.5% 2.3% 6.0% 1.4% 4.0% 2.1% 2.5% 1.4% 2.1% 1.0% 0.9% 0.9% 0.0% 2.1% 0% 2% 4% 6% 8% 10% 12% MT 9.8% WY 9.2% NM 8.0% ND 7.8% AK 7.6% TX 7.0% CO 7.0% OK 6.4% KS 6.4% LA 6.4% WV 5.5% OK 5.4% UT 3.3% AR 2.7% CA 1.8% OH 1.7% PA 1.5% 16- States 6.5% Severance Ad Valorem Rank: 11th FY18 Severance Tax Rate Rank: 8th FY19 Severance Tax Rate

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Oklahoma Oil and Gas Activity and Tax Contribution 35 | P a g e Relative to the other top producing states: • Oklahoma’s FY2019 combined rate of 6.4% in FY2019 will be approximately equal to the 6.5% average combined rate across the major producing states. • Oklahoma’s FY2019 combined rate will rank 8th and be roughly equal to the combined rate levied by traditional producers Texas, Colorado, Louisiana, and Kansas. • Oklahoma’s combined rate will remain 0.6% below dominant-producer Texas but will have a higher effective severance tax rate coupled with a lower effective ad valorem tax rate (as mandated by law). • Relative to the legacy oil-producing states of Alaska and California, the combined FY2019 rate in Oklahoma falls 1.3% below Alaska but 4.6% above the rate in California. • Relative to the new emerging natural gas producing states of Pennsylvania and Ohio, Oklahoma’s combined effective rate in FY2019 will be 4-5 percentage points higher. Idaho Report on Production Taxation Proponents of higher severance taxes9 in Oklahoma routinely refer to a 2017 report commissioned by the state of Idaho assessing the combined severance and ad valorem tax rate in Idaho. The report evaluated Idaho’s effective rate in FY2016 relative to eight other producing states - Utah, Texas, North Dakota, Montana, Alaska, Louisiana, Wyoming, and Oklahoma.10 The report suggests a 3.2% effective severance tax rate and 0% effective ad valorem tax rate for Oklahoma in FY2016. The combined effective rate of 3.2% for Oklahoma is cited in the report as the lowest effective tax rate among the nine states reviewed. This finding has been widely reported as evidence of preferential tax treatment for Oklahoma oil and gas producers. For example, advocates of higher severance tax rates refer to the report as evidence that “Oklahoma’s tax rate on oil and gas is the lowest of any major oil and gas producing state…”11 The concern for state policymakers is that the report has several data and methodological issues that render it largely irrelevant for assessing Oklahoma oil and gas taxation. For the benefit of state policymakers, we provide a detailed evaluation of the overall report including the underlying data, the influence of the set of states used in the analysis, and the conclusions drawn regarding Oklahoma. Idaho Report Concerns. There are four primary concerns with the Idaho report that warrant extended review and discussion: 1. Oklahoma’s effective severance and ad valorem tax rate is understated

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Oklahoma Oil and Gas Activity and Tax Contribution 36 | P a g e The report understates the state’s effective production tax rate by not including ad valorem taxes paid by the industry on taxable oil and gas personal property such as drilling rigs and gathering systems in Oklahoma. Oklahoma levies a severance tax in lieu of ad valorem taxes on the value of reserves but still taxes significant amounts of oil and gas-related commercial personal property. Much like Louisiana, where production is exempt from ad valorem taxes, this type of ad valorem tax revenue was included in the Louisiana calculation but not in the Oklahoma estimate. This is important because ad valorem taxes paid directly by the industry on oil and gas- related commercial personal property in Oklahoma totaled a reported $157.6 million in FY2016.12 A similar 2012 report13 by the Idaho report author attributed only $11.5 million in ad valorem taxes to oil and gas in Oklahoma in FY2010. Making this simple adjustment raises the state’s combined effective rate from 3.2% to 4.7% in FY2016. 2. Nearly all low-tax states are excluded from the comparison The relative ranking of Oklahoma in the report is grossly distorted by the sample of states chosen for comparison. The report excluded eight of the sixteen largest producing states, nearly all of which are relatively low-tax states. The excluded states (along with their current rank by FY2018 production value) include Pennsylvania (4th), Colorado (6th), California (7th), Ohio (11th), West Virginia (12th), Kansas (14th), and Arkansas (15th). These states are all generally viewed as low-tax states and are overwhelmingly among the low-tax group shown in Figure 21 above. Oklahoma typically has a similar or higher combined effective rate than all these states over time. The report provides much less than an adequate sample of large and small producing states. Six of the twelve largest by production value are excluded. Of these states, New Mexico is the only medium-tax rate state with an effective rate above Oklahoma. We see no other common theme among the excluded states other than a generally low effective tax rate. The exclusion of low-tax states is also not a direct result of the research path set out in the report of examining tax rates in the oil-producing states. Among the excluded states are four large traditional oil producers - California, Colorado, New Mexico, and Kansas. California was the only low-tax state included in the 2012 report by the same author comparing North Dakota to seven other states but was dropped in the 2017 report. California had a reported 2.5% effective rate, far lower than in Oklahoma and roughly equal to our finding in Figure 21. Utah, with historically low production taxes, was excluded from the 2012 report. Low-tax states were also excluded from among the small producing states used for the comparison with small producer Idaho in the report. The very small producing states of Utah (13th) and Montana (16th) were included, with Montana generally viewed as a high tax state but Utah a relatively low-tax state. However, the small producing states of West Virginia (12th), Kansas (14th), and Arkansas (15th) were excluded, and all are historically viewed as low-tax states. Idaho’s evaluation, the core purpose of the study, is also distorted by the sample chosen. Idaho is a very small producing state with total output of only about 91,000 barrels of oil and 4 million mcf of natural gas in calendar year 2017 as reported by EIA. Its 4% effective rate is reported as lower than all states in the analysis other than

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Oklahoma Oil and Gas Activity and Tax Contribution 37 | P a g e Oklahoma. Idaho’s rank changes, however, after correcting Oklahoma’s ad valorem tax rate, which gives Idaho the lowest effective rate in the group. But this bottom ranking for Idaho is primarily a result of the sample of states used. When using the sixteen largest producing states, Idaho’s reported 4.0% rate falls well below Oklahoma’s 5.3% rate but is higher than the effective rate in Utah, Arkansas, California, Ohio, and Pennsylvania (see Figure 21). In short, the combination of failing to capture ad valorem tax payments in Oklahoma and overweighting the sample with high-tax states preordained Oklahoma’s poor showing in the comparative rankings. 3. The effective rate in two other comparison states is overstated Estimates for some of the other comparison states are overstated. While the effective rate estimates in the Idaho report are mostly consistent with our estimates in Figure 21, we find that the effective rates for both Utah and Alaska in FY2016 are far lower than reported in the Idaho study. These issues further distort Oklahoma’s ranking and limit the usefulness of the Idaho report. Utah is historically a relatively low-tax state but is assigned a 6.1% effective combined rate in the report. The primary issue is that the estimate used for severance taxes is far higher than reported by the state of Utah. Our estimate of combined severance and ad valorem tax revenue for Utah in FY2016 is 26% lower than the reported amount ($73.19 million vs. $98.98 million).14 This one adjustment drops the effective rate in Utah to 4.5%, which falls below the corrected rate of 4.7% in Oklahoma. This discrepancy is possibly due to the use of estimates for FY2016 that were later revised. Our own FY2018 estimate for Utah is based upon current budgetary estimates and will require revision when final data is released. Reported data for Alaska also far overstates the combined rate. Alaska underwent a collapse in severance taxes in FY2016 that pushed collections far lower than reported in the Idaho report. Our count of combined severance and ad valorem tax revenue for Alaska is approximately $300 million less than the estimate in the report. Severance taxes are approximately $108 million lower than we find ($136.8 million vs. $244.13 million) while ad valorem taxes in the report are more than $400 million higher than we document ($517.0 million vs. $111.74 million).15 After adjusting tax payments downward for this net difference, the effective rate in Alaska is only 5.5% in FY2016, not 12.0% as reported, and only slightly higher than the corrected 4.7% rate in Oklahoma. It is also approximately equal to Oklahoma’s latest FY2018 rate and falls below the state’s projected FY2019 rate. Alaska is traditionally among the highest severance tax rate states, but this correction illustrates the effect of both data irregularities and the tremendous volatility over time in the effective rate calculations for any individual state. The data discrepancy for Alaska is also possibly due to the use of estimates that are subject to substantial revision. Nevertheless, both of these data corrections lead to a

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Oklahoma Oil and Gas Activity and Tax Contribution 38 | P a g e substantially different view of Oklahoma as an extreme outlier having the lowest production tax rate among the states in the report. 4. The report focuses on a single year of data (FY2016) that occurs at the bottom of the production cycle and at the bottom of the tax cycle in Oklahoma The single year of data chosen does not adequately capture the year-to-year volatility in effective tax rates across the states. FY2016 is the most volatile year in recent history in terms of year-to-year changes in effective rates and represents the bottom in the cycle of production value in most states. Alaska’s experience is one example of this concern. Oklahoma’s rapid rise in the effective rate since FY2016 after a tax rate increase is yet another. Continued use of the Idaho report by proponents of higher severance taxes in Oklahoma ignores the significant effect of both the data issues in the Idaho study and the recent sharp rise in effective tax rates in Oklahoma. Beyond tax rate changes in Oklahoma, using a single year also fails to capture the generally declining trend in effective severance tax rates across all the producing states in recent years. In short, data irregularities and the selective sample of states used in the Idaho report greatly limit any usefulness it might otherwise have for evaluating oil and gas tax policy in Oklahoma. The recent sharp increase in the effective severance tax rate in Oklahoma further renders the report irrelevant for current tax policy evaluations in the state. Issues in Calculating Effective Rates. We are in no way minimizing the challenges faced in forming effective production tax rate estimates across many states. As the Idaho report clearly implies, state-to-state comparisons of effective severance and ad valorem tax rates are extremely difficult to make. We agree with this assessment. Numerous assumptions are necessary, and challenges related to the underlying source datasets for both production value and tax payments are many. Some of the more notable data issues include the following: o tax receipts and production volumes are frequently revised; o tax payments are often released with long lags after production; o the tax system within many states produces differing effective tax rates at high versus low energy prices; o estimates of tax receipts must be used for recent fiscal year(s) in some states; o monthly production cannot be matched to the monthly receipt of severance tax revenue in most states o oil and gas tax law changes occur regularly across the producing states; o differing measures of severance tax receipts are reported across states; o tax estimates can reflect differing accounting periods; o ad valorem payments traced to oil and gas are defined inconsistently across states;

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Oklahoma Oil and Gas Activity and Tax Contribution 39 | P a g e o some states provide no published estimates of statewide oil and gas-related taxes; o state-level natural gas prices are highly uncertain; o not all crude oil and natural gas production is reported by state agencies (particularly in Oklahoma); o some states use biennial accounting procedures (North Dakota and Wyoming), making fiscal year analysis challenging; o tax payments can be subject to state tax law changes and audit corrections in arrears; and o state oil and gas and taxing authorities have differing abilities, resources, and willingness to respond to external data requests. It is doubtful that we have successfully eliminated all possible concerns over these issues in our current estimates of combined effective rates in Figure 21. Revisions to the data alone will generally render our own, and all other, state-level estimates out-of-date on a year-to-year basis. These issues illustrate why it is important to work toward a much more relevant evaluation of Oklahoma oil and gas taxation than provided by the Idaho report by taking these additional steps in our estimates: 1. Using a broad group of producing states as a comparison group; 2. Using multiple years of severance tax data to account for changing tax rates and the effect of changing energy prices on tax collections and production value; 3. Evaluating the effective rate over multiple years to account for year-to-year volatility; 4. Using a standardized approach to calculating production value of oil and natural gas; and 5. Using market prices for natural gas to better estimate the production value of natural gas output. Production View of Oklahoma Oil and Gas Taxation. Our conclusions from the ‘production’ view of the tax contribution of oil and gas in Oklahoma are far different than suggested by the Idaho study. Using a broader comparison group including the top sixteen producing states and updating the effective rate estimates to the most recent vintage of data, relevant policy conclusions include the following: 1. Oklahoma’s combined effective severance and ad valorem tax rate is far higher than suggested in the Idaho study, both when the study was released and currently; 2. The combined effective tax rate in Oklahoma has increased sharply since FY2016, reaching 5.4% in FY2018; 3. Oklahoma’s combined effective rate should reach an estimated 6.4% in FY2019, the state’s current fiscal year; 4. The effective severance tax rate will likely approach 7% in FY2020 when all production moves out of the 2% rate bracket; 5. The relative ranking of Oklahoma’s effective rate is highly sensitive to the sample of producing states chosen for comparison;

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Oklahoma Oil and Gas Activity and Tax Contribution 40 | P a g e 6. Relative to the sixteen largest producing states, Oklahoma’s FY2018 rate of 5.4% ranks 11th; 7. After the recent severance tax rate increase, the state’s expected FY2019 effective rate of 6.4% would rank 8th; 8. Oklahoma’s FY2019 overall ranking is a combination of a relatively high severance tax rate (5th) and a low ad valorem tax rate under state law (9th).

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Oklahoma Oil and Gas Activity and Tax Contribution 41 | P a g e VI. Tax Contribution - Corporate View Oklahoma currently ranks among the middle of the pack based on updated effective severance and ad valorem tax rates (see Figure 21). After the recent severance tax rate increase, the state’s expected FY2019 effective severance and ad valorem tax rate of 6.4% would rank 8th among the sixteen largest producing states. For state policymakers, however, this ‘production’ view of oil and gas taxes provides only limited information about the overall business tax contribution of firms comprising the state’s oil and gas industry. This section of the report extends the ‘production’ tax view in the prior section to a broader ‘corporate’ tax view of business taxation. Relatively little is known about the broader tax contribution of oil and gas firms across the producing states. Direct estimates of all state taxes paid directly by firms in the oil and gas sector are generally not available and cannot be tabulated by tax authorities in Oklahoma or other energy-producing states. When attempted, tax incidence studies of this nature tend to examine only a few major tax sources where industry-specific data is easily and reliably identifiable. Other efforts to assess the tax contribution of a given industry rely on widely-used economic models to provide broad evidence of the tax contribution of an industry. In this section of the report, we evaluate the tax contribution of the oil and gas sector using tax estimates from the Bureau of Economic Analysis (BEA) dataset which underlies most commonly used regional economic models (e.g. IMPLAN and REMI models). The BEA dataset is described in the following sections and used to form estimates of the total business tax contribution of oil and gas firms in Oklahoma and other major producing states. Data on Business Taxes The BEA data collection program for Gross Domestic Product (GDP)16 at the state level provides the most widely used comparative measure of federal, state, and local business taxes paid by industry sector within each state.17 The BEA dataset provides a comprehensive and consistent tabulation of business taxes paid by firms in 81 NAICS industry sectors at the state level. The BEA dataset is especially useful for the purposes of this report in calculating the ‘corporate’ tax contribution of firms within an industry because it captures all federal, state, and local taxes paid by firms that are deductible for tax purposes. As a result, the dataset captures nearly all taxes paid except corporate income taxes and employer social security contributions.18 Although not broken down into detail by individual type of tax, the dataset is unique in that it divides total state tax payments into the industry sectors making the payments. The data is of further value for our purposes because approximately 90% of the taxes are paid to state and local governments, with only about 10% going to federal government (primarily excise taxes and custom duties). A comprehensive set of state and local taxes are covered including sales and use taxes, motor fuel, property, severance, motor vehicle, state payroll, and others.

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Oklahoma Oil and Gas Activity and Tax Contribution 42 | P a g e Most of the underlying tax estimates are built ‘bottom-up’ using either special tabulations at the state level, government finance data from the Census Bureau, or IRS tax receipts. The series also nets out any subsidies received by the industry. Totals are controlled to Census Bureau estimates for state and local tax payments received within each state to adjust for payments made within each state. It is important to note that the BEA dataset captures taxes paid by business establishments and excludes tax payments by households on the compensation of wage and salary workers. Taxes paid on self-employment or proprietors’ earnings are likewise excluded. This results in no overlap with estimates of the ‘industry’ tax contributions in later sections of the report. Oklahoma Oil and Gas Business Taxes BEA tax estimates are first adjusted to isolate the oil and gas industry within the mining sector by including only NAICS 211 (Oil and gas extraction) and the oil and gas-related share of NAICS 213 (Support activities for mining). NAICS 212, which excludes all mining other than oil and gas, is excluded from the analysis. The share of NAICS 213 is determined by the ratio of NAICS 211/(NAICS 211 + NAICS 212).19 Based on the BEA dataset, Oklahoma establishments in the oil and gas sector paid a total of $2.43 billion in business taxes in 2016, the most recent year available (see Panel A of Figure 22). Again, state and local taxes comprise most of the payments with federal payments only a small share. The $2.43 billion in taxes paid in 2016 is well below the recent peak of $3.01 billion in 2013 but is representative of the $2.53 billion average across the latest decade from 2007 to 2016. The reemergence of the oil and gas sector beginning in 2003 is highly visible in the tax data. Total business tax payments from oil and gas establishments in Oklahoma tripled from less than $1 billion annually in 2003 to the recent peak of $3.0 billion in 2013. Oil and Gas Pays a High Share of Total Oklahoma Business Taxes BEA reports a total of $11.47 billion in total business taxes paid by all firms across all industries in Oklahoma in 2016. This suggests that tax payments by the oil and gas industry accounted for 21.2% of total business taxes paid by all firms statewide in 2016. This is roughly double the industry’s 10% share of total state GDP. In the recent oil and gas recession, total taxes pulled back sharply in both 2014 and 2015 as the oil and gas industry was hit by the 2014 collapse in oil prices. Total taxes remained flat at $2.43 billion in 2016, the most recent year available. As a gauge of taxes paid relative to the size of the industry, business tax payments as a share of oil and gas production value in Oklahoma the past two decades are shown in Panel B of Figure 22. Both tax payments and production value are on a calendar year basis. After averaging 11.0% of production value from 1997 to 2008, the effective tax rate paid by the sector bounced sharply in 2009 as production value fell in the recession under falling energy prices. The effective rate subsequently averaged 18.6% from 2009 to 2016. The tax share of production pulled back to a recent low of 12.0% in 2014 under a combination of

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Oklahoma Oil and Gas Activity and Tax Contribution 43 | P a g e elevated energy prices and falling tax payments before rebounding once again to above 20% in 2016 under falling energy prices. Oil and Gas vs. Other High-Tax Industries in Oklahoma Few Oklahoma industries produce the same or higher share of GDP in total business taxes as the state’s oil and gas sector.20 Actual tax payments made by the industry the past decade represent a 10.5% share of total GDP produced by the industry. For comparison, all other sectors combined paid business taxes averaging only 5.5% of total GDP produced, roughly half the share of the oil and gas sector.21 In other words, the total tax contribution of the oil and gas industry as a share of GDP produced is roughly twice the level across all industries. Figure 23 details all major NAICS industry sectors in Oklahoma along with several key subsectors that also produce a high share of taxes relative to GDP. Most of the other high-tax sectors in Oklahoma are subject to a dedicated tax, much like the severance tax applied to Figure 22. Federal, State, & Local Tax Payments – Oklahoma (A) Total Tax Payments (B) Effective Rate (Share of Production Value) Notes: Production value and tax payments are in calendar years. Source: Bureau of Economic Analysis, Energy Information Administration, and RegionTrack calculations 0.64 0.54 0.48 0.76 0.86 0.73 0.97 1.16 1.41 1.79 1.83 2.23 2.35 2.52 2.81 2.92 3.01 2.62 2.43 2.43 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 $Billions 11.6% 13.8% 10.7% 9.6% 10.5% 11.6% 10.0% 9.9% 9.3% 12.1%11.8% 10.8% 22.6% 18.3% 19.6% 21.2% 17.0% 12.0% 17.8% 20.2% 0% 5% 10% 15% 20% 25% 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

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Oklahoma Oil and Gas Activity and Tax Contribution 44 | P a g e the oil and gas industry. They are all much smaller in size, however, and produce far lower amounts of total tax revenue. Other high-tax-share sectors in Oklahoma include Amusement, Gambling, and Recreation (27.8% share of sector GDP, gaming tax); Accommodations (20.2% share of sector GDP, hotel/motel tax); Air Transportation (11.7% share of sector GDP, airport and air fare taxes); Insurance Carriers (10.9% share of sector GDP, premium tax); Utilities (10.7% share of sector GDP, ad valorem and utility service tax); and Broadcasting and Telecommunications (9.2% share of sector GDP, telecom user tax). High tax shares are also found in Wholesale Trade (22.2% share of sector GDP) and Retail Trade (17.9% share of sector GDP). However, both sectors act primarily as a tax conduit that passes-through large amounts of general sales and use tax collections. The sales and use taxes collected by Wholesale Trade and Retail Trade are not necessarily tied to a particular product being sold but to the act of reselling in general. As a group, these Oklahoma industries have the highest average total tax burdens as a share of output produced among the private industry sectors tracked by BEA.22

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Oklahoma Oil and Gas Activity and Tax Contribution 45 | P a g e Figure 23. Taxes as Share of State Gross Domestic Product by Industry - Oklahoma Industry Sector 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Average 2007-2016 All industry total 6.1% 5.8% 6.4% 6.5% 6.3% 6.4% 6.1% 5.7% 5.9% 6.3% 6.2% Private industries 7.3% 7.0% 8.0% 8.0% 7.6% 7.7% 7.3% 6.7% 7.1% 7.7% 7.4% Agriculture, forestry, fishing, and hunting -2.0% -2.2% 0.3% -2.1% -0.7% -1.4% -0.2% -0.3% -1.0% -1.5% -1.1% Mining, quarrying, and oil and gas extraction 8.6% 8.8% 14.1% 12.8% 10.8% 11.6% 9.0% 6.8% 9.4% 13.2% 10.5% Utilities 11.8% 10.5% 12.0% 11.6% 10.8% 9.9% 9.7% 10.0% 10.4% 10.4% 10.7% Construction 0.8% 1.0% 0.9% 0.9% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% Manufacturing 1.9% 1.5% 2.3% 2.6% 2.4% 2.1% 2.4% 2.1% 2.2% 2.5% 2.2% Durable goods manufacturing 1.6% 1.3% 1.7% 1.6% 1.4% 1.5% 1.6% 1.4% 1.5% 1.6% 1.5% Nondurable goods manufacturing 2.4% 1.7% 3.0% 4.0% 3.6% 2.8% 3.5% 3.2% 3.1% 3.6% 3.1% Wholesale trade 22.4% 23.4% 25.6% 24.6% 23.5% 20.6% 20.6% 19.6% 20.6% 21.3% 22.2% Retail trade 19.7% 18.7% 16.9% 17.5% 17.9% 18.2% 17.7% 18.0% 17.2% 17.5% 17.9% Transportation and warehousing 4.3% 3.7% 4.8% 4.4% 3.9% 3.0% 2.9% 2.6% 2.4% 2.5% 3.4% Air transportation 12.7% 11.8% 12.7% 11.2% 11.0% 10.7% 12.3% 11.0% 11.1% 12.2% 11.7% Information 8.4% 7.1% 7.5% 8.2% 8.3% 8.6% 7.7% 6.5% 5.7% 5.5% 7.4% Broadcasting (except Internet) and telecommunications 10.9% 9.0% 9.5% 10.5% 10.7% 10.8% 9.7% 7.8% 6.8% 6.6% 9.2% Finance, insurance, real estate, rental, and leasing 5.9% 6.3% 6.6% 6.6% 6.1% 6.5% 6.5% 6.9% 7.4% 7.5% 6.6% Finance and insurance 6.2% 6.8% 7.1% 7.2% 7.6% 8.1% 8.4% 9.4% 10.1% 10.4% 8.1% Insurance carriers and related activities 9.5% 8.9% 9.1% 8.4% 9.7% 10.7% 11.1% 13.5% 13.8% 14.2% 10.9% Real estate and rental and leasing 5.8% 6.1% 6.4% 6.4% 5.6% 5.9% 5.9% 5.9% 6.3% 6.3% 6.1% Professional and business services 2.8% 2.9% 2.9% 3.0% 3.2% 3.2% 3.2% 3.1% 3.1% 3.1% 3.1% Professional, scientific, and technical services 2.7% 2.5% 2.6% 2.7% 2.8% 2.9% 3.0% 2.8% 2.7% 2.7% 2.7% Educational services, health care, and social assistance 2.6% 2.6% 2.7% 2.8% 2.4% 2.6% 2.5% 1.9% 2.0% 2.1% 2.4% Health care and social assistance 2.5% 2.6% 2.6% 2.7% 2.2% 2.5% 2.4% 1.8% 1.8% 1.9% 2.3% Arts, entertainment, recreation, accommodation, and food services 12.3% 10.4% 9.5% 10.7% 11.0% 13.3% 12.9% 12.6% 12.2% 12.0% 11.7% Arts, entertainment, and recreation 25.8% 20.5% 19.3% 17.9% 18.4% 21.0% 20.9% 20.7% 19.6% 17.9% 20.2% Performing arts, spectator sports, museums, and related activities 11.7% 5.2% 5.5% 5.8% 6.4% 6.5% 6.6% 5.8% 5.8% 5.5% 6.5% Amusement, gambling, and recreation industries 33.4% 27.1% 26.7% 24.2% 24.7% 28.7% 28.7% 30.4% 28.5% 25.7% 27.8% Accommodation and food services 9.7% 8.8% 7.9% 9.3% 9.6% 11.7% 11.2% 10.8% 10.5% 10.6% 10.0% Accommodation 19.7% 19.4% 18.6% 19.2% 19.1% 25.9% 20.4% 19.9% 19.5% 20.5% 20.2% Food services and drinking places 8.4% 7.5% 6.8% 8.1% 8.2% 9.3% 9.3% 9.0% 8.7% 8.7% 8.4% Source: Bureau of Economic Analysis and RegionTrack calculations

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Oklahoma Oil and Gas Activity and Tax Contribution 46 | P a g e An alternative view of the tax contribution of the oil and gas sector relative to other sectors in the state is the share of total state business taxes paid (see Figure 24). As a share of the $10.37 billion in average annual taxes paid the past decade by all business entities operating in the state, the mining sector paid an average of $2.53 billion annually, or 24.4% of the total business taxes paid statewide. Again, the majority of these taxes are paid to state and local government. The share of total taxes paid roughly doubled from 14.8% in 2003 as the oil and gas industry began its reemergence to a recent high of 27.5% in 2011. The share has since declined to a recent low of 21.4% of total statewide business taxes in 2016. Figure 24. Mining Sector Share of Total State Business Tax Payments – Oklahoma Notes: Calculated as total mining business tax payments divided by total business tax payments by all industry sectors. Data stated on a calendar year basis. Source: Bureau of Economic Analysis and RegionTrack calculations The share of total state business taxes paid by the mining sector is far higher than all other high-tax share sectors. The mining sector pays a higher share than the state’s key sales tax conduit sectors, Wholesale Trade (18.5%) and Retail Trade (17.3%), both of which collect significant taxes but produce relatively little GDP (their combined GDP is less than the mining sector). The share of total statewide business taxes paid is far lower in the state’s other key high-tax- share sectors, including Utilities ($419 million, 4.0% share), Insurance Carriers ($310 million, 3.0% share), Broadcasting and Telecommunications ($271 million, 2.6% share), Amusement, Gambling, and Recreation ($162 million, 1.6% share), Accommodations ($127 million, 1.2% share), and Air Transportation ($92 million, 0.9% share). Combined, these six high-tax industries paid an average of only $1.38 billion in taxes annually the past decade, or 13.3% of total statewide business taxes paid the past decade, only slightly more than half the 24.4% average share paid by the mining sector. 12.5% 10.6% 9.4% 13.3% 14.3% 11.9% 14.8% 16.2% 19.4% 21.5% 20.9% 24.7% 25.6% 26.1% 27.5% 26.4% 26.6% 23.5% 21.8% 21.4% 0% 5% 10% 15% 20% 25% 30% 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

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Oklahoma Oil and Gas Activity and Tax Contribution 47 | P a g e Oil and Gas-Related Business Taxes Across the Producing States Figure 25 details BEA estimates of total business taxes paid by firms in the oil and gas sector in each of the top sixteen producing states. The data span the period from the reemergence of the domestic energy sector in 2003 through 2016, the most recently available year of data. To avoid counting non-oil and gas forms of mining, the mining sector totals are partitioned to include only oil and gas activity as described earlier in the report. Firms in the sixteen largest producing states paid a combined total of $27.92 billion in taxes in 2016, or 98.4% of total taxes paid nationally by oil and gas firms. The $2.43 billion in taxes paid by firms in Oklahoma’s oil and gas sector in 2016 trailed only dominant producer Texas with $15.54 billion.23 Oklahoma firms paid 7.8% of total oil and gas-related business taxes nationally in 2016 and accounted for 7.5% of the value of national oil and gas production in FY2016. Texas firms paid 49% of total oil and gas business taxes in 2016 and accounted for approximately 40% of the total value of production. Figure 25. Business Taxes on Production and Imports - Oil and Gas Sector $Millions State 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Texas 7,823 9,012 11,836 13,606 14,622 16,613 12,506 13,182 15,288 15,478 16,440 18,042 14,663 15,537 Oklahoma 966 1,157 1,410 1,789 1,833 2,230 2,354 2,516 2,808 2,916 3,012 2,624 2,433 2,433 Alaska 949 1,028 1,343 1,646 3,185 8,309 2,781 3,835 5,431 5,639 6,010 4,724 2,862 1,919 California 572 747 909 1,114 1,474 1,980 1,566 1,714 1,607 1,519 1,670 1,491 1,285 1,297 Colorado 372 540 704 828 991 1,221 1,045 1,283 1,516 1,194 1,397 1,348 1,217 1,253 Louisiana 972 962 1,337 1,295 1,662 1,905 1,223 1,430 1,572 1,553 1,634 1,491 1,190 1,204 North Dakota 33 37 61 73 103 160 151 271 500 597 784 933 1,023 1,027 New Mexico 651 725 923 1,069 1,247 1,459 777 927 1,030 961 1,031 1,208 980 931 Wyoming 595 733 956 1,131 1,150 1,278 997 1,071 1,291 1,087 1,148 944 838 807 Pennsylvania 58 65 92 121 153 184 192 255 328 391 487 454 400 409 Kansas 237 271 328 392 418 503 321 331 383 364 394 351 305 307 Utah 73 94 141 186 229 260 181 207 256 257 280 278 206 202 West Virginia 75 81 116 136 165 198 153 169 181 174 206 215 189 201 Montana 28 37 64 72 87 126 119 151 197 192 212 203 166 187 Ohio 161 171 234 287 317 313 256 261 279 291 160 175 140 147 Arkansas 13 14 19 25 39 61 73 83 100 106 108 86 71 63 United States 13,899 16,051 20,984 24,386 28,353 37,748 25,303 28,361 33,562 33,432 35,770 35,242 28,457 28,372 16-States 13,578 15,671 20,473 23,768 27,673 36,799 24,694 27,684 32,767 32,719 34,971 34,567 27,968 27,924 16-State Share of U.S. 97.7% 97.6% 97.6% 97.5% 97.6% 97.5% 97.6% 97.6% 97.6% 97.9% 97.8% 98.1% 98.3% 98.4% Notes: Data are stated on a calendar year basis. Source: Bureau of Economic Analysis The high share of taxes paid by firms in both Texas and Oklahoma reflects several factors: 1. The presence of a large producing sector for both oil and natural gas in both states; 2. Significant drilling and exploration activity as the two most active drilling states in recent years; and 3. Significant concentrations of white-collar oil and gas employment as the two largest oil and gas hub states in the U.S.

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Oklahoma Oil and Gas Activity and Tax Contribution 48 | P a g e Other major producing states with firms paying approximately $1 billion or more in business taxes in 2016 include Alaska ($1.92 billion), California ($1.3 billion), Colorado ($1.25 billion), Louisiana ($1.2 billion), North Dakota ($1.03 billion), and New Mexico ($931 million). The substantial year-to-year shifts in oil and gas sector business tax payments across the producing states over time reflect many market factors, including: the weak production years of 2015 and 2016 in most states; the long-run collapse in tax payments in Alaska; the surging long-run production trend in North Dakota, Pennsylvania, and Colorado; the weak long-run production trend in California; and two major energy price cycles the past decade. Business Tax Effective Rate Figure 26 provides an alternative state-level comparison of the business tax burden of the oil and gas industry as a share of the total market value of annual production in each state. Taxes as a Share of Production Value. In Oklahoma, $2.43 billion in total taxes paid by the oil and gas sector represents 20.7% of the $11.76 billion in total market value of crude oil and natural gas production in FY2016. This ranks the Oklahoma oil and gas sector as having the third highest overall business tax burden as a share of production value, following only Texas (25.2%) and Alaska (28.6%). The state’s effective rate is also six full percentage points above the sixteen-state average of 14.8%. Six additional states – Montana (18.9%), Louisiana (18.7%), California (16.6%), Colorado (15.5%), Wyoming (15.2%), and Kansas (14.7%) – have effective business tax rates between approximately 15% and 20%. The remaining seven states have effective rates below 12%, including New Mexico (11.6%), Utah (10.1%), North Dakota (6.6%), West Virginia (6.2%), Ohio (4.0%), Pennsylvania (3.5%), and Arkansas (2.7%).24 Figure 26. Business Tax Share of Production Value – 16 Largest Producing States (2016) Notes: The effective tax rate is calculated as total federal, state, and local taxes divided by the annual market value of crude oil and natural gas production. Source: Bureau of Economic Analysis, Energy Information Administration, and RegionTrack calculations 28.6% 25.2% 20.7% 18.9% 18.7% 16.6% 15.5% 15.2% 14.7% 11.6% 10.1% 6.6% 6.2% 4.0% 3.5% 2.7% 14.8% 0% 5% 10% 15% 20% 25% 30% AK TX OK MT LA CA CO WY KS NM UT ND WV OH PA AR 16- States

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Oklahoma Oil and Gas Activity and Tax Contribution 49 | P a g e While the production view of oil and gas taxation in Oklahoma described earlier in the report places Oklahoma in the middle of the producing states, the broader corporate view of taxes consistently places the state among those with the highest overall tax burden. When expanded beyond severance and ad valorem taxes, both the total and effective tax contribution of the oil and gas industry in Oklahoma is quite high relative to other producing states. Taxes as a Share of Economic Output. A final comparative view of the business tax burden of Oklahoma oil and gas firms is taxes paid as a share of total state economic output. Figure 27 illustrates total business taxes paid by firms in the oil and gas sector as a share of total statewide GDP for each of the sixteen largest producing states. In 2016, the $2.43 billion in business taxes paid by firms in the Oklahoma oil and gas sector totaled 1.3% of total state GDP of $181.5 billion. This share is roughly three times the 0.4% average share across the sixteen states and ranks Oklahoma 4th among the group. Oklahoma’s share in 2016 trailed only Alaska (3.8%), Wyoming (2.1%), and North Dakota (1.9%), all three of which have very small statewide economies but a large oil and gas sector coupled with traditionally high taxes on the oil and gas sector. Major producer New Mexico and dominant producer Texas both slightly trailed Oklahoma with oil and gas business taxes equivalent to 1.0% of total statewide GDP. Oil and gas firms in all other states produced taxes from oil and gas activity of 0.5% of state GDP or less in 2016. Firms in the large producing states of Louisiana (0.5%) and Colorado (0.4%) produced less than half the share of state GDP in taxes relative to Oklahoma. Firms in five states – Utah, Pennsylvania, Arkansas, California, and Ohio – produced a negligible share (0.1% or less) of total state GDP in oil and gas taxes in 2016. These five Figure 27. Oil and Gas Business Tax Share of State GDP – Major Producing States (2016) Notes: The effective tax rate is calculated as total federal, state, and local taxes divided by the annual market value of crude oil and natural gas production. Source: Bureau of Economic Analysis, Energy Information Administration, and RegionTrack calculations 3.8% 2.1% 1.9% 1.3% 1.0% 1.0% 0.5% 0.4% 0.4% 0.3% 0.2% 0.1% 0.1% 0.1% 0.0% 0.0% 0.4% 0% 1% 2% 3% 4% AK WY ND OK NM TX LA MT CO WV KS UT PA AR CA OH 16-States

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Oklahoma Oil and Gas Activity and Tax Contribution 50 | P a g e states are generally viewed as relatively low-tax producing states. Total state tax revenue in these states is unlikely to be influenced systematically by changing activity in the oil and gas sector. Corporate vs. Production Taxes in Oklahoma Estimates of the business, or ‘corporate,’ tax contribution of the oil and gas sector based on the BEA dataset suggest that the ‘production’ view alone provides policymakers with an incomplete view of the tax contribution of the oil and gas industry in Oklahoma. While Oklahoma ranks 8th in FY2019 based solely on its combined effective severance and ad valorem tax rate, the state consistently ranks among the states with the highest overall business tax contribution. Relevant policy conclusions concerning the broader corporate tax contribution of oil and gas in Oklahoma include the following: o Oklahoma oil and gas establishments paid a total of $2.43 billion in business taxes in 2016; o Oklahoma firms paid the second highest total amount of taxes among the sixteen major producing states, trailing only dominant producer Texas; o Oklahoma’s oil and gas sector paid an average of $2.52 billion in business taxes annually the past decade, or 24.3% of the total business taxes paid by all industries statewide; o Oklahoma oil and gas firms paid 7.8% of total oil and gas-related business taxes nationally and accounted for 7.5% of the value of national oil and gas production in 2016; o Tax payments made by the industry in Oklahoma the past ten years represent a 10.5% share of total GDP produced by the sector. All other sectors in the state combined paid business taxes averaging only 5.5% of total GDP produced, roughly half the share of the oil and gas sector; o Oil and gas business taxes in Oklahoma totaled 1.3% of total state GDP of $181.5 billion in 2016. This share ranks Oklahoma 4th among the sixteen largest producing states trailing only Alaska, Wyoming, and North Dakota; o In Oklahoma, $2.43 billion in total taxes paid by the oil and gas sector represent 20.7% of the $11.76 billion in total market value of crude oil and natural gas production in 2016. This ranks the state as having the third highest overall business tax burden as a share of production value, following only Texas (25.2%) and Alaska (28.6%).

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Oklahoma Oil and Gas Activity and Tax Contribution 51 | P a g e VII. Tax Contribution - Industry View The two prior sections of the report examine the tax contribution of the Oklahoma oil and gas sector from both the production and corporate tax perspectives. Among the key findings, Oklahoma currently ranks among the middle of the producing states from a production tax view, due largely to statutory limits on ad valorem taxes. When viewed from a corporate perspective, the state’s oil and gas firms have a consistently high tax contribution relative to most other major producing states. Oklahoma ranks 4th among the sixteen largest producing states based on business taxes as a share of GDP produced. This section extends the analysis to consider the tax contribution of the broader industry itself. This primarily extends the analysis to the personal income tax and sales tax contributions made by employees and self-employed proprietors within the oil and gas sector. This approach captures the two largest tax sources in Oklahoma and accounts for key differences in the tax structure in other producing states (e.g. leading-producer Texas has no personal income tax). The critical role of oil and gas activity in determining statewide income and sales tax collections is first illustrated through the behavior of these tax streams in the recent statewide oil and gas recession. Estimates are then formed for income and sales tax payments traced to oil and gas activity in the sixteen largest producing states. Sales tax includes both sales and use taxes at the state and local levels. Effective personal income and sales tax rates as a share of production value are formed for Oklahoma and then compared to the sixteen largest producing states. Finally, a measure of the combined effective severance, ad valorem, personal income, and sales tax rates are formed for each state. Income and Sales Tax Payments in the Recent State Recession The recent state-level oil and gas recession illustrates just how sensitive state personal income and sales tax revenue in Oklahoma is to changes in activity in the oil and gas sector. Personal Income Tax. Figure 28 illustrates the path of state personal income tax revenue during the recent oil and gas-driven shock. After oil and gas activity peaked in the 3rd quarter of 2014, the state began a steady, cumulative decline of $330 million (10%) in total personal income tax revenue through late 2016. Our forecast for personal income tax revenue in July 2014 serves as a counterfactual comparison case to the actual path of revenue for determining the net effect of the pullback in oil and gas activity on expected personal income tax revenue. The expected outlook entering the recession was for average growth in personal income tax revenue of 5.2% annually through FY2018. Based on the forecast in Figure 28, the net decline in total personal income tax revenue reached an estimated $600 million (17.2% decline) from peak to trough in activity in the oil and gas sector. The $600 million estimated income tax decline reflects the net difference between the initial expected outcome and the actual outcome through the 4th quarter of 2016.

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Oklahoma Oil and Gas Activity and Tax Contribution 52 | P a g e Again, the $330 million decline in actual revenue represents a static estimate of the tax effect, while the $600 million decline provides a more representative dynamic estimate of the net state income tax response based on prior expectations. These personal income tax effects are not present in producing states such as Texas, Alaska, and Wyoming that do not levy an income tax. The size of the effect also differs in proportion to the relative size of the average income tax rate in effect in the producing states that do levy an income tax. Figure 28. Total Personal Income Tax Revenue in Recent Energy Recession – OK Source: Census Bureau and RegionTrack forecast (July 2014) Sales Tax. Sales tax revenue was similarly affected during the oil and gas slowdown as shown in Figure 29. From the peak in oil and gas activity in the 3rd quarter of 2014, the state began a steady, cumulative decline of $300 million (11.1%) in state sales (and use) tax through late 2016 (see Figure 29). The decline in sales tax revenue was slightly larger than the decline in personal income taxes. Our forecast for sales tax revenue from July 2014 serves as a highly useful counterfactual comparison case to the actual path of revenue for determining the net effect of the pullback in oil and gas activity on expected sales tax revenue. The expected outlook entering the recession was for average growth in sales tax revenue of 5.7% annually through FY2018. Based on the forecast in Figure 29, the realized net decline in total sales tax revenue reached an estimated $660 million (17.2% decline) from peak to trough in activity in the oil and gas sector. The $660 million decline reflects the net difference between the initial expected outcome and the actual outcome through the 4th quarter of 2016. 2.0 2.4 2.8 3.2 3.6 4.0 10 11 12 13 14 15 16 17 18 $Billions at annual rate Actual Personal Income Tax Counterfactual Personal Income Tax Forecast $602 million estimated total personal income tax effect Peak of oil and gas expansion: 2014Q3 End of oil and gas contraction: 2016Q4

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Oklahoma Oil and Gas Activity and Tax Contribution 53 | P a g e Figure 29. State/Local Sales and Use Tax Revenue in Recent Energy Recession – OK Source: Census Bureau and RegionTrack forecast (July 2014) Personal Income and Sales Tax Contribution of Oil and Gas In order to do a cross-state comparison of the relative personal income and sales tax contributions of Oklahoma’s oil and gas industry, a recent RegionTrack report provided estimates of effective personal income and sales tax rates through FY2016 for the sixteen largest producing states.25 The estimates in this section provide an update of these effective tax rates for the sixteen largest producing states. While not a comprehensive assessment of the total tax contribution of the industry, this approach uses a consistent methodology across the producing states to provide estimates that are much more reflective of the broader tax contribution of the household-related component of the industry. It also demonstrates the necessity of using a broader approach when evaluating the tax contribution of the oil and gas industry in a state like Oklahoma that levies relatively large personal income and sales taxes. Evaluating these elements of the tax contribution of the oil and gas industry in Oklahoma is especially relevant for three reasons: 1. The oil and gas sector in Oklahoma serves an outsized role as a source of total household earnings relative to most other industries in the state and relative to most other producing states (see Figures 6 and 7). The industry pays significantly higher average compensation to wage and salary workers than nearly all industry sectors in Oklahoma. The share of total statewide self-employment income from the oil and gas sector is also historically among the highest in Oklahoma relative to other producing states (see Figure 9). These factors translate into larger personal income and sales tax contributions on average from oil and gas workers and proprietors than from other sectors statewide. 1.8 2.1 2.4 2.7 3.0 3.3 3.6 10 11 12 13 14 15 16 17 18 $Billions at annual rate Actual State/Local Sales & Use Tax Counterfactual State/Local Sales & Use Tax Forecast $655 million estimated total sales tax effect Peak of oil and gas expansion: 2014Q3 End of oil and gas contraction: 2016Q4

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Oklahoma Oil and Gas Activity and Tax Contribution 54 | P a g e 2. The producing states have widely varying tax structures which collect varying degrees of revenue from wage and salary and self-employed individuals. Many oil and gas states have no personal income tax (Alaska, Texas, and Wyoming) and sales tax rates vary widely, with Oklahoma a traditionally high sales tax state. Ignoring differences in tax structure across the states makes cross-state comparisons challenging and potentially misleading. 3. The concentration of oil and gas activity, particularly white-collar employment and self-employment, varies greatly across the producing states. Oil and gas-hub states such as Oklahoma with a large concentration of industry employment and self- employment derive significant amounts of tax revenue from this activity. Oklahoma has the highest share of household earnings derived from the oil and gas sector among all producing states since the reemergence of the industry in 2003 (see Figure 9). States with a relatively small industry presence and less reliance on oil and gas for household earnings must rely more heavily on production and business taxes paid by the sector. Personal Income Tax Contribution Across the Producing States Figure 30 provides comparative estimates of the personal income tax contribution of oil and gas activity in Oklahoma and the other major producing states in FY2017. Estimates of total income tax payments are first derived by multiplying the total household earnings of workers and proprietors in the oil and gas sector by the average income tax rate within each state. Household earnings in the oil and gas sector are averaged across the 2016 to 2017 period for greater consistency with FY2017 income tax receipt data. Non-mining activity (e.g. coal mining) is removed from mining sector data to isolate the contribution of oil and gas activity. Average Personal Income Tax Rate. It is important to note that the use of average tax rates in this section will substantially understate the true amount of oil and gas-related income taxes paid in Oklahoma and most producing states given the high average earnings in the oil and gas industry and progressive tax rates in most states. Ideally, we would use the average income tax rate for individuals that matches the average income earned in the oil and gas sector in each producing state. The use of average rates is necessary because of a lack of access to recent measures of effective tax rates by income bracket in each producing state. We can demonstrate the effect of using average tax rates by using the most recent tax data available for Oklahoma for FY2014. While the average income tax rate across all earnings in Oklahoma is 2.61% in FY2017 (see Figure 30), OTC data for tax year 2014 suggests that taxpayers in Oklahoma with federal adjusted gross income between $75,000 and $100,000 paid an average personal income tax rate of 3.5%. The 3.5% rate is believed to be the best approximation of the average rate paid by oil and gas industry wage and salary workers and proprietors in Oklahoma. Those earning between $100,000 and $200,000 paid an average rate of 3.9%. Those who reported more than $200,000 in federal adjusted gross income paid an average income tax rate of about 4.3%. Data from more recent tax years are not yet available.

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Oklahoma Oil and Gas Activity and Tax Contribution 55 | P a g e Figure 30. Personal Income Tax Contribution of Oil & Gas Sector State Oil & Gas Sector Household Earnings1 Average Income Tax Rate2 Oil & Gas Income Tax Paid at Average Rate3 Oil and Gas Income Tax Paid at OK Rate (2.61%)4 Oil & Gas Production Value5 Effective Rate Alaska 1,778,514,157 0.00% 0 46,462,600 $8,201,141,070 0.00% Arkansas 301,771,151 3.67% 11,064,963 7,883,588 2,473,104,560 0.45% California 3,300,886,087 5.36% 177,055,509 86,233,641 8,545,381,045 2.07% Colorado 9,216,276,077 3.21% 295,747,438 240,769,606 10,069,941,250 2.94% Kansas 1,787,303,623 2.67% 47,667,768 46,692,220 2,270,398,413 2.10% Louisiana 6,280,473,116 2.22% 139,475,161 164,073,539 7,940,949,818 1.76% Montana 594,527,101 4.07% 24,192,354 15,531,659 1,037,600,825 2.33% North Dakota 1,804,099,252 1.07% 19,270,917 47,130,995 17,332,509,833 0.11% New Mexico 1,851,275,618 2.13% 39,379,315 48,363,449 10,707,180,725 0.37% Ohio 595,027,594 2.21% 13,123,951 15,544,734 5,422,020,204 0.24% Oklahoma 5,748,093,196 2.61% 150,165,438 150,165,438 14,256,084,325 1.05% Pennsylvania 1,767,313,825 2.66% 47,071,192 46,169,998 16,252,110,916 0.29% Texas 60,701,867,150 0.00% 0 1,585,799,349 74,405,683,875 0.00% Utah 405,854,520 3.92% 15,900,102 10,602,702 2,323,674,367 0.68% West Virginia 619,113,788 4.44% 27,517,102 16,173,971 4,688,263,988 0.59% Wyoming 932,717,077 0.00% 0 24,366,666 7,784,664,133 0.00% 16-States $97,685,113,331 3.06% $1,007,631,209 $2,551,964,156 $193,710,709,346 0.52% Source: Bureau of Economic Analysis, Census Bureau, and RegionTrack calculations. Notes: 1 Household earnings is defined by Bureau of Economic Analysis as employee compensation plus proprietors’ income. Earnings are averaged over 2016 and 2017 for greater consistency with fiscal year tax and production data. Proprietor’s income consists primarily of the income of sole proprietors and partnerships. The share of household earnings in each state derived from oil and gas activity is calculated as the sum of NAICS 201 (Oil and gas extraction) plus a share of NAICS 203 (Support activities for mining). The share of NAICS 203 included is determined by the ratio of NAICS 201/(NAICS 201 + NAICS 202 (Mining – except oil and gas) ). 2 The average income tax rate for each state is calculated as total individual income tax payments divided by total household earnings. 3 Income tax paid by the oil and gas industry is estimated as oil and gas earnings times the average income tax rate in the state. 4 Oil and gas earnings in each state multiplied by the 2.61% average rate in Oklahoma. 5 Production value is for FY2017. Despite the overall average understating the true rate paid by oil and gas workers, this approach nonetheless provides a consistent measure across the producing states that captures average differences in state personal income taxation. This is done to facilitate cross-state comparisons of tax payments rather than provide an exact estimate of the total tax contribution in any single state. Comparative Income Tax Rates. Across the sixteen states, average income tax rates range from a low of 0% in Texas, Wyoming, and Alaska to a high 5.4% in California. Oklahoma’s 2.61% average income tax rate falls about one-half percentage point below both the 3.17% average income tax rate nationally and the 3.06% rate in the sixteen major producing states in FY2017 (see Figure 30). Other states with a high average income tax rate relative to Oklahoma include West Virginia (4.44%), Montana (4.07%), Utah (3.92%), Arkansas (3.67%), and Colorado (3.21%). These states would be expected to receive a greater proportionate tax contribution through personal income tax payments derived from the industry.

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Oklahoma Oil and Gas Activity and Tax Contribution 56 | P a g e States with average income tax rates similar to Oklahoma include Kansas (2.67%), Louisiana (2.22%), New Mexico (2.13%), Ohio (2.21%), and Pennsylvania (2.66%). Major producer North Dakota levies an average personal income tax rate of only 1.07%, less than half the average rate in Oklahoma. Oklahoma Oil and Gas Income-Related Income Tax Payments. The underlying estimates of income tax payments at the average income tax rate are detailed in Figure 30. In Oklahoma, household earnings of $5.75 billion in the oil and gas sector taxed at the state average personal income tax rate of 2.61% would generate payments of $150.2 million by workers and proprietors in the industry in FY2017. Again, this is not an estimate of the actual taxes paid by the industry in Oklahoma but is a standardized measure of tax payments across the producing states at each state’s average income tax rate. The resulting $150.2 million in oil and gas-related personal income tax payments in Oklahoma would equal about 5% of the $3.13 billion in total personal income taxes paid in the state in FY2017. At the 3.5% average tax rate believed more reflective of oil and gas workers, personal income tax payments would total $201 million, or about 6.5% of total personal income tax payments in the state. The FY2017 estimate of $150.2 million is sharply lower than tax payments traced to Oklahoma’s oil and gas industry in recent years. Earnings in 2017 are 60% below the $14.2 billion earned as recently as 2014. This steep drop reflects the effect of the recent collapse in oil prices on industry earnings payouts. For comparison, payments would total $497 million at the 3.5% rate at the recent peak in oil and gas household earnings 2014, or 15.9% of total statewide personal income tax payments. Comparative Effective Income Tax Rates on Production Figure 30 also details the calculation of estimates of the effective personal income tax rate as a share of production across the producing states. The effective rate is calculated as estimated income tax paid on household earnings from the oil and gas industry divided by the total value of oil and gas production in FY2017. Effective personal income tax rates are shown in rank order for the sixteen largest producing states in Figure 31. This graphic illustrates the wide variation in effective income tax rates on oil and gas production across the producing states. Across all sixteen states, the effective income tax payments traced to household earnings from oil and gas equals 0.52% of production value. Oklahoma’s rate of 1.05% ranks 6th highest among the sixteen states, approximately double the overall average rate. Colorado has the highest effective rate at 2.9%, nearly triple Oklahoma’s rate. Montana, Kansas, and California have effective rates just above 2%, while Louisiana’s rate falls just below 2%. All other major producing states have an effective income tax rate below 1%, with major producers Alaska, Texas, and Wyoming having no personal income tax.

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Oklahoma Oil and Gas Activity and Tax Contribution 57 | P a g e Figure 31. Effective Personal Income Tax Rate on Oil and Gas Production (2017) Notes: Income tax is calculated as household earnings in the oil and gas sector times the average income tax rates in the state. The effective rate is income tax divided by total value of oil and gas production. Household earnings is defined by Bureau of Economic Analysis as employee compensation plus proprietors’ income. Proprietor’s income consists primarily of the income of sole proprietors and partnerships. The share of household earnings in each state derived from oil and gas activity is calculated as the sum of NAICS 201 (Oil and gas extraction) plus a share of NAICS 203 (Support activities for mining). The share of NAICS 203 included is determined by the ratio of NAICS 201/(NAICS 201 + NAICS 202 (Mining – except oil and gas) ). The large gas-producing states of Ohio and Pennsylvania both have effective income tax rates of 0.3% or less. This is due primarily to the lack of associated white-collar employment relative to Oklahoma. Notably, large oil producer North Dakota (0.1%) has the lowest effective income tax rate among those states with an income tax in place. Neighboring New Mexico has a similarly low effective rate of 0.4%. Texas, Alaska, Wyoming, North Dakota, and New Mexico all illustrate the case of a state having a very large oil and gas sector but deriving very little (or no) personal income tax revenue from the presence of oil and gas workers and proprietors in the state. The absence of a personal income tax in Texas, Alaska, and Wyoming along with very low average personal income tax rates in several major producing states has great bearing on the evaluation of the tax contributions by the oil and gas industry in Oklahoma. Texas, for example, would collect $1.59 billion in personal income tax revenue from its oil and gas sector at Oklahoma’s average personal income tax rate. In contrast, Colorado, Montana, Kansas, California, Louisiana, and Oklahoma represent large producing states that derive substantial amounts of personal income tax revenue from the presence of oil and gas workers and proprietors in the states. Oil and Gas-Related Sales Tax. Firms in the oil and gas industry and their employees also pay significant amounts of sales and use taxes, with many state and local governments highly dependent upon these taxes to fund government activities.26 Sales taxes are an especially critical source of revenue at the local level in Oklahoma, given that ad valorem tax revenue cannot be used to fund general municipal expenditures. 2.9% 2.3% 2.1% 2.1% 1.8% 1.1% 0.7% 0.6% 0.4% 0.4% 0.3% 0.2% 0.1% 0.0% 0.0% 0.0% 0.52% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% CO MT KS CA LA OK UT WV AR NM PA OH ND AK TX WY 16- States

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Oklahoma Oil and Gas Activity and Tax Contribution 58 | P a g e Many producing states are much less reliant than Oklahoma on sales taxes and many have much lower average sales tax rates. Differences in the overall level of oil and gas activity across the states also produces much different sales tax contributions. States with larger oil and gas industries, in general, tend to generate relatively more sales tax revenue from oil and gas activity than states with a smaller industry. States with more drilling activity also tend to produce significantly more sales tax revenue. Oklahoma has both a large oil and gas industry and a high level of drilling activity. Data Constraints. Collecting comparable state-level data on sales tax paid by the oil and gas industry from state tax agencies is generally not possible. Differences in tax law, reporting standards, payment processes, collecting and remitting parties, and treatment of out-of-state purchases makes assembling comparative sales tax data related to oil and gas activity virtually impossible in most states. The most significant hurdle is that it is not possible in most states to differentiate between sales tax payments collected and remitted by the oil and gas industry on their own taxable sales versus taxes paid in conjunction with their own taxable purchases, regardless of the industry remitting the tax. As a result, the sales tax payable on many of the purchases by the oil and gas industry are remitted by firms in other industries and cannot be tracked. The tax comparison in this report is most concerned with estimates of sales taxes paid directly by oil and gas firms, not necessarily the amount remitted by the oil and gas industry based on the purchases of others. This is a common misuse of sales tax data reported at the industry level. Comparative overall measures of sales tax burden are further complicated by differences in the share of the tax that is paid by residents versus nonresidents, particularly by tourists. All sales tax data used in the analysis are derived from the Census Bureau’s State and Local Government Finance database.27 The database provides a standardized measure of tax collections by type of tax at both the state and local level. Total sales taxes are based on FY2017 data at the state level and FY2016 data at the local level. These measures reflect the most recently available data on a consistent basis across the states. Comparative Measure of Sales Tax Payments. Comparative state-level estimates of the sales tax contribution of the oil and gas industry are formed in Figure 32 by apportioning total state and local sales and use tax receipts to each industry based on its average contribution to state GDP in the 2016 to 2017 period (for consistency with FY2017 tax data). This follows the approach commonly used to apportion state and local taxes at the industry level in widely- used economic impact models and by BEA.28 Because oil and gas activity is a component of the broader mining sector, we remove non-oil and gas-related mining activity from GDP using the same approach in prior sections of the report. The underlying assumption is that sales tax payments related to the oil and gas industry are proportional to the overall size of the industry. Hence, the amount of purchases made by the industry, income paid to workers, and earnings of proprietors who operate oil and gas-related businesses will be closely related to sales taxes paid. This approach is applied consistently to each state whereby the oil and gas industry’s share of total state economic activity determines the overall share of state sales tax payments derived from the industry.29 It also accounts for overall differences in the size of the taxable sales base across the producing

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Oklahoma Oil and Gas Activity and Tax Contribution 59 | P a g e states. This provides for a consistent comparison of the oil and gas industry’s sales tax contribution in each of the major producing states. Figure 32. Sales Tax Contribution of Oil & Gas Sector (2017) State Oil & Gas Share of State GDP1 Total State and Local Sales Tax2 Oil & Gas- Related Sales Tax Oil & Gas Production Value Effective Rate Alaska 11.2% 623,505,000 69,832,560 8,201,141,070 0.9% Arkansas 1.0% 6,032,463,000 60,324,630 2,473,104,560 2.4% California 0.3% 73,725,031,000 221,175,093 8,545,381,045 2.6% Colorado 2.7% 9,496,189,000 256,397,103 10,069,941,250 2.5% Kansas 0.6% 5,517,464,000 33,104,784 2,270,398,413 1.5% Louisiana 3.6% 12,085,009,000 435,060,324 7,940,949,818 5.5% Montana 1.0% 664,902,000 6,649,020 1,037,600,825 0.6% North Dakota 7.1% 1,886,898,000 133,969,758 17,332,509,833 0.8% New Mexico 5.8% 4,104,654,000 238,069,932 10,707,180,725 2.2% Ohio 1.2% 22,187,945,000 266,255,340 5,422,020,204 4.9% Oklahoma 9.9% 5,973,618,000 591,388,182 14,256,084,325 4.1% Pennsylvania 1.5% 20,909,833,000 313,647,495 16,252,110,916 1.9% Texas 6.7% 56,272,186,000 3,770,236,462 74,405,683,875 5.1% Utah 0.5% 4,623,194,000 23,115,970 2,323,674,367 1.0% West Virginia 3.5% 2,782,507,000 97,387,745 4,688,263,988 2.1% Wyoming 6.8% 976,102,000 66,374,936 7,784,664,133 0.9% 16-States 2.7% 227,861,500,000 6,582,989,334 193,710,709,346 3.4% Source: Bureau of Economic Analysis, Census Bureau, and RegionTrack calculations. Notes: Oil and gas-related sales tax is calculated by multiplying the share of GDP in oil and gas by total state and local sales taxes. 1 The share of GDP in each state derived from oil and gas activity is calculated as the sum of NAICS 201 (Oil and gas extraction) plus a share of NAICS 203 (Support activities for mining). The share of NAICS 203 included is determined by the ratio of NAICS 201/(NAICS 201 + NAICS 202 (Mining – except oil and gas) ). 2 Includes both state and local sales and use tax, as well as gross receipts. Based on the definition in the Census State and Local Government Finance database. State sales tax is for 2017. Local sales tax in 2016. Sales Tax Contribution in Oklahoma. Oklahoma’s estimated total sales tax contribution of $591 million is second highest among the sixteen states, behind only the $3.77 billion estimate for Texas. The major producing states of Louisiana ($435 million), Pennsylvania ($314 million), Ohio ($266 million), Colorado ($256 million), New Mexico ($238 million), and California ($221 million) are the only other states estimated to collect more than $200 million in sales tax from oil and gas related activity and earnings. North Dakota is estimated to generate only $134 million, roughly one-fourth the total in Oklahoma, which reflects both a smaller oil and gas industry and far lower average sales tax rates. Several of the key producing states generate much less estimated sales tax revenue. These include West Virginia ($97 million), Alaska ($70 million), Wyoming ($66 million), Arkansas ($60 million), and Kansas ($33 million). Montana, which has no general state or local sales tax, produced only $7 million. Most of the low sales tax-producing states have relatively small levels of oil and gas employment and/or low average state and local sales tax rates.

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Oklahoma Oil and Gas Activity and Tax Contribution 60 | P a g e Why Such Large Amounts of Sales Tax in Oklahoma? Critics of oil and gas industry taxation often question estimates of the sales tax contribution of the industry. The estimated $591 million paid by the sector in Oklahoma assumes a 9.9% share of total state and local sales taxes paid. The industry pays sales and use tax in many ways including well drilling and completion, general operations, equipment purchases, and information technology purchases. Most important, though, is sales and use taxes related to drilling activity. To place the sales and use tax contribution of drilling into perspective, recent survey data of well drilling costs experienced by several major producers in Oklahoma finds an average of $98,000 per well in state and local sales and use tax ($1.2 million in taxable purchases) payments from the drilling and completion of a typical modern horizontal well with a 5,000 foot lateral in the state. At an average estimated cost of $6.125 million per well in FY2017, the drilling and completion of approximately 1,500 wells completed statewide in 2017 required a total of $9.2 billion in spending. Based on approximately 1,500 wells completed in 2017, total sales and use tax payments from drilling activity alone totaled an estimated $147 million. This number of wells is significant but is now less than half the nearly 3,200 wells completed as recently as 2014 prior to the recent industry collapse. It is also far less than the average of 2,700 wells completed annually in Oklahoma in the 2001 to 2014 period. Drilling-related sales and use tax would total $265 million annually measured at the average drilling pace from 2001 to 2014. The overall estimate of sales tax attributed to the industry is not highly sensitive to the choice of GDP to apportion the data. The relative sizes of the cross-state estimates are essentially unchanged when using other measures of economic activity such as total household earnings share, wage and salary income share, or total compensation share in place of GDP. Effective Sales Tax Rates. Figure 33 ranks the sixteen largest producing states by effective sales tax rate as a share of oil and gas production. The effective rate is calculated as estimated oil and gas-related sales tax payments divided by the total value of oil and gas production in FY2017. The overall effective rate across all sixteen states is 3.4%. The effective sales tax rates vary from a high of 5.5% in Louisiana to a low of 0.6% in Montana. Oklahoma’s effective sales tax rate of 4.1% is 4th highest among the 16 states and one percentage point below Texas, a historically high-sales tax state with active drilling. Oklahoma’s rate is 0.7% above the average rate of 3.4% across all 16 states. Drilling-active Louisiana and Ohio also rank among the highest effective sales tax rates. The sales tax contribution is far higher in the top four states – Louisiana, Texas, Ohio, and Oklahoma - relative to the bottom twelve, with no other state having an effective sales tax rate above 2.6%. All four are highly active drilling states. Seven states – California, Colorado, Arkansas, New Mexico, West Virginia, Pennsylvania, and Kansas – form a middle tier with effective sales tax rates between 1.5% and 2.6%.

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Oklahoma Oil and Gas Activity and Tax Contribution 61 | P a g e Five additional states – Utah, Wyoming, Alaska, North Dakota, and Montana – have an effective sales tax rate of 1% or less. Alaska, Montana, North Dakota, and Wyoming are all examples of traditional high tax oil and gas producing states, yet they receive relatively little contribution from oil and gas activity in the form of sales taxes. This analysis illustrates the need to consider the sales tax contribution of oil and gas activity when evaluating tax policy in Oklahoma and the other three high-sales tax states. Ignoring the sales tax contribution when comparing Oklahoma to other traditional producing states such as Wyoming, Alaska, and North Dakota overlooks a key component of the industry’s tax contribution within the state. Figure 33. Effective Sales Tax Rate on Oil and Gas Activity (FY2017) Notes: Includes both state and local sales and use tax, as well as gross receipts tax. Based on the definition used in the Census Bureau State and Local Government Finance Database. State sales tax is for FY2017, the latest year available. Local sales tax is for FY2016, the latest year available. The effective rate is state and local sales tax from oil and gas activity divided by total value of oil and gas production. Household earnings is defined by Bureau of Economic Analysis as employee compensation plus proprietors’ income. Proprietor’s income consists primarily of the income of sole proprietors and partnerships. The share of household earnings in each state derived from oil and gas activity is calculated as the sum of NAICS 201 (Oil and gas extraction) plus a share of NAICS 203 (Support activities for mining). The share of NAICS 203 included is determined by the ratio of NAICS 201/(NAICS 201 + NAICS 202 (Mining – except oil and gas) ). Combined Effective Rates Figure 34 combines the effective personal income tax and sales tax rates from this section with severance and ad valorem effective tax rates developed in earlier sections of the report. Figure 35 provides a visual comparison of the relative contributions of the four taxes across the sixteen largest producing states. Combined effective tax rates as a share of production across the four tax categories average 10.4% and range from a low of 3.7% in Pennsylvania to a high of 13.6% in Louisiana. 5.5% 5.1% 4.9% 4.1% 2.6% 2.5% 2.4% 2.2% 2.1% 1.9% 1.5% 1.0% 0.9% 0.9% 0.8% 0.6% 3.4% 0% 1% 2% 3% 4% 5% 6% LA TX OH OK CA CO AR NM WV PA KS UT WY AK ND MT 16-States

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Oklahoma Oil and Gas Activity and Tax Contribution 62 | P a g e Figure 34. Combined Effective Tax Rate – Oil and Gas-Related Taxes State Effective Rate Severance Ad Valorem Sales Income Total Alaska 6.1% 1.5% 0.0% 0.9% 8.4% Arkansas 1.8% 1.0% 0.4% 2.4% 5.6% California 0.9% 0.9% 2.1% 2.6% 6.5% Colorado 1.0% 6.0% 2.9% 2.5% 12.5% Kansas 2.4% 4.0% 2.1% 1.5% 10.0% Louisiana 4.2% 2.1% 1.8% 5.5% 13.6% Montana 9.4% 0.4% 2.3% 0.6% 12.8% North Dakota 7.8% 0.0% 0.1% 0.8% 8.6% New Mexico 6.6% 1.3% 0.4% 2.2% 10.6% Ohio 0.9% 0.9% 0.2% 4.9% 6.9% Oklahoma (FY18) 4.0% 1.4% 1.1% 4.1% 10.6% Oklahoma (FY19) 5.1% 1.4% 1.1% 4.1% 11.7% Pennsylvania 1.5% 0.0% 0.3% 1.9% 3.7% Texas 4.7% 2.3% 0.0% 5.1% 12.1% Utah 1.2% 2.1% 0.7% 1.0% 5.0% West Virginia 3.0% 2.5% 0.6% 2.1% 8.1% Wyoming 5.0% 4.2% 0.0% 0.9% 10.0% 16-States 4.4% 2.1% 0.52% 3.4% 10.4% Notes: Base year is FY2017 for severance tax; approximately FY2016 for ad valorem tax subject to reported variability; FY2016/17 for sales tax; and FY2017 for personal income tax. Figure 35. Overall Combined Effective Production Tax Rate – 16 Largest Producing States 4.2% 9.4% 1.0% 4.7% 5.1% 4.0% 6.6% 5.0% 2.4% 7.8% 6.1% 3.0% 0.9% 0.9% 1.8% 1.2% 1.5% 4.4% 2.1% 0.4% 6.0% 2.3% 1.4% 1.4% 1.3% 4.2% 4.0% 0.0% 1.5% 2.5% 0.9% 0.9% 1.0% 2.1% 0.0% 2.1% 1.8% 2.3% 2.9% 0.0% 1.1% 1.1% 0.4% 0.0% 2.1% 0.1% 0.0% 0.6% 0.2% 2.1% 0.4% 0.7% 0.3% 0.5% 5.5% 0.6% 2.5% 5.1% 4.1% 4.1% 2.2% 0.9% 1.5% 0.8% 0.9% 2.1% 4.9% 2.6% 2.4% 1.0% 1.9% 3.4% 0% 2% 4% 6% 8% 10% 12% 14% 16% LA 13.6% MT 12.8% CO 12.5% TX 12.1% OK 11.7% OK 10.6% NM 10.6% WY 10.0% KS 10.0% ND 8.6% AK 8.4% WV 8.1% OH 6.9% CA 6.5% AR 5.6% UT 5.0% PA 3.7% 16- States 10.4% Severance Ad Valorem Income Sales Rank: 5th @ FY18 Effective Severance Tax Rate Rank: 5th @FY19 Effective Severance Tax Rate

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Oklahoma Oil and Gas Activity and Tax Contribution 63 | P a g e Oklahoma’s combined effective rate of 10.6% based on the FY2018 severance tax rate ranks 5th among the sixteen largest producing states, just above the overall average rate of 10.4%. The state’s combined rate will rise further to 11.7% in FY2019 as the average effective severance tax rate in Oklahoma rises under the new 5% severance tax rate. The state’s rank will remain 5th among the sixteen largest producing states but will exceed the average by more than a full percentage point. Louisiana, Montana, Colorado, and Texas all exceed the rate in Oklahoma with combined effective rates between12% and 14%. However, Oklahoma’s FY2019 combined rate will fall only slightly below the rate in Texas. A second tier of states below Oklahoma includes New Mexico, Wyoming, Kansas, North Dakota, Alaska, and West Virginia, all with combined effective rates between 8% and 10%. Ohio and California have estimated combined effective rates between 6% and 7%. The remaining states of Arkansas, Utah, and Pennsylvania have overall effective rates below 6% of production value. Major gas producer Pennsylvania has the lowest overall effective rates across the four tax categories at 3.7% of production value. Key Components in Oklahoma. By component of the overall effective rate in Figure 35, the 10.4% average across the sixteen states is comprised of a 4.4% severance tax rate, a 3.4% sales tax rate, a 2.1% ad valorem tax rate, and a 0.5% personal income tax rate. Relative to the average for the group of sixteen states, Oklahoma has a similar effective rate for severance taxes, a lower effective ad valorem tax rate, and a higher than average effective rate for both sales and income taxes.

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Oklahoma Oil and Gas Activity and Tax Contribution 64 | P a g e VIII. How are Oklahoma oil and gas severance tax revenues used? Over the past decade, the state’s oil and gas sector has contributed $6.6 billion in gross production tax revenue ($655 million annually) to the funding of Oklahoma state government (see Figure 35).30 Gross production revenue is first apportioned by statute for several dedicated purposes, primarily local government and public education, with the remainder deposited in the general revenue fund.31 Of the $6.6 billion in gross production revenue paid the past decade, $3.1 billion (47%) went to dedicated uses, with the remaining $3.5 billion (53%) transferred to the state’s general revenue fund. General revenue fund contributions from severance taxes (after allocations to dedicated uses) averaged $349 million annually. Current Severance Tax Apportionment Severance taxes paid by state oil and gas producers in FY2018 totaled $682 million. Under current apportionment rules, severance taxes are first distributed to a range of dedicated funds (see Figure 36).32 FY2018 dedicated uses include $83.86 million returned to counties for roads, $83.86 million to local school districts, $47.37 million to the common education technical fund, $47.37 million to the higher education capital fund, $47.37 million to the Oklahoma student aid revolving fund, and $18.85 million to other dedicated uses. Gross production tax revenue supported a total of $329 million in off the top dedicated uses in FY2018. The remaining $353 million was distributed to the general revenue fund. Education-Related Distributions A total of $226 million was apportioned to education-related dedicated funds in FY2018. Recipients include both common and higher education. Over the past decade, $2.11 billion in gross production tax revenue was apportioned for educational purposes, an average of $211 million annually in the period. Common education is the largest traditional direct beneficiary of gross production tax revenue. Over the past decade, gross production revenue received by local school districts and the common education technical fund33 totaled $1.16 billion, or $116 million annually. Common education’s share of gross production taxes reached $131 million in FY2018, the largest amount received the past decade. Higher education remains a significant recipient as well, receiving $95 million in FY2018 through the higher education capital fund and the Oklahoma student aid revolving fund. Contributions of gross production taxes to higher education totaled $902 million the past decade, or $90 million annually.

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Oklahoma Oil and Gas Activity and Tax Contribution 65 | P a g e Figure 36. Distribution of Oklahoma Gross Production Taxes Fiscal Year Total Apportion- ment* General Revenue Fund Dedicated Uses Total Education- Related Distributions* Returned to Counties for Roads To School Districts Common Education Technical Fund Higher Education Capital Fund Oklahoma Student Aid Revolving Fund Other* 2009 $1,052,147,399 $727,272,066 $80,108,185 $80,108,185 $47,372,299 $47,372,299 $47,372,299 $22,542,066 $222,225,082 2010 732,151,105 444,359,631 60,899,931 60,899,931 47,372,299 47,372,299 47,372,299 23,874,715 203,016,828 2011 817,535,694 509,858,904 68,749,447 68,749,447 47,372,299 47,372,299 47,372,299 28,060,999 210,866,344 2012 835,987,836 430,478,292 70,326,434 70,326,434 47,372,298 47,372,298 47,372,298 122,739,782 264,889,028 2013 513,576,262 221,610,957 62,542,178 62,542,178 47,372,298 47,372,298 47,372,298 24,764,055 204,659,072 2014 665,470,660 333,239,402 80,971,420 80,971,420 47,372,295 47,372,296 47,372,295 28,171,532 223,088,306 2015 542,074,273 213,359,735 81,878,193 81,878,193 47,372,290 47,372,290 47,372,290 22,841,281 223,995,063 2016 319,784,759 95,011,360 55,965,659 55,965,659 33,890,977 33,890,977 33,890,977 11,169,150 157,638,590 2017 411,219,672 157,437,279 62,893,884 62,893,884 38,404,347 38,404,347 38,404,347 12,781,585 178,106,924 2018 682,072,596 353,386,508 83,861,652 83,861,652 47,371,864 47,371,864 47,371,864 18,847,192 225,977,244 10-year Total $6,572,020,255 $3,486,014,134 $708,196,983 $708,196,983 $451,273,266 $451,273,267 $451,273,266 $315,792,357 $2,114,462,482 10-year Average $657,202,026 $348,601,413 $70,819,698 $70,819,698 $45,127,327 $45,127,327 $45,127,327 $31,579,236 $211,446,248 Source: Historical issues of Apportionment of Statutory Revenues by the Oklahoma Tax Commission. * “Other” includes but is not limited to: Community Water Infrastructure Development Revolving Fund, Conservation Commission Infrastructure Revolving Fund, County Bridge and Road Fund, OK Water Resources Board, Tourism & Recreation Capital Expenditure Revolving Fund, and the Statewide Circuit Engineering District Revolving Fund. “Education-Related Distributions” include School Districts, Common Education Technical Fund, Higher Education Capital Fund, Oklahoma Student Aid Revolving Fund, and special distributions to common education (FY2012 only).

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Oklahoma Oil and Gas Activity and Tax Contribution 66 | P a g e Figure 37. Gross Production Tax Revenue Returned to School Districts County 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average ADAIR 0 1,565 32 346 0 993 442 0 0 4 0 338 ALFALFA 278,901 318,482 316,249 317,137 349,751 706,616 1,733,355 3,737,264 6,675,851 4,415,648 4,753,655 2,332,401 ATOKA 97,064 412,273 592,286 351,202 381,449 292,346 178,799 153,328 130,222 92,847 110,791 269,555 BEAVER 2,018,381 2,178,315 2,071,842 1,277,279 1,096,382 1,391,075 1,293,302 2,151,798 1,643,232 723,908 629,900 1,445,703 BECKHAM 3,565,760 4,428,907 4,182,256 1,612,723 1,319,599 1,443,981 1,660,075 1,781,381 2,243,343 1,505,923 1,351,987 2,153,017 BLAINE 1,288,521 1,372,051 1,253,826 640,918 775,485 962,220 896,125 1,785,561 1,252,261 680,358 1,311,146 1,092,995 BRYAN 71,024 139,704 150,153 87,840 96,197 70,534 80,793 95,655 78,492 42,156 33,957 87,548 CADDO 3,179,423 4,050,424 4,361,425 2,464,365 2,494,773 2,699,846 1,475,751 1,764,750 1,520,317 907,452 966,132 2,270,523 CANADIAN 1,764,090 1,980,702 1,985,570 1,533,999 2,415,220 3,229,388 2,251,677 4,155,784 4,940,761 3,649,425 4,211,583 3,035,411 CARTER 2,545,615 3,222,150 3,495,192 2,998,076 3,855,089 5,058,388 3,792,832 5,665,667 4,888,488 3,635,591 2,441,572 3,905,305 CHEROKEE 0 0 0 36 69 0 0 0 0 0 0 11 CHOCTAW 0 0 0 0 0 0 0 0 0 0 0 0 CIMARRON 118,975 104,065 108,945 70,646 77,372 83,952 55,041 59,823 74,699 65,155 70,075 76,977 CLEVELAND 268,778 296,504 258,222 247,018 279,950 276,820 250,231 259,126 205,330 121,629 121,614 231,644 COAL 251,641 708,760 1,249,858 1,169,991 1,932,895 1,702,949 1,024,043 1,280,895 1,097,825 940,992 1,092,211 1,220,042 COMANCHE 115,105 123,113 175,697 127,716 109,482 131,338 76,328 86,526 62,250 33,565 30,983 95,700 COTTON 48,256 54,271 52,179 47,181 60,152 91,007 61,966 78,413 54,373 26,751 22,434 54,873 CRAIG 27,804 23,431 22,565 6,201 5,936 3,375 2,263 2,837 2,208 1,183 1,825 7,182 CREEK 937,212 1,058,243 1,163,030 984,512 1,115,881 869,072 1,286,504 1,041,695 865,392 559,952 541,782 948,606 CUSTER 2,270,415 2,535,412 2,562,699 1,324,703 1,380,650 1,587,679 931,034 889,602 829,663 517,971 594,576 1,315,399 DELAWARE 0 0 0 0 0 0 0 43 173 95 0 31 DEWEY 1,398,349 1,433,346 1,279,714 727,986 1,025,293 1,426,228 1,316,012 1,999,118 1,773,299 930,933 1,100,734 1,301,266 ELLIS 1,272,804 1,782,754 2,143,793 1,579,717 1,939,793 2,889,377 3,276,044 3,918,098 3,579,806 1,820,449 1,941,727 2,487,156 GARFIELD 590,906 674,733 684,863 468,800 503,770 463,229 452,173 943,272 1,355,773 1,630,831 1,783,840 896,128 GARVIN 2,083,188 2,504,794 2,605,609 2,056,948 2,407,925 3,009,522 2,098,126 2,715,211 3,061,771 1,958,364 2,373,972 2,479,224 GRADY 4,046,821 4,608,915 4,356,461 2,676,356 2,961,954 2,857,572 2,381,265 3,405,966 4,384,743 3,893,360 4,911,477 3,643,807 GRANT 397,965 535,897 453,148 387,754 464,762 519,630 940,730 2,030,543 2,412,169 1,125,695 859,422 972,975 GREER 3,436 5,013 7,477 3,959 1,984 1,756 2,029 1,882 1,419 989 864 2,737 HARMON 1,018 3,151 5,888 1,662 2,610 2,970 1,603 1,517 1,329 568 483 2,178 HARPER 853,560 947,486 826,054 577,897 592,870 702,110 630,990 568,348 429,364 304,393 219,912 579,942 HASKELL 1,057,226 1,165,731 1,009,081 446,095 335,516 239,256 144,526 153,834 117,807 61,382 115,650 378,888 HUGHES 349,870 704,640 1,097,469 1,176,551 1,676,932 1,462,553 787,398 849,219 701,956 742,177 1,020,270 1,021,917 JACKSON 30,048 40,435 37,298 37,226 71,513 43,753 36,418 125,034 108,221 63,740 34,482 59,812 JEFFERSON 136,728 166,298 162,166 146,911 183,039 258,301 180,253 256,430 124,358 22,020 33,632 153,341 JOHNSTON 6,158 12,247 22,644 94,204 113,052 230,318 172,641 278,385 354,839 315,043 255,799 184,917 KAY 352,835 469,246 533,373 523,481 661,636 879,618 652,819 923,799 1,047,164 825,443 494,490 701,107 KINGFISHER 1,192,318 1,356,121 1,498,490 972,345 1,145,790 1,173,485 892,829 1,190,708 1,874,411 1,871,157 4,256,329 1,623,166 KIOWA 114,278 87,344 84,930 104,035 70,893 66,780 36,214 33,769 24,945 19,660 19,469 54,804 LATIMER 4,176,497 4,936,641 4,233,625 2,291,456 1,882,566 1,134,710 802,517 773,336 311,814 263,635 452,560 1,708,286

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Oklahoma Oil and Gas Activity and Tax Contribution 67 | P a g e Figure 37. (Cont.) Gross Production Tax Revenue Returned to School Districts County 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average LE FLORE 905,889 1,081,147 1,211,358 606,002 515,352 337,151 224,295 254,881 159,348 74,810 171,403 463,575 LINCOLN 843,356 1,173,033 1,390,014 978,508 1,200,952 914,626 660,523 816,076 517,498 511,173 629,477 879,188 LOGAN 878,772 822,616 732,155 473,988 506,125 445,654 515,335 834,859 1,928,341 1,468,921 748,259 847,625 LOVE 238,591 273,493 280,540 209,015 283,179 311,526 334,263 631,590 450,998 357,391 840,944 397,294 MAJOR 2,069,575 2,396,206 2,555,227 1,771,312 1,952,959 1,992,499 1,290,035 1,426,478 1,241,155 713,755 642,011 1,598,164 MARSHALL 219,871 263,441 320,791 283,507 330,351 460,979 683,666 690,129 790,834 532,368 394,431 475,050 MAYES 7,542 9,642 9,436 9,164 8,356 9,610 1,456 2,209 1,451 754 5,424 5,750 MCCLAIN 898,290 1,119,974 1,074,843 784,410 919,805 1,008,003 806,392 1,087,165 841,289 569,802 528,141 873,982 MCCURTAIN 0 0 74 0 0 0 0 0 0 0 0 7 MCINTOSH 179,661 248,429 271,973 131,780 120,973 84,402 42,201 37,660 28,384 15,218 26,184 100,720 MURRAY 109,619 111,676 109,492 118,508 169,237 155,750 154,251 142,269 98,378 42,630 50,320 115,251 MUSKOGEE 37,303 34,703 35,673 32,784 38,897 27,991 32,444 32,287 25,780 9,811 15,356 28,572 NOBLE 533,738 679,426 839,647 636,122 741,719 699,912 541,371 1,010,959 1,181,970 878,254 391,166 760,055 NOWATA 259,591 274,842 280,548 147,022 114,622 182,214 108,321 151,457 60,378 50,629 65,324 143,536 OKFUSKEE 201,741 224,343 260,373 197,614 276,172 178,349 267,436 293,464 288,259 181,914 174,142 234,207 OKLAHOMA 1,066,559 1,314,602 1,381,829 1,247,181 1,623,545 1,351,368 1,512,883 1,298,260 1,243,317 714,323 762,404 1,244,971 OKMULGEE 175,527 203,832 226,779 191,541 228,118 160,845 169,142 169,518 161,138 79,193 83,486 167,359 OSAGE 846,865 986,361 1,316,441 1,320,186 1,275,266 1,922,188 1,318,157 1,674,914 927,242 536,404 770,994 1,204,815 OTTAWA 0 0 0 0 0 0 0 0 0 0 0 0 PAWNEE 171,446 185,565 200,661 193,574 227,863 261,078 292,457 435,824 365,755 166,718 173,099 250,259 PAYNE 403,333 468,543 452,174 351,346 417,277 347,070 436,780 749,948 1,559,140 1,203,840 770,496 675,661 PITTSBURG 2,300,390 2,686,523 2,749,425 1,828,185 1,890,575 1,945,531 1,645,193 2,048,865 1,610,941 1,073,776 1,435,756 1,891,477 PONTOTOC 875,657 963,949 1,036,410 834,074 1,189,213 526,000 1,780,615 1,313,868 1,378,858 698,472 509,936 1,023,139 POTTAWATOMIE 846,405 1,063,973 985,987 636,746 833,716 514,900 915,667 749,400 757,488 404,091 285,668 714,764 PUSHMATAHA 290,409 430,653 417,903 151,171 78,103 31,021 50,470 40,758 43,693 19,682 26,053 128,951 ROGER MILLS 5,044,123 6,129,753 5,613,200 2,645,881 2,314,300 2,619,050 2,778,536 4,037,314 4,650,795 2,808,447 2,295,090 3,589,237 ROGERS 62,497 70,880 52,586 24,338 34,812 37,215 22,480 30,632 14,264 9,318 11,371 30,789 SEMINOLE 919,316 1,288,107 1,613,825 1,094,008 1,453,345 1,001,150 1,565,123 1,453,713 1,171,253 779,374 705,342 1,212,524 SEQUOYAH 88,619 107,043 95,638 67,878 52,005 37,519 20,254 17,000 11,996 10,591 16,200 43,612 STEPHENS 3,772,682 4,282,090 4,564,150 2,881,052 3,177,345 3,595,768 2,307,879 3,508,388 4,232,663 3,806,159 3,717,711 3,607,321 TEXAS 2,957,732 3,241,159 3,406,616 2,524,650 2,733,181 2,409,774 1,903,532 1,599,903 1,069,640 669,419 1,162,719 2,072,059 TILLMAN 22,744 24,974 27,222 49,904 112,518 112,608 85,899 228,010 182,442 59,435 38,295 92,131 TULSA 124,794 867,059 792,076 741,192 777,329 964,958 851,060 944,567 408,454 241,427 359,497 694,762 WAGONER 13,440 16,617 22,882 22,122 28,579 35,216 24,293 31,088 34,271 18,109 13,953 24,713 WASHINGTON 254,539 288,450 312,469 229,775 136,336 265,647 140,185 183,097 70,409 50,804 80,899 175,807 WASHITA 2,106,401 2,734,727 3,576,536 2,641,466 4,576,312 6,269,982 2,890,848 2,730,115 2,527,183 1,266,496 1,044,176 3,025,784 WOODS 961,234 1,222,346 1,551,338 1,587,806 1,837,739 2,597,269 1,724,824 3,460,533 5,120,367 2,788,893 3,163,986 2,505,510 WOODWARD 1,629,915 1,865,074 1,822,656 998,701 911,752 886,079 545,542 460,027 491,661 297,811 264,761 854,406 All Counties $69,229,136 $83,598,414 $86,635,053 $58,177,785 $66,876,156 $72,663,646 $60,498,956 $79,735,839 $83,877,100 $56,880,656 $60,535,813 $70,947,942 Source: Oklahoma State Department of Education – Oklahoma Cost Accounting System

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Oklahoma Oil and Gas Activity and Tax Contribution 68 | P a g e Gross Production Tax Distribution by Region A portion of the gross production tax generated from oil and gas production in each county is allocated back to the county for distribution on an average daily attendance basis among the county’s independent school districts. Figure 37 provides a breakdown of severance taxes distributed to school districts by county statewide in the FY2008 to FY2017 period. County-Level Distributions. Since some counties have large amounts of oil and gas production and others very little, there is substantial variation in the revenues received. School districts in six counties received distributions averaging more than $3 million annually the past decade - Carter ($3.9 million), Stephens County ($3.6 million), Roger Mills ($3.6 million), Grady ($3.6 million), Canadian ($3.0 million), and Washita ($3.0 million). All six counties are traditionally large oil and gas producers. School districts in seven additional counties received distributions averaging between $2 million and $3 million annually. This group includes Alfalfa, Beckham, Caddo, Ellis, Garvin, Texas, and Woods, all traditional oil and gas producing counties. Districts in fourteen additional counties received distributions averaging between $1 million and $2 million annually. These counties include Beaver, Blaine, Coal, Custer, Dewey, Hughes, Kingfisher, Latimer, Major, Oklahoma, Osage, Pittsburg, Pontotoc, and Seminole. In total, districts in 27 counties received more than $1 million or more annually from oil and gas severance taxes from FY2008 to FY2017. School districts in only fourteen counties – Adair, Cherokee, Choctaw, Craig, Delaware, Greer, Harmon, Mayes, McCurtain, Muskogee, Ottawa, Rogers, Sequoyah, and Wagoner – received less than $50,000 annually in gross production revenue in the ten-year period. Historically, these counties are home to very little oil or gas production. Gross production taxes are much more concentrated outside the three largest counties in the state – Oklahoma ($1.23 million), Tulsa ($642,000), and Cleveland ($235,000). School District Distributions. Gross production tax receipts by individual school district the past decade are detailed in Figure 38. Larger schools located in traditional oil and gas producing regions of the state tend to receive the largest distributions. Twelve individual school districts received more than $1 million annually in gross production revenue between FY2008 and FY2017 - Alva ($1.84 million), Duncan ($1.68 million), Ardmore ($1.33 million), Guymon ($1.32 million), Elk City ($1.27 million), Mustang ($1.23 million), Cheyenne ($1.15 million), Cherokee ($1.09 million), Chickasha ($1.07 million), Cordell ($1.05 million), Wilburton ($1.02 million), and Yukon ($1.0 million). Thirty additional districts received between $500,000 and $1 million annually in the period. Thirty-eight districts received between $250,000 and $500,000 annually. Eighty-nine districts received between $100,000 and $250,000 annually. Fifty-four districts received between $50,000 and $100,000 annually.

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Oklahoma Oil and Gas Activity and Tax Contribution 69 | P a g e In total, 223 individual school districts in Oklahoma received $50,000 or more annually in gross production revenue between FY2008 and FY2017. The state’s charter schools do not share in school district distributions of gross production tax revenue.

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Oklahoma Oil and Gas Activity and Tax Contribution 70 | P a g e Figure 38. Gross Production Tax Distribution by County/District County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average ADAIR CAVE SPRINGS 0 0 2 20 0 993 19 0 0 0 0 103 ADAIR DAHLONEGAH 0 350 0 0 0 0 0 0 0 0 0 35 ADAIR GREASY 0 0 0 0 0 0 0 0 0 0 0 0 ADAIR MARYETTA 0 0 0 0 0 0 0 0 0 0 0 0 ADAIR PEAVINE 0 0 0 0 0 0 0 0 0 0 0 0 ADAIR ROCKY MOUNTAIN 0 0 0 0 0 0 0 0 0 0 0 0 ADAIR STILWELL 0 0 15 156 0 0 194 0 0 2 0 37 ADAIR WATTS 0 0 4 44 0 0 56 0 0 1 0 11 ADAIR WESTVILLE 0 1,216 11 125 0 0 173 0 0 2 0 153 ADAIR ZION 0 0 0 0 0 0 0 0 0 0 0 0 ALFALFA BURLINGTON 55,204 61,152 60,998 68,274 83,287 165,371 377,123 782,657 1,252,508 830,532 947,167 462,907 ALFALFA CHEROKEE 124,960 145,538 142,729 133,586 141,524 294,164 779,185 1,711,859 3,134,063 2,076,783 2,302,327 1,086,176 ALFALFA TIMBERLAKE 98,737 111,792 112,523 115,277 124,939 247,081 577,047 1,242,748 2,289,280 1,508,332 1,504,161 783,318 ATOKA ATOKA 49,216 206,864 298,977 180,527 183,862 141,980 85,830 71,453 60,667 44,555 55,237 132,995 ATOKA CANEY 13,126 61,713 84,310 49,209 50,299 39,212 26,302 21,987 18,815 12,844 15,246 37,994 ATOKA HARMONY 0 0 0 0 0 0 0 0 0 0 0 0 ATOKA LANE 0 0 0 0 0 0 0 0 0 0 0 0 ATOKA STRINGTOWN 11,231 43,373 58,534 31,970 56,544 35,486 20,022 19,603 17,993 12,981 14,887 31,139 ATOKA TUSHKA 23,491 100,323 150,466 89,497 90,744 75,669 46,646 40,285 32,747 22,468 25,421 67,427 BEAVER BALKO 193,522 251,710 227,726 144,919 135,112 192,291 189,101 320,259 232,112 102,068 89,990 188,529 BEAVER BEAVER 684,150 722,906 717,569 450,852 383,926 473,306 430,580 688,962 549,383 247,967 203,747 486,920 BEAVER FORGAN 328,024 371,786 329,289 201,954 178,603 226,316 207,157 337,687 227,332 93,519 88,554 226,220 BEAVER TURPIN 812,685 831,913 797,258 479,554 398,741 499,162 466,465 804,889 634,405 280,354 247,610 544,035 BECKHAM ELK CITY 2,137,462 2,684,868 2,520,077 958,026 793,286 872,917 983,653 1,042,960 1,281,889 835,794 728,343 1,270,181 BECKHAM ERICK 233,382 295,944 272,680 108,713 84,453 92,336 111,042 120,302 145,449 95,611 94,230 142,076 BECKHAM MERRITT 512,255 625,373 587,817 236,568 191,839 211,414 266,436 295,290 397,510 288,648 272,778 337,367 BECKHAM SAYRE 682,661 822,722 801,683 309,416 250,022 267,314 298,944 322,828 418,495 285,869 256,636 403,393 BLAINE CANTON 243,383 262,721 241,175 121,814 155,567 201,982 183,215 355,450 250,530 141,602 269,115 218,317 BLAINE GEARY 288,953 291,317 269,571 137,209 164,404 208,789 193,998 384,560 267,420 144,527 269,315 233,111 BLAINE OKEENE 231,639 253,361 235,687 117,803 136,797 163,394 155,358 300,736 214,506 117,678 228,614 192,394 BLAINE WATONGA 524,546 564,651 507,392 264,092 318,717 388,055 363,554 744,815 519,806 276,551 544,101 449,174 BRYAN (ILC) CHOCTAW NATION 0 0 0 0 0 0 0 0 0 0 0 0 BRYAN ACHILLE 4,636 9,083 9,768 5,183 5,352 3,666 3,733 4,097 3,250 1,699 1,412 4,724 BRYAN BENNINGTON 2,886 5,399 5,918 3,202 3,480 2,569 3,115 3,471 2,909 1,631 1,338 3,303 BRYAN CADDO 4,532 8,357 9,721 5,594 6,484 4,859 5,411 6,266 4,975 2,618 2,169 5,645 BRYAN CALERA 6,231 12,311 13,010 7,712 8,342 6,106 7,031 8,336 6,976 3,871 3,128 7,682 BRYAN COLBERT 8,865 16,249 16,871 10,131 11,406 8,495 9,536 11,452 9,319 4,648 3,653 10,176 BRYAN DURANT 32,265 63,295 68,707 40,955 44,921 32,882 38,278 44,962 37,246 20,159 16,328 40,773 BRYAN ROCK CREEK 5,124 10,534 10,952 6,282 6,334 4,598 5,123 6,295 5,109 2,716 2,086 6,003 BRYAN SILO 6,484 14,476 15,206 8,782 9,877 7,359 8,568 10,776 8,707 4,813 3,844 9,241 CADDO ANADARKO 1,041,864 1,286,699 1,366,717 763,292 779,054 844,981 480,247 575,733 490,078 288,794 298,251 717,385 CADDO BINGER-ONEY 178,032 229,735 253,435 137,411 139,119 152,236 79,845 109,128 101,398 60,929 59,823 132,306 CADDO BOONE-APACHE 309,164 407,429 451,524 244,695 252,107 266,764 142,927 165,391 150,332 90,423 94,104 226,570 CADDO CARNEGIE 331,852 410,082 452,063 257,003 251,236 275,892 141,187 170,794 145,503 87,552 94,058 228,537

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Oklahoma Oil and Gas Activity and Tax Contribution 71 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average CADDO CEMENT 137,288 180,803 201,652 119,618 114,804 116,551 62,228 76,535 62,062 35,991 41,458 101,170 CADDO CYRIL 202,842 277,727 259,110 143,174 147,598 157,844 87,206 100,561 88,418 57,482 62,826 138,195 CADDO FORT COBB-BROXTON 181,377 242,455 248,162 140,127 142,955 157,843 86,150 104,941 85,479 50,403 55,888 131,440 CADDO GRACEMONT 98,604 120,869 133,680 75,850 72,379 73,920 40,578 44,189 38,423 22,784 24,047 64,672 CADDO HINTON 324,844 405,161 472,711 286,277 300,516 321,721 171,911 204,242 177,059 105,687 117,632 256,292 CADDO HYDRO-EAKLY 241,696 319,703 340,539 195,729 197,177 218,541 120,604 140,094 113,882 65,950 74,083 178,630 CADDO LOOKEBA SICKLES 131,861 169,764 181,832 101,189 97,828 113,553 62,867 73,142 67,681 41,456 43,961 95,327 CANADIAN BANNER 0 0 0 0 0 0 0 0 0 0 0 0 CANADIAN CALUMET 20,872 26,421 27,504 21,180 28,895 41,880 30,392 56,298 59,673 41,066 43,755 37,706 CANADIAN DARLINGTON 0 0 0 0 0 0 0 0 0 0 0 0 CANADIAN EL RENO 223,132 242,587 235,376 177,656 275,698 362,206 246,125 439,575 494,601 370,168 430,547 327,454 CANADIAN MAPLE 0 0 0 0 0 0 0 0 0 0 0 0 CANADIAN MUSTANG 712,971 792,660 797,334 612,828 971,306 1,289,535 904,331 1,676,378 2,009,382 1,505,389 1,743,160 1,230,230 CANADIAN PIEDMONT 178,291 214,718 221,730 187,316 302,885 408,128 288,304 546,680 663,684 500,233 593,648 392,732 CANADIAN RIVERSIDE 0 0 0 0 0 0 0 0 0 0 0 0 CANADIAN UNION CITY 22,561 25,789 27,553 20,032 33,275 44,935 28,399 51,713 60,677 43,302 48,421 38,410 CANADIAN YUKON 606,264 678,527 676,073 514,986 803,161 1,082,704 754,126 1,385,140 1,652,744 1,189,267 1,352,053 1,008,878 CARTER (ILC) TRI-COUNTY 0 0 0 0 0 0 0 0 0 0 0 0 CARTER ARDMORE 859,695 1,080,208 1,187,964 1,018,497 1,311,835 1,719,929 1,273,849 1,937,201 1,672,348 1,248,995 817,692 1,326,852 CARTER DICKSON 373,888 462,240 501,465 420,967 565,581 762,671 579,930 831,107 725,584 534,264 368,660 575,247 CARTER FOX 99,606 120,487 133,814 114,251 145,419 172,599 127,380 190,584 170,950 128,591 83,244 138,732 CARTER HEALDTON 167,362 209,128 224,828 191,584 237,113 295,258 216,126 337,362 300,088 212,069 141,040 236,460 CARTER LONE GROVE 449,313 581,752 616,162 515,346 663,931 881,493 665,095 959,732 800,986 606,420 412,314 670,323 CARTER PLAINVIEW 407,471 509,308 552,680 482,599 616,532 825,215 621,097 952,951 825,058 624,343 427,626 643,741 CARTER SPRINGER 51,970 71,342 81,563 79,902 106,630 137,585 99,906 147,016 118,285 83,727 59,924 98,588 CARTER WILSON 136,310 187,685 196,715 174,932 208,048 263,637 209,449 309,714 275,189 197,182 131,072 215,362 CARTER ZANEIS 0 0 0 0 0 0 0 0 0 0 0 0 CHEROKEE BRIGGS 0 0 0 0 0 0 0 0 0 0 0 0 CHEROKEE CHEROKEE IMMERSION CHARTER SCH 0 0 0 0 0 0 0 0 0 0 0 0 CHEROKEE GRAND VIEW 0 0 0 0 0 0 0 0 0 0 0 0 CHEROKEE HULBERT 0 0 0 14 8 0 0 0 0 0 3 CHEROKEE KEYS 0 0 0 22 13 0 0 0 0 0 0 3 CHEROKEE LOWREY 0 0 0 0 0 0 0 0 0 0 0 0 CHEROKEE NORWOOD 0 0 0 0 0 0 0 0 0 0 0 0 CHEROKEE PEGGS 0 0 0 0 0 0 0 0 0 0 0 0 CHEROKEE SHADY GROVE 0 0 0 0 0 0 0 0 0 0 0 0 CHEROKEE TAHLEQUAH 0 0 0 0 48 0 0 0 0 0 0 5 CHEROKEE TENKILLER 0 0 0 0 0 0 0 0 0 0 0 0 CHEROKEE WOODALL 0 0 0 0 0 0 0 0 0 0 0 0 CHOCTAW BOSWELL 0 0 0 0 0 0 0 0 0 0 0 0 CHOCTAW FORT TOWSON 0 0 0 0 0 0 0 0 0 0 0 0 CHOCTAW HUGO 0 0 0 0 0 0 0 0 0 0 0 0 CHOCTAW SOPER 0 0 0 0 0 0 0 0 0 0 0 0 CHOCTAW SWINK 0 0 0 0 0 0 0 0 0 0 0 0 CIMARRON BOISE CITY 73,390 64,850 70,905 46,978 50,574 54,227 33,811 38,783 48,151 42,000 43,221 49,350 CIMARRON FELT 21,333 19,372 18,864 10,331 12,231 14,813 11,230 11,841 14,805 12,210 14,301 14,000

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Oklahoma Oil and Gas Activity and Tax Contribution 72 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average CIMARRON KEYES 24,252 19,843 19,175 13,338 14,567 14,912 10,000 9,198 11,743 10,945 12,553 13,627 CLEVELAND LEXINGTON 7,386 8,206 7,361 6,440 7,365 7,068 6,224 6,559 5,331 3,179 3,008 6,074 CLEVELAND LITTLE AXE 8,877 9,392 8,222 7,201 8,302 8,073 6,897 6,915 5,774 3,417 3,342 6,754 CLEVELAND MOORE 143,148 154,133 140,188 127,796 147,740 147,126 133,426 138,113 110,612 65,379 64,250 122,876 CLEVELAND NOBLE 19,907 20,120 18,717 17,174 19,628 18,963 16,489 16,770 13,541 7,913 7,601 15,692 CLEVELAND NORMAN 89,460 104,653 83,733 88,407 96,915 95,590 87,196 90,768 70,072 41,741 43,413 80,249 CLEVELAND ROBIN HILL 0 0 0 0 0 0 0 0 0 0 0 0 COAL COALGATE 190,172 520,068 908,539 867,429 1,389,483 1,249,306 756,628 952,521 803,163 691,230 794,672 893,304 COAL COTTONWOOD 0 0 0 0 0 0 0 0 0 0 0 0 COAL TUPELO 61,469 188,692 341,319 302,561 543,412 453,643 267,415 328,374 294,662 249,762 297,539 326,738 COMANCHE BISHOP 0 0 0 0 0 0 0 0 0 0 0 0 COMANCHE CACHE 8,053 8,841 12,209 9,585 8,405 10,468 6,440 7,947 5,416 3,005 2,851 7,517 COMANCHE CHATTANOOGA 1,454 1,619 2,159 1,690 1,465 1,694 1,009 1,134 700 365 343 1,218 COMANCHE ELGIN 7,597 8,517 12,441 9,462 8,653 11,302 7,122 9,153 6,300 3,549 3,420 7,992 COMANCHE FLETCHER 2,396 2,668 3,851 3,075 2,494 2,883 1,649 2,024 1,440 773 726 2,158 COMANCHE FLOWER MOUND 0 0 0 0 0 0 0 0 0 0 0 0 COMANCHE GERONIMO 1,618 1,881 2,808 2,023 1,714 2,208 1,220 1,499 1,071 552 495 1,547 COMANCHE INDIAHOMA 1,262 1,210 720 1,859 1,857 1,298 835 997 645 358 330 1,011 COMANCHE LAWTON 90,499 96,077 138,151 97,503 82,774 98,913 56,520 61,848 45,398 24,287 22,187 72,366 COMANCHE STERLING 2,227 2,299 3,357 2,518 2,120 2,572 1,534 1,923 1,280 675 630 1,891 COTTON BIG PASTURE 10,214 11,745 10,788 9,309 11,596 17,495 11,211 14,603 10,528 4,954 4,146 10,638 COTTON TEMPLE 9,734 10,851 10,533 9,385 11,455 18,196 12,181 13,086 8,135 4,184 3,731 10,174 COTTON WALTERS 28,309 31,675 30,858 28,486 37,101 55,316 38,574 50,723 35,711 17,614 14,557 34,062 CRAIG BLUEJACKET 1,705 1,430 1,514 428 363 238 179 230 164 85 148 478 CRAIG KETCHUM 6,023 5,028 4,267 1,271 1,136 753 503 607 500 266 405 1,474 CRAIG VINITA 14,514 12,110 12,415 3,404 2,853 1,877 1,289 1,631 1,279 688 1,038 3,858 CRAIG WELCH 3,742 3,227 3,072 831 710 430 293 368 266 145 233 958 CRAIG WHITE OAK 1,821 1,635 1,297 267 874 76 0 0 0 0 0 415 CREEK ALLEN-BOWDEN 0 0 0 0 0 0 0 0 0 0 0 0 CREEK BRISTOW 137,295 152,942 169,043 143,007 161,545 129,303 193,393 158,775 131,755 85,117 85,318 141,020 CREEK DEPEW 28,276 32,971 34,954 31,105 38,044 28,463 42,373 37,494 30,821 18,945 18,135 31,330 CREEK DRUMRIGHT 53,327 59,601 67,355 55,388 63,498 48,422 70,851 56,170 46,809 29,332 27,143 52,457 CREEK GYPSY 0 0 0 0 0 0 0 0 0 0 0 0 CREEK KELLYVILLE 97,104 108,898 119,534 103,469 115,262 90,202 131,708 104,191 85,755 54,302 50,816 96,414 CREEK KIEFER 30,544 33,816 40,136 36,622 47,256 40,039 65,601 58,594 51,814 35,296 35,661 44,484 CREEK LONE STAR 0 0 0 0 0 0 0 0 0 0 0 0 CREEK MANNFORD 128,516 140,122 159,276 128,677 143,546 116,258 172,735 138,144 118,224 77,675 76,605 127,126 CREEK MOUNDS 51,496 68,021 74,384 56,857 69,021 51,640 69,134 54,982 46,242 28,800 28,004 54,709 CREEK OILTON 29,258 31,320 34,923 27,773 30,952 22,383 32,626 27,165 20,313 13,547 13,818 25,482 CREEK OLIVE 32,215 38,321 40,195 34,343 40,144 30,169 45,515 35,641 29,661 18,524 17,067 32,958 CREEK PRETTY WATER 0 0 0 0 0 0 0 0 0 0 0 0 CREEK SAPULPA 349,181 392,230 423,230 367,271 406,614 312,191 462,567 370,540 303,998 198,415 189,215 342,627 CUSTER ARAPAHO-BUTLER 155,877 164,222 207,075 93,962 94,719 115,538 66,871 64,770 61,704 38,237 47,733 95,483 CUSTER BUTLER 45,451 47,844 0 0 0 0 0 0 0 0 0 4,784 CUSTER CLINTON 943,469 1,070,826 1,102,983 587,948 616,517 697,852 419,973 389,469 358,965 219,591 248,584 571,271 CUSTER THOMAS-FAY-CUSTER UNIFIED DIST 251,267 280,034 271,509 134,532 142,334 154,967 87,627 81,585 73,654 46,801 51,762 132,480

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Oklahoma Oil and Gas Activity and Tax Contribution 73 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average CUSTER WEATHERFORD 874,350 972,485 981,132 508,262 527,080 619,322 356,564 353,779 335,340 213,342 246,498 511,380 DELAWARE CLEORA 0 0 0 0 0 0 0 0 0 0 0 0 DELAWARE COLCORD 0 0 0 0 0 0 0 5 17 10 0 3 DELAWARE GROVE 0 0 0 0 0 0 0 18 73 41 0 13 DELAWARE JAY 0 0 0 0 0 0 0 12 50 25 0 9 DELAWARE KANSAS 0 0 0 0 0 0 0 6 26 15 0 5 DELAWARE KENWOOD 0 0 0 0 0 0 0 0 0 0 0 0 DELAWARE LEACH 0 0 0 0 0 0 0 0 0 0 0 0 DELAWARE MOSELEY 0 0 0 0 0 0 0 0 0 0 0 0 DELAWARE OAKS-MISSION 0 0 0 0 0 0 0 0 0 0 0 0 DEWEY SEILING 681,674 688,739 643,850 372,495 512,388 723,690 667,246 1,003,402 893,240 480,027 553,990 653,907 DEWEY TALOGA 212,706 201,240 140,215 62,010 107,813 176,044 150,076 179,398 145,694 80,455 126,016 136,896 DEWEY VICI 503,969 543,367 495,649 293,481 405,091 526,494 498,690 816,317 734,365 370,451 420,728 510,463 ELLIS ARNETT 297,725 395,889 454,527 329,303 389,700 601,280 760,588 921,882 806,414 442,310 489,587 559,148 ELLIS FARGO 345,541 511,982 612,570 435,115 529,331 780,038 798,889 947,555 860,587 435,816 630,656 654,254 ELLIS GAGE 214,710 280,872 314,268 215,516 258,872 379,106 366,622 422,503 374,037 150,304 0 276,210 ELLIS SHATTUCK 414,828 594,011 762,428 599,782 761,891 1,128,952 1,349,945 1,626,158 1,538,767 792,019 821,484 997,544 GARFIELD CHISHOLM 58,580 64,381 65,684 43,768 47,301 43,070 39,600 84,212 122,074 152,732 165,720 82,854 GARFIELD COVINGTON-DOUGLAS 18,620 20,230 20,291 13,805 15,614 13,634 12,764 24,904 34,946 40,314 43,292 23,979 GARFIELD DRUMMOND 17,039 19,078 19,702 16,886 17,327 15,378 14,640 29,427 41,562 47,157 49,577 27,073 GARFIELD ENID 400,770 463,604 469,840 317,068 342,999 318,244 314,911 661,586 953,881 1,152,354 1,259,820 625,431 GARFIELD GARBER 20,765 24,603 25,209 17,561 16,922 15,642 14,975 33,188 45,170 55,262 59,743 30,828 GARFIELD KREMLIN-HILLSDALE 16,938 18,909 18,754 13,775 14,789 14,085 14,640 29,342 39,359 43,994 50,408 25,806 GARFIELD PIONEER-PLEASANT VALE 35,092 38,923 41,327 29,042 30,823 27,137 25,505 50,269 71,785 80,493 88,362 48,366 GARFIELD WAUKOMIS 23,103 25,005 24,055 16,896 17,996 16,039 15,138 30,344 46,995 58,525 66,917 31,791 GARVIN ELMORE CITY-PERNELL 214,139 259,065 267,755 220,778 252,936 311,248 210,058 273,734 305,144 188,712 237,108 252,654 GARVIN LINDSAY 475,067 578,708 599,976 486,410 566,764 708,741 510,030 646,313 738,902 481,845 579,571 589,726 GARVIN MAYSVILLE 194,831 230,695 231,806 167,905 203,866 248,619 162,528 204,481 223,155 139,153 158,749 197,096 GARVIN PAOLI 110,363 137,011 141,368 107,319 124,810 158,741 104,215 134,576 158,755 98,226 116,467 128,149 GARVIN PAULS VALLEY 570,885 675,187 715,778 566,379 648,758 792,965 544,340 707,136 789,607 506,609 622,294 656,905 GARVIN STRATFORD 228,754 288,537 298,269 248,625 298,772 381,492 280,373 364,983 418,404 273,360 331,737 318,455 GARVIN WHITEBEAD 0 0 0 0 0 0 0 0 0 0 0 0 GARVIN WYNNEWOOD 289,149 335,592 350,657 259,532 312,020 407,717 286,582 383,988 427,803 270,458 328,047 336,240 GRADY ALEX 184,257 221,109 201,234 120,563 126,653 114,230 84,161 125,507 164,361 141,042 182,420 148,128 GRADY AMBER-POCASSET 223,754 255,530 244,220 149,484 163,294 161,380 137,234 195,029 257,155 223,193 274,681 206,120 GRADY BRIDGE CREEK 583,458 695,548 683,141 424,315 486,824 470,411 401,159 586,042 753,462 681,203 871,120 605,322 GRADY CHICKASHA 1,336,395 1,445,525 1,320,172 817,976 885,531 835,769 686,697 990,323 1,254,293 1,109,739 1,379,966 1,072,599 GRADY FRIEND 0 0 0 0 0 0 0 0 0 0 0 0 GRADY MIDDLEBERG 0 0 0 0 0 0 0 0 0 0 0 0 GRADY MINCO 273,267 308,304 290,324 177,116 197,830 194,639 165,978 231,409 307,952 268,206 328,151 246,991 GRADY NINNEKAH 227,709 262,808 244,586 149,901 179,098 180,048 145,356 204,357 274,353 249,287 312,401 220,220 GRADY PIONEER 0 0 0 0 0 0 0 0 0 0 0 0 GRADY RUSH SPRINGS 290,543 336,331 321,454 193,837 211,056 205,526 171,362 241,613 308,372 259,469 329,930 257,895 GRADY TUTTLE 765,980 900,150 879,985 548,548 616,954 601,155 509,442 723,587 932,217 840,941 1,076,910 762,989 GRADY VERDEN 161,460 183,609 171,347 94,615 94,713 94,414 79,876 108,098 132,579 120,281 155,898 123,543 GRANT DEER CREEK-LAMONT 100,295 134,018 117,219 95,975 116,277 126,184 232,550 459,856 524,299 250,133 193,062 224,957

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Oklahoma Oil and Gas Activity and Tax Contribution 74 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average GRANT MEDFORD 114,797 153,246 132,420 112,005 134,929 199,197 340,906 763,590 885,819 391,832 293,665 340,761 GRANT POND CREEK-HUNTER 141,007 199,113 163,194 141,195 171,330 194,248 367,273 807,097 1,002,050 483,731 372,694 390,192 GRANT WAKITA 41,866 49,520 40,315 38,579 42,226 0 0 0 0 0 0 17,064 GREER GRANITE 917 1,378 2,012 1,053 536 462 549 502 397 287 235 741 GREER MANGUM 2,519 3,635 5,465 2,906 1,448 1,294 1,480 1,380 1,022 702 628 1,996 HARMON HOLLIS 1,018 3,151 5,888 1,662 2,610 2,970 1,603 1,517 1,329 568 483 2,178 HARPER BUFFALO 314,604 345,156 293,351 215,340 227,917 263,746 236,799 218,472 168,222 111,546 78,626 215,918 HARPER LAVERNE 538,957 602,329 532,702 362,557 364,953 438,364 394,191 349,875 261,142 192,847 141,286 364,025 HASKELL KEOTA 219,943 234,213 200,498 86,615 65,141 44,867 27,710 31,083 22,711 11,664 23,091 74,759 HASKELL KINTA 85,554 90,963 87,058 39,245 30,322 23,415 13,745 14,013 10,284 5,435 10,659 32,514 HASKELL MCCURTAIN 137,818 154,428 125,507 51,374 38,428 26,121 15,930 16,147 12,933 6,419 11,872 45,916 HASKELL STIGLER 612,024 685,873 595,900 268,860 201,625 144,854 87,140 92,591 71,879 37,864 70,028 225,661 HASKELL WHITEFIELD 1,887 254 118 0 0 0 0 0 0 0 0 37 HUGHES CALVIN 27,743 53,138 81,743 83,880 111,081 112,195 55,983 59,590 51,500 56,255 68,879 73,424 HUGHES HOLDENVILLE 162,705 322,612 507,992 549,505 775,282 668,658 362,853 411,447 334,797 345,490 495,166 477,380 HUGHES MOSS 36,359 78,738 129,108 129,475 200,485 174,118 88,231 96,582 83,802 95,286 123,466 119,929 HUGHES STUART 42,366 89,038 134,698 141,975 191,508 158,391 93,591 100,834 81,758 92,757 125,699 121,025 HUGHES WETUMKA 59,481 121,428 196,737 210,620 322,244 294,791 163,811 180,767 150,100 152,390 207,061 199,995 JACKSON ALTUS 22,891 30,729 28,356 28,283 58,683 32,779 27,415 94,148 81,518 47,582 25,741 45,523 JACKSON BLAIR 1,748 2,216 1,981 1,978 2,962 2,639 2,149 7,951 6,600 3,981 2,202 3,466 JACKSON DUKE 976 1,576 1,412 1,309 1,951 1,599 1,447 5,090 4,193 2,655 1,376 2,261 JACKSON NAVAJO 2,692 3,636 3,543 3,588 5,046 4,215 3,334 11,030 9,968 6,308 3,563 5,423 JACKSON OLUSTEE-ELDORADO 1,740 2,278 2,006 2,067 2,870 2,520 2,074 6,816 5,942 3,214 1,600 3,139 JEFFERSON RINGLING 56,528 69,808 67,370 59,610 80,792 97,678 71,334 99,723 49,315 8,532 13,272 61,743 JEFFERSON RYAN 29,472 35,892 35,366 31,086 36,350 60,820 41,610 59,551 30,434 5,326 7,750 34,419 JEFFERSON TERRAL 0 0 0 0 83 0 0 0 0 0 0 8 JEFFERSON WAURIKA 50,728 60,598 59,429 56,215 65,814 99,803 67,308 97,156 44,609 8,162 12,609 57,170 JOHNSTON COLEMAN 701 1,427 2,743 11,065 13,336 28,019 22,021 33,126 38,893 35,986 26,328 21,294 JOHNSTON MANNSVILLE 0 0 0 0 0 0 0 0 0 0 0 0 JOHNSTON MILBURN 802 1,548 2,537 11,093 13,366 26,670 19,794 31,318 40,572 32,960 29,984 20,984 JOHNSTON MILL CREEK 518 1,052 1,897 8,737 10,744 20,696 14,417 22,376 30,113 28,557 24,456 16,304 JOHNSTON RAVIA 0 0 0 0 0 0 0 0 0 0 0 0 JOHNSTON TISHOMINGO 3,278 6,518 12,411 50,184 60,102 123,776 93,984 153,210 196,523 173,114 138,244 100,807 JOHNSTON WAPANUCKA 859 1,702 3,057 13,125 15,503 31,158 22,425 38,355 48,739 44,426 36,788 25,528 KAY BLACKWELL 66,653 88,634 101,027 98,165 129,011 163,044 116,178 162,131 182,009 140,975 83,808 126,498 KAY BRAMAN (Consolidated) 5,999 7,424 7,205 5,918 7,130 934 0 0 0 0 0 2,861 KAY KILDARE 0 0 0 0 0 0 0 0 0 0 0 0 KAY NEWKIRK 30,255 40,829 46,205 46,519 49,794 83,652 66,842 95,781 110,189 88,014 52,428 68,025 KAY PECKHAM 0 0 0 0 0 0 0 0 0 0 0 0 KAY PONCA CITY 215,546 286,034 326,835 321,095 411,152 549,320 410,166 584,005 663,490 522,852 313,621 438,857 KAY TONKAWA 34,383 46,325 52,101 51,784 64,548 82,668 59,634 81,882 91,477 73,602 44,633 64,865 KINGFISHER CASHION 175,930 206,857 233,904 149,469 176,979 182,506 126,148 166,555 268,318 261,753 595,211 236,770 KINGFISHER DOVER 94,494 105,161 112,021 72,645 79,991 77,474 57,611 66,091 100,722 92,382 197,970 96,207 KINGFISHER HENNESSEY 298,644 343,323 375,712 241,075 280,808 277,043 215,733 289,496 467,583 471,463 1,059,249 402,148 KINGFISHER KINGFISHER 446,413 509,110 551,731 360,407 426,815 450,769 360,307 492,967 748,585 746,100 1,692,524 633,932 KINGFISHER LOMEGA 70,387 80,499 93,324 62,477 75,403 77,629 57,265 76,647 124,977 124,927 303,429 107,658

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Oklahoma Oil and Gas Activity and Tax Contribution 75 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average KINGFISHER OKARCHE 106,449 111,171 131,797 86,272 105,794 108,064 75,765 98,952 164,225 174,532 407,946 146,452 KIOWA HOBART 53,570 41,663 40,805 50,473 34,245 32,495 17,677 16,665 12,770 10,259 9,696 26,675 KIOWA LONE WOLF 8,139 5,554 5,154 6,954 4,258 3,858 1,776 1,678 1,462 1,025 1,462 3,318 KIOWA MOUNTAIN VIEW-GOTEBO 18,441 13,734 12,787 14,449 10,380 9,402 5,609 5,340 3,917 3,069 2,987 8,167 KIOWA SNYDER 34,128 26,392 26,183 32,158 22,011 21,025 11,153 10,086 6,795 5,306 5,324 16,643 LATIMER BUFFALO VALLEY 454,005 532,438 452,366 246,733 194,450 121,378 87,226 89,152 36,236 27,253 43,365 183,060 LATIMER PANOLA 671,218 839,497 731,568 379,800 302,109 169,070 115,658 105,506 40,727 27,785 46,504 275,822 LATIMER RED OAK 480,343 592,388 541,728 289,849 259,171 162,302 120,737 121,386 50,751 47,582 88,504 227,440 LATIMER WILBURTON 2,570,931 2,972,318 2,507,963 1,375,074 1,126,836 681,959 478,896 457,291 184,100 161,015 274,187 1,021,964 LE FLORE ARKOMA 36,882 42,436 49,541 22,301 19,021 13,127 9,193 11,082 6,831 3,379 7,391 18,430 LE FLORE BOKOSHE 25,417 30,690 33,298 15,310 12,356 7,768 4,899 5,972 3,438 1,740 4,054 11,952 LE FLORE CAMERON 43,552 50,651 53,457 25,817 20,222 12,980 7,563 8,646 5,347 2,300 5,062 19,204 LE FLORE FANSHAWE 0 0 0 0 0 0 0 0 0 0 0 0 LE FLORE HEAVENER 94,239 112,172 129,290 67,832 59,812 40,513 25,561 30,230 18,918 8,738 19,783 51,285 LE FLORE HODGEN 0 0 0 0 0 0 0 0 0 0 0 0 LE FLORE HOWE 44,673 52,728 60,768 30,467 24,472 18,426 12,696 13,945 8,949 4,642 11,088 23,818 LE FLORE LE FLORE 23,439 30,114 31,655 14,019 12,125 7,880 5,256 6,303 3,816 1,737 4,283 11,719 LE FLORE MONROE 0 0 0 0 0 0 0 0 0 0 0 0 LE FLORE PANAMA 77,856 88,753 98,566 49,868 41,412 25,762 16,450 19,280 12,690 6,034 13,940 37,275 LE FLORE POCOLA 86,697 115,701 117,011 56,886 47,908 30,834 20,859 22,695 14,416 6,677 15,644 44,863 LE FLORE POTEAU 215,958 256,579 295,543 147,369 129,365 84,727 57,934 64,765 40,440 19,009 44,028 113,976 LE FLORE SHADY POINT 0 0 0 0 0 0 0 0 0 0 0 0 LE FLORE SPIRO 123,775 143,700 161,997 79,786 68,282 43,783 29,405 33,171 19,833 9,078 20,684 60,972 LE FLORE TALIHINA 59,779 69,735 82,885 44,798 37,312 23,680 15,796 17,636 10,882 4,973 11,338 31,903 LE FLORE WHITESBORO 20,497 21,960 24,529 13,005 11,130 6,824 4,931 5,460 3,577 1,691 3,768 9,688 LE FLORE WISTER 53,125 65,929 72,819 38,544 31,936 20,846 13,750 15,696 10,213 4,812 10,339 28,488 LINCOLN AGRA 64,734 88,786 102,002 70,459 87,981 68,513 50,941 65,977 40,937 37,648 38,360 65,160 LINCOLN CARNEY 30,947 42,779 52,550 37,390 46,129 33,629 25,171 34,082 20,223 20,310 27,103 33,937 LINCOLN CHANDLER 173,960 245,639 292,943 200,374 246,532 185,994 131,120 163,567 106,649 109,632 137,646 182,009 LINCOLN DAVENPORT 55,402 81,081 94,302 64,393 80,837 59,089 41,044 51,718 35,511 34,878 43,975 58,683 LINCOLN MEEKER 131,790 181,965 213,947 150,151 184,790 143,099 103,965 128,646 79,228 77,910 97,345 136,105 LINCOLN PRAGUE 151,020 214,927 258,985 186,949 226,658 177,557 127,733 150,845 95,360 97,067 117,277 165,336 LINCOLN STROUD 129,351 174,966 212,320 152,367 187,229 140,608 102,203 123,814 76,792 74,634 93,978 133,891 LINCOLN WELLSTON 106,152 142,890 162,966 116,424 140,795 106,138 78,347 97,427 62,799 59,093 73,794 104,067 LINCOLN WHITE ROCK 0 0 0 0 0 0 0 0 0 0 0 0 LOGAN COYLE 76,140 67,821 63,411 39,285 38,684 33,705 37,770 59,266 119,696 95,034 51,456 60,613 LOGAN CRESCENT 125,927 120,688 104,002 73,535 73,319 61,119 72,099 114,783 273,145 205,781 100,785 119,926 LOGAN GUTHRIE 625,590 589,176 527,958 335,522 366,495 325,805 376,658 614,402 1,435,606 1,092,243 556,215 622,008 LOGAN MULHALL-ORLANDO 51,114 44,931 36,785 25,646 27,626 25,025 28,808 46,408 99,894 75,863 39,804 45,079 LOVE GREENVILLE 0 0 0 0 0 0 0 0 0 0 0 0 LOVE MARIETTA 149,439 169,749 172,259 126,328 174,216 190,173 206,630 394,549 281,646 220,844 517,902 245,430 LOVE THACKERVILLE 44,446 52,500 54,068 42,090 56,462 59,015 58,431 111,673 81,298 67,638 167,833 75,101 LOVE TURNER 44,705 51,245 54,213 40,598 52,500 62,338 69,202 125,368 88,055 68,909 155,209 76,764 MAJOR ALINE-CLEO 215,827 242,549 254,325 180,198 224,097 216,373 135,219 134,128 120,492 70,402 64,972 164,275 MAJOR CIMARRON 385,716 448,240 479,629 332,912 381,593 388,563 253,553 266,260 222,166 121,740 108,944 300,360 MAJOR FAIRVIEW 952,787 1,093,996 1,133,399 788,826 836,594 861,333 565,298 658,658 573,755 334,344 298,354 714,456

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Oklahoma Oil and Gas Activity and Tax Contribution 76 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average MAJOR RINGWOOD 515,244 611,421 687,873 469,377 510,675 526,230 335,964 367,432 324,741 187,268 169,741 419,072 MARSHALL KINGSTON 86,639 99,324 123,406 107,098 123,764 176,114 263,576 273,594 317,545 218,028 160,901 186,335 MARSHALL MADILL 133,232 164,117 197,385 176,409 206,587 284,864 420,091 416,535 473,288 314,341 233,530 288,715 MAYES ADAIR 1,065 1,356 1,348 1,351 1,104 1,295 212 332 225 117 827 817 MAYES CHOUTEAU-MAZIE 1,089 1,383 1,296 1,221 975 1,138 179 272 188 98 689 744 MAYES LOCUST GROVE 1,764 2,285 2,183 2,101 1,722 1,985 317 489 311 156 1,129 1,268 MAYES OSAGE 0 0 0 0 0 0 0 0 0 0 0 0 MAYES PRYOR 2,682 3,435 3,413 3,328 2,736 3,246 565 849 554 292 2,110 2,053 MAYES SALINA 942 1,182 1,196 1,165 1,819 1,946 184 268 173 90 670 869 MAYES WICKLIFFE 0 0 0 0 0 0 0 0 0 0 0 0 MCCLAIN BLANCHARD 218,929 269,171 254,262 188,479 220,784 246,777 201,168 271,705 210,786 145,282 134,101 214,251 MCCLAIN DIBBLE 99,091 118,078 114,501 82,174 93,426 97,919 78,409 104,431 78,215 50,616 44,461 86,223 MCCLAIN NEWCASTLE 188,990 245,934 246,482 184,132 221,244 243,371 194,501 272,906 216,787 150,447 144,360 212,016 MCCLAIN PURCELL 203,581 249,366 233,090 167,623 192,730 208,964 165,762 217,756 163,654 107,054 98,476 180,447 MCCLAIN WASHINGTON 125,832 156,837 146,821 106,089 123,810 136,321 108,283 144,336 111,270 75,517 70,146 117,943 MCCLAIN WAYNE 61,867 80,588 79,685 55,914 67,811 74,650 58,270 76,030 60,577 40,886 36,597 63,101 MCCURTAIN BATTIEST 0 0 3 0 0 0 0 0 0 0 0 0 MCCURTAIN BROKEN BOW 0 0 21 0 0 0 0 0 0 0 0 2 MCCURTAIN DENISON 0 0 0 0 0 0 0 0 0 0 0 0 MCCURTAIN EAGLETOWN 0 0 3 0 0 0 0 0 0 0 0 0 MCCURTAIN FOREST GROVE 0 0 0 0 0 0 0 0 0 0 0 0 MCCURTAIN GLOVER 0 0 0 0 0 0 0 0 0 0 0 0 MCCURTAIN HAWORTH 0 0 7 0 0 0 0 0 0 0 0 1 MCCURTAIN HOLLY CREEK 0 0 0 0 0 0 0 0 0 0 0 0 MCCURTAIN IDABEL 0 0 17 0 0 0 0 0 0 0 0 2 MCCURTAIN LUKFATA 0 0 0 0 0 0 0 0 0 0 0 0 MCCURTAIN SMITHVILLE 0 0 4 0 0 0 0 0 0 0 0 0 MCCURTAIN VALLIANT 0 0 13 0 0 0 0 0 0 0 0 1 MCCURTAIN WRIGHT CITY 0 0 6 0 0 0 0 0 0 0 0 1 MCINTOSH CHECOTAH 89,440 121,668 132,077 63,152 57,602 38,889 20,013 17,879 13,587 7,673 13,184 48,573 MCINTOSH EUFAULA 69,228 96,827 108,601 54,860 47,598 33,095 15,663 13,885 10,526 5,940 10,036 39,703 MCINTOSH HANNA 6,172 8,289 9,062 3,820 8,042 6,542 3,669 3,203 2,025 521 899 4,607 MCINTOSH MIDWAY 14,821 21,644 22,233 9,948 7,730 5,876 2,856 2,693 2,247 1,084 2,064 7,838 MCINTOSH RYAL 0 0 0 0 0 0 0 0 0 0 0 0 MCINTOSH STIDHAM 0 0 0 0 0 0 0 0 0 0 0 0 MURRAY DAVIS 44,227 44,581 43,813 48,156 70,207 65,988 65,433 59,522 40,823 17,337 20,461 47,632 MURRAY SULPHUR 65,392 67,095 65,678 70,352 99,030 89,762 88,817 82,747 57,555 25,293 29,859 67,619 MUSKOGEE BOYNTON-MOTON 501 353 311 243 240 0 0 0 0 0 0 115 MUSKOGEE BRAGGS 610 585 653 532 648 438 483 457 359 137 206 450 MUSKOGEE FORT GIBSON 5,433 4,825 5,194 4,470 5,367 3,881 4,580 4,559 3,786 1,411 2,079 4,015 MUSKOGEE HASKELL 2,686 2,369 2,550 2,192 2,582 1,890 2,165 2,121 1,694 609 928 1,910 MUSKOGEE HILLDALE 5,259 4,626 4,926 4,379 5,257 3,796 4,449 4,457 3,729 1,409 2,107 3,914 MUSKOGEE MUSKOGEE 16,646 16,451 15,925 15,773 18,329 13,213 15,222 15,130 11,665 4,526 7,438 13,367 MUSKOGEE OKTAHA 1,879 1,746 1,948 1,659 2,128 1,552 1,835 1,916 1,543 570 821 1,572 MUSKOGEE PORUM 1,488 1,335 1,477 1,257 1,513 1,088 1,207 1,185 984 376 567 1,099 MUSKOGEE WAINWRIGHT 0 0 0 0 0 0 0 0 0 0 0 0

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Oklahoma Oil and Gas Activity and Tax Contribution 77 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average MUSKOGEE WARNER 1,994 1,688 1,923 1,656 2,059 1,539 1,801 1,768 1,483 574 890 1,538 MUSKOGEE WEBBERS FALLS 806 725 763 623 774 593 702 694 536 199 321 593 NOBLE BILLINGS 30,012 37,378 41,234 29,766 36,921 31,498 20,783 33,490 35,229 26,629 13,633 30,656 NOBLE FRONTIER 97,483 120,098 147,267 105,860 113,639 107,428 85,328 167,782 200,069 154,068 68,493 127,003 NOBLE MORRISON 115,248 156,342 200,367 159,510 192,759 181,439 144,211 262,735 304,506 219,029 102,978 192,388 NOBLE PERRY 290,995 365,608 450,779 340,987 398,401 379,548 291,048 546,952 642,166 478,528 206,063 410,008 NOWATA NOWATA 139,134 147,207 146,931 77,493 65,560 93,089 56,113 76,943 30,518 25,273 32,490 75,162 NOWATA OKLAHOMA UNION 83,135 88,165 90,700 48,465 34,790 62,904 37,127 53,583 20,961 18,237 23,399 47,833 NOWATA SOUTH COFFEYVILLE 37,322 39,469 42,917 21,064 14,272 26,222 15,080 20,930 8,899 7,119 9,434 20,541 OKFUSKEE BEARDEN 0 0 0 0 0 0 0 0 0 0 0 0 OKFUSKEE BOLEY 6,188 5,147 575 0 0 0 0 0 0 0 0 572 OKFUSKEE GRAHAM-DUSTIN 31,845 52,160 73,922 79,420 102,139 73,642 144,940 160,465 173,153 23,241 16,410 89,949 OKFUSKEE MASON 24,746 27,301 30,285 22,597 29,501 19,136 19,717 20,653 17,645 23,854 24,321 23,501 OKFUSKEE OKEMAH 86,436 98,895 112,801 90,394 130,185 80,633 71,577 63,900 54,592 76,810 73,956 85,374 OKFUSKEE PADEN 26,234 29,807 33,367 23,639 32,344 21,661 19,752 18,931 16,780 21,521 22,660 24,046 OKFUSKEE WELEETKA 47,508 50,719 56,613 42,660 58,335 37,678 34,380 29,514 26,090 36,488 36,795 40,927 OKLAHOMA (ILC) POOLED INVESTMENT 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA ASTEC CHARTERS 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA BETHANY 14,627 18,218 18,971 17,335 22,502 18,217 21,912 17,686 16,876 9,776 10,434 17,193 OKLAHOMA CHOCTAW-NICOMA PARK 46,733 56,912 60,719 53,771 69,865 56,239 77,766 78,471 76,110 32,888 33,552 59,629 OKLAHOMA CROOKED OAK 10,094 12,328 13,130 11,349 14,858 11,774 14,126 11,882 11,013 6,511 7,413 11,439 OKLAHOMA CRUTCHO 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA DEER CREEK 25,693 34,755 39,339 37,476 50,505 41,375 55,684 48,302 50,075 30,776 34,440 42,273 OKLAHOMA EDMOND 185,208 235,151 248,296 224,389 294,519 236,684 287,168 236,422 226,758 133,152 144,365 226,690 OKLAHOMA EPIC BLENDED LEARNING CHARTER 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA EPIC ONE ON ONE CHARTER SCHOOL 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA HARRAH 22,482 27,642 28,644 25,235 31,645 24,628 28,218 22,504 20,712 11,815 12,773 23,382 OKLAHOMA INSIGHT SCHOOL OF OKLAHOMA 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA JOHN W REX CHARTER ELEMENTARY 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA JONES 10,540 12,797 13,790 12,269 16,276 12,898 15,248 12,025 11,218 6,285 6,789 11,959 OKLAHOMA LUTHER 8,058 9,800 9,578 16,190 11,899 9,685 11,116 9,228 9,179 5,267 5,241 9,718 OKLAHOMA MIDWEST CITY-DEL CITY 140,480 171,321 179,965 158,302 202,113 160,774 188,441 152,195 141,847 82,279 86,264 152,350 OKLAHOMA MILLWOOD 10,813 12,335 12,873 11,087 13,973 11,654 13,605 9,447 10,032 5,577 5,401 10,598 OKLAHOMA OAKDALE 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKC CHARTER SANTA FE SOUTH 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKC CHARTER: DOVE SCIENCE ACAD 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKC CHARTER: HARDING CHARTER 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKC CHARTER: HARDING FINE ARTS 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKC CHARTER: HUPFELD/W VILLAGE 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKC CHARTER: INDEPENDENCE MS 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKC CHARTER: KIPP REACH COLL. 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKC CHARTER: SEEWORTH ACADEMY 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKLAHOMA CITY 376,555 465,433 488,737 441,445 589,555 521,416 505,764 461,756 444,176 260,004 278,520 445,681 OKLAHOMA OKLAHOMA CONNECTIONS ACADEMY 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKLAHOMA VIRTUAL CHARTER ACAD 0 0 0 0 0 0 0 0 0 0 0 0 OKLAHOMA OKLAHOMA YOUTH ACADEMY 0 0 0 0 0 0 0 0 0 0 0 0

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Oklahoma Oil and Gas Activity and Tax Contribution 78 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average OKLAHOMA PUTNAM CITY 184,356 219,937 227,559 201,661 257,800 206,784 246,295 200,119 189,167 108,953 115,377 197,365 OKLAHOMA WESTERN HEIGHTS 30,920 37,972 40,227 36,672 48,036 39,240 47,542 38,222 36,154 21,041 21,835 36,694 OKMULGEE BEGGS 29,121 34,098 38,935 34,268 41,733 29,609 31,398 31,682 29,962 14,655 15,049 30,139 OKMULGEE DEWAR 11,248 13,103 15,118 13,355 16,709 10,673 11,218 11,445 10,026 5,065 5,448 11,216 OKMULGEE HENRYETTA 32,214 37,946 43,158 36,719 43,694 31,005 32,962 32,986 32,183 15,455 16,337 32,244 OKMULGEE MORRIS 26,841 31,654 34,623 28,736 34,553 24,263 26,660 27,266 27,237 13,273 14,063 26,233 OKMULGEE OKMULGEE 47,285 54,242 57,889 48,061 56,466 39,636 39,922 40,350 38,795 18,937 19,754 41,405 OKMULGEE PRESTON 14,558 16,877 20,181 16,906 20,124 14,809 15,330 14,237 13,335 7,184 7,914 14,690 OKMULGEE SCHULTER 5,730 6,456 6,597 5,425 6,103 4,317 4,872 4,507 3,669 1,768 1,880 4,559 OKMULGEE TWIN HILLS 0 0 0 0 0 0 0 0 0 0 0 0 OKMULGEE WILSON 8,533 9,458 10,277 8,070 8,736 6,533 6,781 7,045 5,931 2,854 3,041 6,873 OSAGE (ILC) OSAGE COUNTY 0 0 0 0 0 0 0 0 0 0 0 0 OSAGE ANDERSON 0 0 0 0 0 0 0 0 0 0 0 0 OSAGE AVANT 0 0 0 0 0 0 0 0 0 0 0 0 OSAGE BARNSDALL 118,593 140,859 164,332 171,399 168,461 285,783 161,104 217,162 114,767 62,908 106,329 159,310 OSAGE BOWRING 0 0 0 0 0 0 0 0 0 0 0 0 OSAGE HOMINY 170,185 187,708 228,393 243,187 241,767 332,405 227,620 297,738 148,645 84,802 145,934 213,820 OSAGE MCCORD 0 0 0 0 0 0 0 0 0 0 0 0 OSAGE OSAGE HILLS 0 0 0 0 0 0 0 0 0 0 0 0 OSAGE PAWHUSKA 241,779 285,146 467,902 413,781 407,672 604,651 422,032 560,251 343,685 196,425 231,061 393,261 OSAGE PRUE 98,566 105,982 164,915 153,322 145,655 201,565 151,141 189,180 127,423 75,444 90,597 140,522 OSAGE SHIDLER 61,246 72,952 83,023 113,375 95,430 142,850 89,923 126,522 59,375 36,181 58,733 87,836 OSAGE WOODLAND 114,015 146,815 152,493 170,950 164,084 231,918 158,850 217,252 104,489 63,576 109,423 151,985 OSAGE WYNONA 42,481 46,898 55,384 54,172 52,197 123,018 107,486 66,810 28,858 17,069 28,917 58,081 OTTAWA AFTON 0 0 0 0 0 0 0 0 0 0 0 0 OTTAWA COMMERCE 524,764 600,301 650,655 410,578 442,281 496,410 315,998 485,139 564,310 507,713 490,283 496,367 OTTAWA FAIRLAND 0 0 0 0 0 0 0 0 0 0 0 0 OTTAWA MIAMI 0 0 0 0 0 0 0 0 0 0 0 0 OTTAWA QUAPAW 0 0 0 0 0 0 0 0 0 0 0 0 OTTAWA TURKEY FORD 0 0 0 0 0 0 0 0 0 0 0 0 OTTAWA WYANDOTTE 0 0 0 0 0 0 0 0 0 0 0 0 PAWNEE CLEVELAND 119,890 130,493 140,936 136,351 160,738 183,321 206,169 302,307 247,373 113,796 120,355 174,184 PAWNEE JENNINGS 0 0 0 0 0 0 0 0 0 0 0 0 PAWNEE PAWNEE 51,556 55,071 59,725 57,222 67,124 77,757 86,287 133,516 118,382 52,922 52,744 76,075 PAYNE (ILC) FIVE-STAR 0 0 0 0 0 0 0 0 0 0 0 0 PAYNE CUSHING 74,467 85,480 82,015 62,551 71,932 59,922 76,045 128,886 266,698 203,117 129,247 116,589 PAYNE GLENCOE 14,270 17,111 14,928 12,430 13,706 11,047 13,822 24,298 50,519 38,892 25,531 22,228 PAYNE OAK GROVE 0 0 0 0 0 0 0 2 7 4 0 1 PAYNE PERKINS-TRYON 54,504 63,160 61,278 48,096 57,931 48,676 60,270 104,856 215,874 168,895 108,477 93,751 PAYNE RIPLEY 18,139 21,754 20,721 16,329 19,384 16,649 20,382 33,866 68,406 51,942 33,622 30,306 PAYNE STILLWATER 220,193 255,218 248,310 192,821 231,898 193,671 246,697 424,725 888,725 691,259 443,097 381,642 PAYNE YALE 21,760 25,820 24,921 19,119 22,425 17,106 19,564 33,317 68,918 49,735 30,521 31,145 PITTSBURG CANADIAN 154,696 178,786 179,543 115,158 126,527 128,285 104,520 140,335 116,058 73,653 100,101 126,297 PITTSBURG CARLTON LANDING ACADEMY 0 0 0 0 0 0 0 0 0 0 0 0 PITTSBURG CROWDER 155,520 178,251 189,168 110,265 131,633 135,231 116,794 149,626 116,098 75,741 102,740 130,555 PITTSBURG FRINK-CHAMBERS 0 0 0 0 0 0 0 0 0 0 0 0

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Oklahoma Oil and Gas Activity and Tax Contribution 79 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average PITTSBURG HAILEYVILLE 156,179 198,076 192,128 126,775 130,117 118,771 94,632 115,149 88,315 58,423 76,628 119,901 PITTSBURG HARTSHORNE 265,667 303,361 332,793 217,184 229,297 234,424 204,050 231,041 183,839 127,482 168,769 223,224 PITTSBURG HAYWOOD 0 0 0 0 0 0 0 0 0 0 0 0 PITTSBURG INDIANOLA 117,196 138,253 128,186 79,386 75,920 73,097 57,435 70,925 56,948 35,689 48,196 76,403 PITTSBURG KIOWA 104,595 122,279 120,205 78,204 80,557 81,603 68,421 98,078 76,307 50,106 68,195 84,395 PITTSBURG KREBS 0 0 0 0 0 362 0 0 0 0 0 36 PITTSBURG MCALESTER 966,408 1,119,489 1,154,945 767,883 806,830 828,020 724,479 919,802 720,558 490,927 653,650 818,658 PITTSBURG PITTSBURG 52,359 64,419 66,367 84,923 41,823 74,182 40,581 43,704 34,753 22,856 34,208 50,782 PITTSBURG QUINTON 169,596 209,735 213,494 145,777 154,537 157,084 140,336 170,794 122,494 77,463 103,202 149,492 PITTSBURG SAVANNA 158,175 173,874 172,596 102,631 113,335 114,472 93,946 109,411 95,572 61,437 80,068 111,734 PITTSBURG TANNEHILL 0 0 0 0 0 0 0 0 0 0 0 0 PONTOTOC ADA 335,958 380,252 411,750 323,198 466,672 200,513 680,106 491,473 516,053 263,491 187,949 392,146 PONTOTOC ALLEN 58,450 63,657 67,527 52,558 74,503 33,078 110,470 83,911 89,809 47,197 35,514 65,822 PONTOTOC BYNG 221,989 242,345 255,018 212,882 299,161 132,142 450,435 334,591 343,957 173,070 127,207 257,081 PONTOTOC LATTA 92,137 101,088 112,914 91,131 123,020 54,986 203,009 159,167 172,171 83,956 62,227 116,367 PONTOTOC ROFF 45,176 45,482 47,931 38,962 59,430 25,468 83,381 63,844 69,445 33,685 23,129 49,076 PONTOTOC STONEWALL 53,397 56,884 62,785 50,681 70,910 32,787 108,493 81,360 85,796 44,902 34,312 62,891 PONTOTOC VANOSS 68,550 74,240 78,485 64,662 95,515 47,025 144,721 99,522 101,627 52,172 39,598 79,757 POTTAWATOMIE ASHER 16,100 22,122 18,599 12,477 16,506 11,494 19,661 16,629 17,699 9,399 6,472 15,106 POTTAWATOMIE BETHEL 98,303 124,863 117,837 76,215 97,948 61,658 109,336 90,423 87,672 47,316 34,342 84,761 POTTAWATOMIE DALE 54,268 67,518 63,580 41,296 53,303 31,201 55,356 46,668 47,630 26,666 19,640 45,286 POTTAWATOMIE EARLSBORO 18,644 23,362 20,088 13,058 16,859 11,212 18,107 15,036 15,033 8,516 6,399 14,767 POTTAWATOMIE GROVE 0 0 0 0 0 0 0 0 0 0 0 0 POTTAWATOMIE MACOMB 26,555 33,260 30,579 19,730 27,263 17,148 29,412 21,598 21,109 10,235 7,309 21,764 POTTAWATOMIE MAUD 24,707 30,861 27,829 18,181 24,123 13,371 25,674 21,131 21,661 11,700 8,092 20,262 POTTAWATOMIE MCLOUD 131,113 165,582 153,149 100,396 131,761 80,386 145,774 117,946 120,106 64,963 46,597 112,666 POTTAWATOMIE NORTH ROCK CREEK 0 0 0 0 0 0 0 0 0 0 0 0 POTTAWATOMIE PLEASANT GROVE 0 0 0 0 0 0 0 0 0 0 0 0 POTTAWATOMIE SHAWNEE 288,843 360,693 334,071 217,181 287,376 177,946 320,307 262,922 264,274 138,925 96,401 246,010 POTTAWATOMIE SOUTH ROCK CREEK 0 0 0 0 0 0 0 0 0 0 0 0 POTTAWATOMIE TECUMSEH 170,109 213,757 200,479 125,819 163,277 100,094 175,304 143,326 148,736 79,734 55,949 140,648 POTTAWATOMIE WANETTE 17,762 21,955 19,776 12,392 15,302 10,390 16,735 13,719 13,566 6,638 4,468 13,494 PUSHMATAHA ALBION 0 0 0 0 0 0 0 0 0 0 0 0 PUSHMATAHA ANTLERS 150,717 223,983 211,211 77,480 40,250 16,121 25,173 20,366 21,851 9,948 12,923 65,931 PUSHMATAHA CLAYTON 46,494 68,306 65,952 22,864 11,896 4,042 7,773 6,237 6,580 2,848 3,858 20,035 PUSHMATAHA MOYERS 21,881 33,275 34,536 11,872 6,470 2,753 4,685 3,859 4,545 2,069 2,728 10,679 PUSHMATAHA NASHOBA 0 0 0 0 0 0 0 0 0 0 0 0 PUSHMATAHA RATTAN 71,318 105,090 106,204 38,954 19,487 8,104 12,838 10,296 10,717 4,818 6,545 32,305 PUSHMATAHA TUSKAHOMA 0 0 0 0 0 0 0 0 0 0 0 0 ROGER MILLS CHEYENNE 1,713,437 1,998,060 1,749,676 836,435 719,448 825,803 860,609 1,280,806 1,539,143 918,218 749,671 1,147,787 ROGER MILLS HAMMON 1,158,717 1,538,709 1,477,376 699,657 607,084 654,410 684,145 1,005,491 1,129,816 658,432 515,712 897,083 ROGER MILLS LEEDEY 1,186,290 1,411,873 1,180,580 532,520 469,196 552,997 562,917 835,085 891,961 555,625 483,859 747,661 ROGER MILLS REYDON 531,110 737,646 676,833 340,759 311,906 361,051 403,284 511,374 540,407 352,443 258,787 449,449 ROGER MILLS SWEETWATER 454,568 443,465 528,735 236,510 206,667 224,789 267,581 404,559 549,469 323,729 287,062 347,256 ROGERS CATOOSA 9,850 11,507 8,253 3,828 4,891 5,861 3,669 4,876 2,233 1,455 1,770 4,834 ROGERS CHELSEA 4,826 5,300 3,794 1,680 2,275 2,677 1,555 2,155 989 629 785 2,184

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Oklahoma Oil and Gas Activity and Tax Contribution 80 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average ROGERS CLAREMORE 18,574 20,875 15,780 7,276 9,483 11,073 6,726 9,245 4,265 2,806 3,410 9,094 ROGERS FOYIL 3,221 3,661 2,698 1,269 1,557 1,760 1,043 1,402 607 384 447 1,483 ROGERS INOLA 6,011 6,722 4,912 2,235 3,288 3,662 2,171 3,021 1,480 968 1,172 2,963 ROGERS JUSTUS-TIAWAH 0 509 0 0 2,781 0 0 0 0 0 0 329 ROGERS OOLOGAH-TALALA 8,247 9,236 7,106 3,338 4,306 5,026 3,029 4,138 1,932 1,256 1,538 4,091 ROGERS SEQUOYAH 6,373 6,988 5,358 2,510 3,277 3,768 2,251 3,008 1,451 950 1,164 3,072 ROGERS VERDIGRIS 5,395 6,081 4,685 2,202 2,955 3,388 2,036 2,787 1,306 870 1,085 2,739 SEMINOLE (ILC) SEMINOLE COUNTY 0 0 0 0 0 0 0 0 0 0 0 0 SEMINOLE BOWLEGS 61,934 92,324 109,670 72,984 96,325 63,447 97,366 81,714 65,549 44,580 39,623 76,358 SEMINOLE BUTNER 49,376 76,450 85,708 51,650 67,124 40,018 65,947 64,189 56,312 37,109 34,860 57,937 SEMINOLE JUSTICE 0 0 0 0 0 0 0 0 0 0 0 0 SEMINOLE KONAWA 139,211 199,417 244,198 162,513 217,156 155,680 220,464 207,594 167,500 110,562 102,335 178,742 SEMINOLE NEW LIMA 57,585 77,827 94,996 65,681 85,404 56,973 87,343 78,741 66,542 45,126 43,308 70,194 SEMINOLE SASAKWA 40,009 57,421 76,904 55,023 73,434 49,629 74,557 62,123 47,880 34,061 30,998 56,203 SEMINOLE SEMINOLE 313,707 436,796 553,008 379,075 516,380 362,977 575,169 530,700 414,347 275,209 251,197 429,486 SEMINOLE STROTHER 64,890 89,728 117,197 82,982 110,573 78,042 119,999 117,297 104,202 66,069 61,659 94,775 SEMINOLE VARNUM 53,819 78,469 106,702 64,380 73,451 51,987 95,204 85,655 68,403 46,075 41,683 71,201 SEMINOLE WEWOKA 138,784 179,676 225,440 159,720 213,497 142,395 229,073 225,701 180,517 120,583 99,678 177,628 SEQUOYAH BELFONTE 0 0 0 0 0 0 0 0 0 0 0 0 SEQUOYAH BRUSHY 0 0 0 0 0 0 0 0 0 0 0 0 SEQUOYAH CENTRAL 6,123 7,194 6,379 4,886 3,489 4,362 1,457 1,240 904 797 1,196 3,190 SEQUOYAH GANS 4,713 5,524 5,108 3,801 2,801 2,057 1,120 909 658 638 1,023 2,364 SEQUOYAH GORE 7,145 8,138 7,058 2,604 4,152 2,370 1,455 1,236 857 718 1,063 2,965 SEQUOYAH LIBERTY 0 0 0 0 0 0 0 0 0 0 0 0 SEQUOYAH MARBLE CITY 0 0 0 0 0 0 0 0 0 0 0 0 SEQUOYAH MOFFETT 0 0 0 0 0 0 0 0 0 0 0 0 SEQUOYAH MULDROW 20,184 24,356 21,695 15,927 11,970 8,195 4,596 3,795 2,681 2,323 3,584 9,912 SEQUOYAH ROLAND 14,618 18,111 16,114 11,485 8,193 5,610 3,164 2,666 1,852 1,617 2,425 7,124 SEQUOYAH SALLISAW 24,181 29,301 26,230 19,434 14,350 10,026 5,665 4,750 3,386 2,956 4,644 12,074 SEQUOYAH VIAN 11,656 14,420 13,053 9,740 7,050 4,900 2,796 2,403 1,658 1,542 2,265 5,983 STEPHENS BRAY-DOYLE 215,245 248,755 266,199 166,325 175,287 183,539 119,889 156,110 213,250 176,828 173,738 187,992 STEPHENS CENTRAL HIGH 185,943 219,743 242,727 154,339 173,639 187,620 119,674 189,461 234,842 208,931 195,648 192,662 STEPHENS COMANCHE 0 0 0 0 0 0 0 0 0 0 0 0 STEPHENS DUNCAN 1,729,632 1,958,511 2,083,259 1,336,941 1,503,759 1,711,106 1,093,600 1,668,919 1,985,018 1,765,284 1,715,726 1,682,212 STEPHENS EMPIRE 262,025 295,317 313,449 188,092 204,637 223,959 141,662 213,696 262,358 229,150 238,955 231,128 STEPHENS GRANDVIEW 0 0 0 0 0 0 0 0 0 0 0 0 STEPHENS MARLOW 644,397 720,559 755,336 466,600 508,334 596,588 394,593 603,179 732,763 689,413 676,076 614,344 STEPHENS VELMA-ALMA 210,676 238,903 252,526 158,177 169,408 196,546 122,463 191,885 240,122 228,840 227,284 202,615 TEXAS GOODWELL 152,711 160,685 171,256 129,866 136,261 113,677 87,359 77,766 52,241 36,357 60,290 102,576 TEXAS GUYMON 1,825,500 2,034,386 2,153,872 1,598,488 1,752,897 1,568,303 1,225,257 1,021,596 682,685 425,328 750,968 1,321,378 TEXAS HARDESTY 83,070 88,505 89,290 61,757 62,929 47,179 34,258 29,288 22,109 14,184 22,685 47,218 TEXAS HOOKER 409,946 441,614 468,655 351,443 361,891 318,476 252,815 225,939 152,514 96,259 172,801 284,241 TEXAS OPTIMA 0 0 0 0 0 0 0 0 0 0 0 0 TEXAS STRAIGHT 0 0 0 0 0 0 0 0 0 0 0 0 TEXAS TEXHOMA 210,160 222,130 224,246 164,125 184,616 155,966 132,719 103,708 66,990 41,918 64,656 136,107 TEXAS TYRONE 181,130 194,836 196,918 146,002 156,036 138,434 109,956 94,889 61,269 36,554 60,601 119,549

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Oklahoma Oil and Gas Activity and Tax Contribution 81 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average TEXAS YARBROUGH 95,215 99,004 102,378 72,969 78,551 67,739 61,170 46,716 31,833 18,820 30,718 60,990 TILLMAN DAVIDSON 1,682 1,779 2,030 3,634 5,900 8,063 5,396 12,774 9,344 2,797 1,676 5,339 TILLMAN FREDERICK 12,818 14,358 15,445 27,695 79,307 60,306 46,641 126,536 102,917 34,061 22,790 53,006 TILLMAN GRANDFIELD 3,484 4,022 4,474 8,304 12,795 18,652 14,018 37,503 30,566 9,755 6,413 14,650 TILLMAN TIPTON 4,759 4,814 5,273 10,270 14,517 25,588 19,844 51,197 39,614 12,822 7,416 19,136 TULSA BERRYHILL 1,424 1,579 1,726 1,528 1,702 1,463 2,002 1,583 1,333 722 711 1,435 TULSA BIXBY 4,860 5,440 6,104 5,708 6,439 5,978 8,384 6,776 5,867 3,304 3,413 5,741 TULSA BROKEN ARROW 17,991 19,763 21,951 19,863 22,346 20,034 27,650 21,250 18,512 10,295 10,423 19,209 TULSA COLLINSVILLE 2,543 2,902 3,293 3,096 3,525 3,215 4,367 3,310 2,727 1,518 1,518 2,947 TULSA DEBORAH BROWN (CHARTER) 0 0 0 0 0 0 0 0 0 0 0 0 TULSA DOVE SCHOOLS OF TULSA 0 0 0 0 0 0 0 0 0 0 0 0 TULSA GLENPOOL 2,602 2,932 3,229 2,896 3,243 2,855 3,912 2,996 2,602 1,464 1,514 2,764 TULSA JENKS 11,200 12,324 13,696 12,386 13,850 12,152 17,429 13,534 11,451 6,391 6,500 11,971 TULSA KEYSTONE 0 0 0 0 0 0 0 0 0 0 0 0 TULSA LANGSTON HUGHES ACAD ARTS-TECH 0 0 0 0 0 0 0 0 0 0 0 0 TULSA LIBERTY 721 771 862 729 805 720 996 725 589 317 308 682 TULSA OWASSO 9,776 10,758 11,876 10,770 12,269 11,032 15,241 11,745 9,682 5,454 5,444 10,427 TULSA SAND SPRINGS 6,083 6,697 7,284 6,592 7,235 6,109 8,516 6,530 5,442 2,948 2,900 6,025 TULSA SANKOFA MIDDLE SCHL (CHARTER) 0 0 0 0 0 0 0 0 0 0 0 0 TULSA SKIATOOK 2,875 3,170 3,438 3,053 3,429 3,051 4,173 3,165 2,598 1,426 1,414 2,892 TULSA SPERRY 0 731,075 643,213 607,388 627,904 831,544 667,699 803,536 289,633 175,826 293,727 567,154 TULSA TULSA 48,170 51,626 55,376 49,199 54,347 48,929 66,321 50,539 42,071 22,990 22,747 46,415 TULSA TULSA CHARTER: COLLEGE BOUND 0 0 0 0 0 0 0 0 0 0 0 0 TULSA TULSA CHARTER: COLLEGIATE HALL 0 0 0 0 0 0 0 0 0 0 0 0 TULSA TULSA CHARTER: HONOR ACADEMY 0 0 0 0 0 0 0 0 0 0 0 0 TULSA TULSA CHARTER: KIPP TULSA 0 0 0 0 0 0 0 0 0 0 0 0 TULSA TULSA CHARTER: SCHL ARTS/SCI. 0 0 0 0 0 0 0 0 0 0 0 0 TULSA TULSA LEGACY CHARTER SCHL INC 0 0 0 0 0 0 0 0 0 0 0 0 TULSA UNION 16,548 18,022 20,028 17,985 20,236 17,877 24,372 18,878 15,947 8,774 8,878 17,100 WAGONER COWETA 6,173 7,848 10,841 10,811 13,813 16,939 11,904 15,311 16,978 9,086 6,944 12,047 WAGONER OKAY 1,120 1,262 1,673 1,614 2,012 2,369 1,667 1,953 2,057 1,121 852 1,658 WAGONER PORTER CONSOLIDATED 1,038 1,367 1,874 1,746 2,346 2,960 2,064 2,735 2,984 1,517 1,175 2,077 WAGONER WAGONER 5,109 6,140 8,495 7,951 10,408 12,948 8,658 11,088 12,252 6,385 4,982 8,931 WASHINGTON BARTLESVILLE 183,185 207,036 226,114 167,193 99,111 192,502 101,727 125,391 47,435 36,354 58,837 126,170 WASHINGTON CANEY VALLEY 25,425 28,967 29,697 20,846 12,264 24,877 12,998 16,333 5,983 4,635 7,582 16,418 WASHINGTON COPAN 10,864 11,683 12,141 8,056 4,887 9,154 4,561 14,420 7,060 2,283 2,378 7,662 WASHINGTON DEWEY 35,064 40,765 44,517 33,680 20,073 39,113 20,899 26,953 9,931 7,532 12,102 25,557 WASHITA BURNS FLAT-DILL CITY 626,143 846,403 1,076,680 787,977 1,351,371 1,878,492 897,058 836,684 758,414 385,820 299,451 911,835 WASHITA CANUTE 242,953 372,635 530,741 444,815 831,386 1,232,722 582,364 541,036 502,299 256,061 215,259 550,932 WASHITA CORDELL 704,501 908,088 1,208,303 884,116 1,719,565 2,213,411 985,186 923,997 875,767 427,991 360,969 1,050,739 WASHITA SENTINEL 323,067 395,937 544,687 404,070 673,990 945,357 426,241 428,398 390,703 196,625 168,497 457,451 WASHITA WASHITA HEIGHTS 209,738 211,663 216,124 120,486 0 0 0 0 0 0 0 54,827 WOODS ALVA 716,818 898,301 1,138,085 1,128,780 1,291,557 1,942,963 1,271,109 2,572,076 3,735,639 2,030,610 2,349,039 1,835,816 WOODS FREEDOM 56,229 75,010 106,025 163,932 218,698 168,171 102,734 201,513 326,085 174,265 187,275 172,371 WOODS WAYNOKA 188,187 249,035 307,228 295,093 327,483 486,134 350,980 686,945 1,058,644 584,018 627,672 497,323 WOODWARD FORT SUPPLY 65,785 69,640 69,799 43,842 37,239 31,942 18,599 14,843 14,925 10,145 9,797 32,077

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Oklahoma Oil and Gas Activity and Tax Contribution 82 | P a g e County District Name 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10-year Average WOODWARD MOORELAND 230,205 262,269 250,512 140,070 129,254 131,452 76,561 62,738 66,729 38,971 36,585 129,577 WOODWARD SHARON-MUTUAL 131,066 139,185 145,743 79,711 71,827 71,687 44,423 37,872 37,847 22,544 20,810 72,974 WOODWARD WOODWARD 1,202,859 1,393,980 1,356,602 735,077 673,432 650,998 405,959 344,573 372,161 226,150 197,570 687,215

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Oklahoma Oil and Gas Activity and Tax Contribution 83 | P a g e IX. Appendix A: Severance and Ad Valorem Tax Data and Methodology Effective severance and ad valorem tax rates for the sixteen largest oil and gas producing states (including Oklahoma) are estimated and used throughout the report. There is no generally accepted methodology for calculating these effective tax rates. The basic formula – taxes paid divided by value of oil and gas production – is generally accepted. However, the method of determining each component used in the calculation can require significant judgement. Each step of the process is described in this section of the report along with a description of data sources used. Fiscal Year Basis All effective tax rate estimates are calculated on a fiscal year basis. The fiscal year for all producing states except Texas is July to June. The fiscal year in Texas is September to August. Both Wyoming and North Dakota use a biennial budget cycle, but efforts are made to calculate data for each fiscal year covering July to June. Data are generally reported for the FY2012 to FY2018 period. Some estimates for FY2019 are provided for Oklahoma. Crude Oil and Natural Gas Production Quantity For consistency across the states, the quantity of oil and gas production at the state level is derived from monthly EIA estimates for both crude oil and natural gas. Natural gas production represents marketed production. EIA estimates are in turn derived from a combination of state reports, private vendors, and direct surveys of producers. Production is not derived from direct reports of state oil and gas reporting agencies. State-provided estimates suffer from many issues including incomplete reporting, delayed release, and lack of revisions. For example, Oklahoma has long underreported crude oil and natural gas production quantities.34 EIA production data is available online at: https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_m.htm and https://www.eia.gov/dnav/ng/ng_prod_sum_a_EPG0_VGM_mmcf_m.htm Crude Oil and Natural Gas Prices Crude oil prices are derived from EIA monthly estimates of the first purchaser price. Monthly values are used to create a fiscal year average. Crude oil prices are available online at: https://www.eia.gov/dnav/pet/pet_pri_dfp1_k_m.htm Natural gas prices are derived from three potential sources: 1. Prices are derived from state reporting entities in New Mexico. 2. Prices are provided for most states using proprietary price data provided by National Gas Intelligence (NGI) (naturalgasintel.com). Fiscal year annual averages are derived from an average of weekly prevailing spot prices at the major trading hubs serving each state. NGI prices are used in twelve states - Arkansas, California, Colorado, Kansas, Louisiana, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia, and Wyoming. NGI prices are preferred because many prices reported by the states do

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Oklahoma Oil and Gas Activity and Tax Contribution 84 | P a g e not necessarily reflect the actual revenue received by producers and can be reduced by a range of expenses. State-reported prices also may not provide statewide coverage of the range of prices received in the state. Most state-reported prices are highly consistent with NGI prices. The only significant differential is found in Wyoming. Prices reported in state-produced annual reports are consistently lower than reported spot prices at hubs used by Wyoming producers. This tends to raise the estimated value of production and lower the estimated effective tax rates in Wyoming. Because Wyoming is a significant natural gas producer, the use of reported spot prices will reduce the effective tax rate relative to estimates based on state reported data. 3. Henry Hub spot prices are used in three states – Alaska, Montana, and North Dakota. These states do not have an active hub tracked in the NGI dataset and we are unable to gather representative state-reported prices on a monthly basis. Using Henry Hub can result in some overstatement of the value of natural gas production in these states. The estimated effective severance and ad valorem tax rates are understated as a result. However, these three states are all very small natural gas producers with generally less than 10% of the value of production attributed to natural gas. The potential result is believed to represent only an insignificant understatement of the effective severance and ad valorem tax rates in these states. Production Value Production value of crude oil and natural gas is calculated for each on monthly basis as production quantity times price. Monthly estimates are aggregated to form fiscal year totals. Severance Taxes Severance taxes are typically collected directly from state reporting entities. Sources include budget documents, prepared tax reports, research documents, compilations from large online databases, and other methods. Taxes are collected on a fiscal year basis. Biennial budget data in Wyoming and North Dakota are converted to fiscal years. Most states now provide ongoing severance tax collection information in electronic form. Links to online sources for each state are detailed below. These links are active at the time of publication but are undoubtedly subject to substantial change over time. Source Data - Severance Taxes Alaska Alaska has undergone significant shifts in oil and gas production tax revenue in recent years. Unlike most producing states, oil and gas production taxes in Alaska are based on a firm’s profitability rather than a fixed share or percentage of production value. Taxes collapsed to historically low levels in FY2015 under pressure from collapsing oil prices. Taxes receipts through FY2017 are as reported the Alaska Department of Revenue. FY2018 severance tax receipts are estimated from the FY2018 budget and include only oil production taxes. http://tax.alaska.gov/programs/programs/reports/Annual.aspx?60650&Year=2017 http://www.tax.alaska.gov/programs/sourcebook/index.aspx http://www.tax.alaska.gov/programs/documentviewer/viewer.aspx?1423r

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Oklahoma Oil and Gas Activity and Tax Contribution 85 | P a g e Arkansas Severance taxes are as reported by the Arkansas Bureau of Legislative Research. http://www.arkleg.state.ar.us/assembly/2019/Summary%20Budget%20Manuals/2018-B-BOOK.pdf http://www.arkleg.state.ar.us/assembly/2017/Summary%20Budget%20Manuals/2016_B_BOOK.PDF California There is no statewide severance tax levied in California. There is, however, a statewide quantity-based assessment on oil and gas production. The FY2018 assessment is $0.5038349 per barrel of oil and per 10,000 cubic feet of natural gas. The FY2019 assessment $.5547977 per barrel of oil and per 10,000 cubic feet of natural gas. Revenue payments made to the State Land Commission for production on state land are also included. These payments have not been updated beyond FY2016 and are carried forward in FY2017 and FY2018. http://www.conservation.ca.gov/dog/for_operators/Pages/assessments.aspx https://www.castatelands.opengov.com/transparency#/1908/accountType=revenues&embed=n&breakdown= types&currentYearAmount=cumulative&currentYearPeriod=years&graph=stacked&legendSort=desc&proration =true&saved_view=null&selection=77F2D803BBFF001F5C5F2F5E92919206&projections=null&projectionType= null&highlighting=null&highlightingVariance=null&year=NaN&selectedDataSetIndex=null&fiscal_start=earliest &fiscal_end=latest Colorado Colorado severance taxes are largely offset by credits for ad valorem tax payments. A 2016 Colorado Supreme Court ruling also affected severance tax receipts in Colorado. A wider range of operating expenses were allowed in calculating severance tax liability. This resulted in a significant decline in severance tax receipts beginning in FY2015. http://leg.colorado.gov/sites/default/files/sept2018forecast.pdf http://leg.colorado.gov/sites/default/files/sept2017forecast.pdf https://leg.colorado.gov/sites/default/files/interested_persons_memo_on_severance_taxes.pdf https://www.colorado.gov/pacific/revenue/annual-report Kansas https://www.ksrevenue.org/pdf/ar17complete.pdf https://www.ksrevenue.org/pdf/taxesfees/06-18TaxesFees.pdf Louisiana http://revenue.louisiana.gov/NewsAndPublications/Publications http://www.dnr.louisiana.gov/index.cfm/page/221 http://revenue.louisiana.gov/Publications/FY%202018%20Sev%20Coll%20and%20Dist.pdf Montana https://mtrevenue.gov/wp-content/uploads/2018/07/2018-FYE-Revenue-Monitoring-Report.pdf https://mtrevenue.gov/wp-content/uploads/2018/01/FY2017-Fiscal-Year-End-Revenue-Monitoring-Report.pdf North Dakota North Dakota taxes include both gross production and oil extraction taxes.

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Oklahoma Oil and Gas Activity and Tax Contribution 86 | P a g e https://www.legis.nd.gov/state-revenue-information https://www.legis.nd.gov/files/resource/finance-facts/2018ndfinancefacts.pdf https://www.nd.gov/tax/data/upfiles/media/2016-state-and-local-taxes-guide-web.pdf?20181121190142 New Mexico Severance taxes included in the New Mexico analysis include the Oil and Gas Emergency School Tax, the Oil and Gas Conservation tax, and the Oil and Gas Severance tax. https://tap.state.nm.us/Tap/_/ Ohio Production taxes in Ohio are calculated as 10 cents per barrel of oil and 2.5 cents per mcf of natural gas. https://www.tax.ohio.gov/Portals/0/communications/publications/annual_reports/2017AnnualReport/AR201 7.pdf#page=89 Oklahoma Gross production taxes in Oklahoma include severance taxes and a 0.095% excise tax. Refunds are deducted from total receipts on an annual basis. Because refineries are part of the downstream oil and gas sector and are not strictly related to production, the value of major refineries in the four counties where they are present in Oklahoma (Carter, Garvin, Kay, and Tulsa) is removed from the total. Centrally assessed transmission pipelines are excluded as well. https://www.ok.gov/tax/Forms_&_Publications/Publications/Annual_Reports/index.html Pennsylvania Pennsylvania levies no direct severance tax on production. Instead, an impact fee is levied during the first 15 years of well operation. These fees are listed along with severance taxes in the analysis. Impact fees are included in the year of payment and distribution, not production year. http://www.puc.state.pa.us/filing_resources/issues_laws_regulations/act_13_impact_fee_.aspx Texas https://comptroller.texas.gov/transparency/reports/revenue-by-source/history.php https://comptroller.texas.gov/transparency/revenue/watch/general-revenue/ Utah Severance taxes include the oil and gas severance tax and the oil and gas Conservation fee. https://tax.utah.gov/econstats/revenue https://tax.utah.gov/commission-office/reports https://tax.utah.gov/esu/revenuereports/summary2018.pdf West Virginia https://tax.wv.gov/ResearchAndGovernment/Research/SeveranceTaxHistoryAndData/Pages/SeveranceTaxHist oryAndData.aspx https://tax.wv.gov/Documents/Reports/SeveranceTaxes.TaxData.FiscalYears.2004-2016.pdf

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Oklahoma Oil and Gas Activity and Tax Contribution 87 | P a g e Wyoming http://eadiv.state.wy.us/creg/creg.html http://eadiv.state.wy.us/creg/GreenCREG_Oct18.pdf Source Data - Ad Valorem Taxes We report the most recently available fiscal year of ad valorem tax payments by the oil and gas industry in each state. Data on ad valorem taxes at the state level are far less accessible than severance tax data and face several reporting issues. The primary concerns are that there is no standardized reporting of data across the states and the definition of oil and gas- related assets varies widely as well. Many states also have no centralized collection of ad valorem data. Links to online sources for each state are detailed below. These links are active at the time of publication but are undoubtedly subject to substantial change over time. Alaska http://tax.alaska.gov/programs/programs/reports/Annual.aspx?60018&Year=2017 Arkansas Arkansas no longer releases reports of property valuations by detailed property type, particularly minerals. Our estimate is based on the FY2015 ad valorem report which is no longer available online. California No statewide tabulations of oil and gas-related ad valorem tax receipts are readily available for California and must be estimated. Our estimate of statewide oil and gas ad valorem payments for FY2017 has dropped from prior estimates to only $75 million. Our estimate of ad valorem taxes for the state is based largely on data for Kern County assessment data. Kern County is the dominant producing region of the state and accounts for more than 70% of total oil production in the state. Ad valorem taxes from oil and gas property totaled approximately $40 million in FY2016 and $27 million in FY2017. This is down approximately 65% from FY2015 levels. Our estimate is that Kern County oil and gas-related ad valorem taxes averaged only approximately $50 million annually in the FY2015 to FY2017 period. Given the share of total statewide production in Kern County, assigning one-third of the estimated state total to other regions seems appropriate for our purposes. https://www.kerncounty.com/CAO/budget/fy1718/rec/recommendedBudgetFinal.pdf https://www.kerncounty.com/CAO/budget/fy1617/rec/recommendedBudgetFinal.pdf Colorado https://leg.colorado.gov/sites/default/files/interested_persons_memo_on_severance_taxes.pdf Kansas Kansas ad valorem taxes revenues from oil and gas are generally not published and must be calculated from assessment data. Our estimate of $88.566 million for FY2017 is formed using

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Oklahoma Oil and Gas Activity and Tax Contribution 88 | P a g e a known taxable value of oil and gas assets of $651.4 million and a statewide average tax rate of 13.596% of total taxable value. https://www.ksrevenue.org/PVDMAPS/Statewide.pdf Louisiana Louisiana ad valorem taxes revenues from oil and gas are generally not published and must be calculated from assessed value data. Includes oil and gas surface equipment, drilling rigs, and oil and gas wells. Reported assessed values are multiplied by a statewide average millage rate of 9.8% to determine tax payments. http://www.latax.state.la.us/Menu_AnnualReports/UploadedFiles/2017%20LOUISIANA%20TAX%20COMMISSI ON%20ANNUAL%20REPORT.pdf Montana Taxes include Oil and Gas Field Equipment and Oil and Gas Flow Lines. https://mtrevenue.gov/wp-content/uploads/2017/06/2016-Biennial-Report-Property-Taxes.pdf North Dakota North Dakota levies no ad valorem taxes on oil and gas activity. https://www.nd.gov/tax/oilgas/ New Mexico https://tap.state.nm.us/Tap/_/ Ohio There is no statewide reporting of ad valorem taxes in Ohio. The $30.3 million estimate for FY2015 reflects tax payments in Belmont, Carroll, Guernsey, Harrison, Monroe, and Noble counties only. Based on the rising production trend in Ohio, ad valorem taxes are likely significantly higher in more recent fiscal years. https://energyindepth.org/wp-content/uploads/2017/02/Ohios-Oil-and-Gas-Industry-Property-Tax- Payments2.pdf Oklahoma Two categories of oil and gas-related equipment are used in the estimates – Refineries, Gas Plants, Gathering, and Compression; and Other Oil, Gas, and Mining Property. https://www.ok.gov/tax/Forms_&_Publications/Publications/Ad_Valorem_Publications/index.html Pennsylvania Pennsylvania levies no ad valorem taxes on oil and gas activity. Texas Statewide reporting on oil and gas-related ad valorem taxes are currently only available through FY2015. Estimates published in news accounts provide unofficial FY2016 estimates. We will report the official FY2015 total until a more recent update of the data is available.

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Oklahoma Oil and Gas Activity and Tax Contribution 89 | P a g e https://comptroller.texas.gov/taxes/property-tax/reports/index.php Utah Includes ad valorem taxes on oil and gas production and oil and gas gathering only. https://propertytax.utah.gov/annual-reports/2017annual.pdf West Virginia https://tax.wv.gov/Documents/Reports/SeveranceTaxStructure.JointSelectCommitteeOnTaxReform.pdf https://www.energyindepth.org/record-tax-revenue-is-latest-shale-driven-good-news-for-w-virginia/ Wyoming http://revenue.wyo.gov/dor-annual-reports Severance Tax Payments, Production Value, and Effective Rate by State Region Fiscal Year Production Volume Production Value ($) Severance Tax Effective Rate Crude Oil (bbl) Natural Gas (mmcf) Crude Oil Natural Gas Total All 16 States 2012 1,697,942 22,561,756 159,786,849,680 65,878,743,514 225,665,593,194 16,218,398,337 7.2% 2013 2,036,108 23,311,287 187,562,687,897 79,846,438,049 267,409,125,946 15,125,742,306 5.7% 2014 2,418,592 24,496,894 229,606,405,102 104,753,570,173 334,359,975,274 16,783,127,917 5.0% 2015 2,799,719 26,548,555 165,887,263,453 79,013,207,687 244,900,471,139 11,261,989,613 4.6% 2016 2,689,969 26,878,433 98,706,690,746 52,957,570,948 151,664,261,694 6,219,744,213 4.1% 2017 2,596,765 26,283,366 115,726,996,542 69,848,929,189 185,575,925,730 7,480,729,582 4.0% 2018 3,001,788 28,945,961 171,091,585,930 74,564,986,121 245,656,572,052 10,803,257,190 4.4% 16 States ex OK 2012 1,613,839 20,602,356 152,127,589,470 60,100,792,059 212,228,381,529 15,369,451,288 7.2% 2013 1,930,249 21,293,649 178,219,307,909 73,097,399,914 251,316,707,823 14,609,761,658 5.8% 2014 2,291,628 22,367,965 217,224,241,002 95,572,453,842 312,796,694,844 16,103,724,587 5.1% 2015 2,642,728 24,084,705 155,628,032,428 71,200,829,815 226,828,862,243 10,705,443,387 4.7% 2016 2,528,833 24,376,901 92,588,491,106 47,686,059,023 140,274,550,129 5,888,919,913 4.2% 2017 2,442,243 23,866,288 108,703,070,263 63,166,150,522 171,869,220,785 7,058,834,606 4.1% 2018 2,817,486 26,228,961 160,696,799,545 67,609,007,168 228,305,806,713 10,105,286,612 4.4% AK 2012 202,707 355,558 20,358,032,933 1,082,970,408 21,441,003,341 6,141,053,900 28.6% 2013 186,168 343,692 17,680,685,240 1,184,305,350 18,864,990,590 4,120,062,888 21.8% 2014 187,552 335,043 18,015,151,067 1,442,639,318 19,457,790,384 2,727,066,796 14.0% 2015 174,792 345,661 10,737,326,900 1,157,676,299 11,895,003,199 524,009,352 4.4% 2016 179,017 336,517 5,945,154,570 758,845,835 6,704,000,405 244,127,946 3.6% 2017 180,236 349,642 7,152,215,070 1,048,926,000 8,201,141,070 490,837,994 6.0% 2018 178,226 339,066 9,716,881,520 999,397,035 10,716,278,555 654,600,000 6.1% AR 2012 6,250 1,127,047 556,437,500 3,363,745,919 3,920,183,419 52,588,803 1.3% 2013 6,596 1,149,259 581,827,663 3,898,459,161 4,480,286,825 47,684,575 1.1% 2014 6,659 1,136,986 629,808,220 4,867,418,255 5,497,226,475 72,076,246 1.3% 2015 6,625 1,080,471 412,472,500 3,517,713,154 3,930,185,654 74,282,076 1.9% 2016 5,862 924,988 211,584,005 1,989,544,480 2,201,128,485 31,858,962 1.4% 2017 5,368 750,548 227,173,760 2,140,998,791 2,368,172,551 38,152,523 1.6% 2018 5,112 642,272 266,318,160 1,796,696,447 2,063,014,607 36,579,167 1.8% CA 2012 196,497 244,384 20,880,098,715 771,893,652 21,651,992,367 515,814,119 2.4% 2013 197,426 249,956 20,163,939,988 876,665,124 21,040,605,113 421,036,101 2.0% 2014 201,357 248,327 20,455,689,833 1,115,978,140 21,571,667,972 475,583,052 2.2% 2015 205,285 242,214 13,479,697,383 810,533,828 14,290,231,211 258,355,049 1.8% 2016 194,206 216,057 7,317,358,403 490,053,286 7,807,411,689 85,207,117 1.1% 2017 179,176 201,269 7,969,001,913 574,534,940 8,543,536,853 58,968,049 0.7% 2018 170,704 200,598 10,270,406,160 525,353,625 10,795,759,785 98,960,976 0.9%

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Oklahoma Oil and Gas Activity and Tax Contribution 90 | P a g e Region Fiscal Year Production Volume Production Value ($) Severance Tax Effective Rate Crude Oil (bbl) Natural Gas (mmcf) Crude Oil Natural Gas Total CO 2012 43,630 1,710,882 3,812,425,758 4,986,878,854 8,799,304,612 108,835,984 1.2% 2013 56,594 1,652,386 4,789,125,765 5,500,999,542 10,290,125,307 195,948,763 1.9% 2014 79,121 1,605,729 7,213,131,899 6,913,276,644 14,126,408,543 263,607,649 1.9% 2015 113,137 1,668,598 6,773,606,471 5,258,887,872 12,032,494,342 24,264,418 0.2% 2016 120,634 1,697,551 4,269,237,260 3,570,161,947 7,839,399,207 28,591,701 0.4% 2017 115,757 1,685,143 5,103,436,738 4,554,185,453 9,657,622,191 57,856,222 0.6% 2018 152,219 1,751,913 8,189,635,898 4,207,560,777 12,397,196,676 125,800,000 1.0% KS 2012 42,636 301,116 3,775,702,040 892,045,695 4,667,747,735 125,709,000 2.7% 2013 45,269 292,017 3,892,341,793 982,189,922 4,874,531,714 122,928,000 2.5% 2014 47,768 288,982 4,550,459,293 1,276,297,030 5,826,756,324 151,273,000 2.6% 2015 49,183 294,855 3,109,062,359 942,920,942 4,051,983,301 121,429,000 3.0% 2016 41,283 259,784 1,505,453,400 550,304,121 2,055,757,521 43,770,874 2.1% 2017 36,414 230,798 1,583,614,515 636,237,203 2,219,851,718 51,640,410 2.3% 2018 35,091 211,014 1,890,615,353 541,141,599 2,431,756,952 59,001,570 2.4% LA 2012 70,349 3,100,734 7,629,935,292 9,361,551,235 16,991,486,527 878,260,000 5.2% 2013 71,541 2,731,767 7,487,958,000 9,355,259,915 16,843,217,915 825,760,000 4.9% 2014 70,447 2,096,921 7,272,185,104 8,922,132,816 16,194,317,921 854,990,000 5.3% 2015 67,441 1,860,306 4,697,659,056 6,119,068,106 10,816,727,162 719,550,000 6.7% 2016 59,979 1,779,479 2,423,151,600 3,883,521,681 6,306,673,281 441,196,634 7.0% 2017 54,205 1,815,223 2,544,427,871 5,249,986,425 7,794,414,295 357,918,568 4.6% 2018 48,881 2,503,719 2,892,044,365 7,166,449,255 10,058,493,620 425,661,544 4.2% MT 2012 24,758 71,752 2,106,059,902 211,285,723 2,317,345,624 227,704,000 9.8% 2013 28,469 63,534 2,404,705,258 209,791,915 2,614,497,173 206,437,000 7.9% 2014 29,239 61,521 2,622,056,057 259,446,874 2,881,502,931 230,293,000 8.0% 2015 30,442 54,837 1,774,844,705 166,496,556 1,941,341,261 188,421,000 9.7% 2016 25,630 50,510 877,421,692 100,287,605 977,709,297 95,429,000 9.8% 2017 21,619 47,210 901,007,857 119,795,375 1,020,803,232 98,104,000 9.6% 2018 20,370 46,308 1,084,312,075 100,063,870 1,184,375,945 111,280,000 9.4% ND 2012 196,754 129,558 16,873,295,117 307,689,454 17,180,984,570 1,713,225,000 10.0% 2013 275,461 204,249 23,767,004,631 587,224,385 24,354,229,016 2,457,530,000 10.1% 2014 350,341 264,789 31,960,441,627 1,081,420,342 33,041,861,968 3,247,807,069 9.8% 2015 428,609 413,644 25,902,270,567 1,336,208,001 27,238,478,568 2,800,985,013 10.3% 2016 410,266 514,953 14,385,635,402 1,122,769,191 15,508,404,593 1,483,340,852 9.6% 2017 367,191 531,513 15,758,919,743 1,456,124,156 17,215,043,899 1,454,871,000 8.5% 2018 422,625 637,748 23,447,939,375 1,630,163,607 25,078,102,982 1,945,887,966 7.8% NM 2012 77,687 1,232,825 7,018,437,798 3,728,915,504 10,747,353,301 848,261,450 7.9% 2013 93,981 1,186,945 8,039,682,963 4,046,285,614 12,085,968,576 817,424,663 6.8% 2014 112,799 1,198,119 10,667,965,425 5,196,193,106 15,864,158,531 1,091,845,658 6.9% 2015 139,859 1,238,619 8,623,472,842 4,124,601,270 12,748,074,112 811,790,846 6.4% 2016 145,957 1,242,137 5,533,838,024 2,521,538,110 8,055,376,134 475,551,579 5.9% 2017 154,636 1,253,245 6,968,671,340 3,509,086,000 10,477,757,340 653,283,466 6.2% 2018 203,161 1,346,985 11,142,872,948 3,623,389,650 14,766,262,598 979,742,523 6.6% OH 2012 4,888 81,701 450,604,353 257,249,215 707,853,569 2,531,325 0.4% 2013 5,621 98,515 509,852,805 347,830,810 857,683,615 3,024,975 0.4% 2014 11,404 295,575 1,081,593,373 1,385,084,155 2,466,677,528 8,529,775 0.3% 2015 21,132 758,070 1,242,720,090 2,213,154,832 3,455,874,922 21,064,950 0.6% 2016 26,367 1,265,427 868,397,145 2,380,447,456 3,248,844,601 34,272,375 1.1% 2017 18,388 1,541,400 799,341,683 3,875,626,700 4,674,968,383 40,373,800 0.9% 2018 20,009 2,102,458 1,086,772,161 5,328,256,389 6,415,028,550 54,562,350 0.9% OK 2012 84,103 1,959,400 7,659,260,210 5,777,951,455 13,437,211,665 848,947,049 6.3% 2013 105,859 2,017,638 9,343,379,988 6,749,038,135 16,092,418,123 515,980,648 3.2% 2014 126,964 2,128,929 12,382,164,100 9,181,116,331 21,563,280,431 679,403,330 3.2% 2015 156,991 2,463,850 10,259,231,024 7,812,377,872 18,071,608,896 556,546,226 3.1% 2016 161,136 2,501,532 6,118,199,640 5,271,511,925 11,389,711,565 330,824,299 2.9% 2017 154,522 2,417,078 7,023,926,278 6,682,778,667 13,706,704,945 421,894,976 3.1% 2018 184,302 2,717,000 10,394,786,385 6,955,978,954 17,350,765,339 697,970,578 4.0% 2019e 184,302 2,717,000 9,782,750,160 8,123,830,000 17,906,580,160 906,995,000 5.1%

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Oklahoma Oil and Gas Activity and Tax Contribution 91 | P a g e Region Fiscal Year Production Volume Production Value ($) Severance Tax Effective Rate Crude Oil (bbl) Natural Gas (mmcf) Crude Oil Natural Gas Total PA 2012 3,646 1,778,349 323,889,372 5,623,198,287 5,947,087,659 204,210,000 3.4% 2013 4,715 2,742,305 408,456,521 9,493,533,445 9,901,989,966 202,472,000 2.0% 2014 6,250 3,805,016 561,182,292 15,393,782,663 15,954,964,954 225,752,000 1.4% 2015 7,135 4,577,398 400,029,721 10,736,787,783 11,136,817,504 223,500,000 2.0% 2016 6,809 5,131,812 247,558,218 7,421,342,331 7,668,900,548 187,711,700 2.4% 2017 5,859 5,330,850 257,800,883 11,892,986,587 12,150,787,470 172,728,300 1.4% 2018 6,978 5,724,228 372,724,055 13,647,102,193 14,019,826,248 209,557,300 1.5% TX 2012 657,295 7,379,170 61,144,867,375 20,425,151,354 81,570,018,729 3,807,555,500 4.7% 2013 861,644 7,560,179 80,720,245,993 26,467,850,237 107,188,096,231 4,486,090,000 4.2% 2014 1,073,747 7,868,246 102,065,915,874 34,200,206,787 136,266,122,661 5,773,652,000 4.2% 2015 1,261,609 8,039,518 70,448,246,560 24,438,247,859 94,886,494,419 4,159,630,000 4.4% 2016 1,190,612 7,504,087 44,847,377,510 16,161,772,246 61,009,149,756 2,282,701,440 3.7% 2017 1,192,476 6,761,532 54,719,742,450 19,379,084,306 74,098,826,756 3,090,098,096 4.2% 2018 1,426,956 7,135,384 83,558,262,492 19,349,929,636 102,908,192,128 4,822,624,000 4.7% UT 2012 27,833 477,941 2,324,078,694 1,379,447,254 3,703,525,948 65,540,973 1.8% 2013 32,252 480,534 2,588,921,793 1,586,402,912 4,175,324,705 53,164,253 1.3% 2014 38,567 467,910 3,337,684,598 2,000,810,393 5,338,494,990 89,159,562 1.7% 2015 40,692 446,236 2,382,550,510 1,392,953,564 3,775,504,074 69,685,131 1.8% 2016 32,676 385,158 1,128,356,740 801,425,533 1,929,782,273 27,740,000 1.4% 2017 31,937 334,877 1,342,285,496 900,191,236 2,242,476,731 20,461,434 0.9% 2018 35,718 303,054 1,841,828,435 728,491,307 2,570,319,742 31,543,542 1.2% WV 2012 2,362 464,954 205,062,935 1,437,986,484 1,643,049,419 99,234,290 6.0% 2013 4,262 619,178 367,270,747 2,156,751,769 2,524,022,515 115,014,548 4.6% 2014 8,527 887,938 788,513,008 3,692,286,687 4,480,799,695 229,466,901 5.1% 2015 12,125 1,257,240 658,609,792 3,298,185,793 3,956,795,584 215,361,550 5.4% 2016 9,385 1,315,043 265,196,638 2,246,367,411 2,511,564,049 134,408,900 5.4% 2017 8,054 1,457,173 319,482,045 3,565,004,102 3,884,486,147 133,052,031 3.4% 2018 10,435 1,704,271 532,837,188 4,123,057,617 4,655,894,804 138,844,691 3.0% WY 2012 56,547 2,146,385 4,668,661,688 6,270,783,021 10,939,444,709 578,926,944 5.3% 2013 60,250 1,919,133 4,817,288,750 6,403,849,812 11,221,138,562 535,183,892 4.8% 2014 67,850 1,806,863 6,002,463,333 7,825,480,632 13,827,943,966 662,621,879 4.8% 2015 84,662 1,807,038 4,985,462,973 5,687,393,957 10,672,856,930 493,115,001 4.6% 2016 80,150 1,753,398 2,762,770,500 3,687,677,790 6,450,448,290 293,010,834 4.5% 2017 70,927 1,575,865 3,055,948,901 4,263,383,247 7,319,332,148 340,488,713 4.7% 2018 81,001 1,579,943 4,403,349,362 3,841,954,161 8,245,303,523 410,640,983 5.0%

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Oklahoma Oil and Gas Activity and Tax Contribution 92 | P a g e X. Endnotes 1 The state economic forecasts used in the report for counterfactual comparisons are prepared multiple times each year as part of our ongoing economic forecasting project. All counterfactual forecasts are from the RegionTrack July 2014 release of the Oklahoma State and Local Area Economic Outlook. The forecasts are used as inputs to the state budgeting process by the Oklahoma Tax Commission. 2 Referenced are Bureau of Economic analysis RIMS industry level multipliers using the 2007 U.S. benchmark input-output table and 2015 regional data at the state level. 3 At the regional level, gross domestic product is essentially equivalent to value added as used in input-output modeling. 4 Both West Virginia and Wyoming will have much lower shares after removing coal production from total mining activity. 5 BEA defines Proprietors’ Income as: Current-production income of sole proprietorships, partnerships, and tax- exempt cooperatives. Excludes dividends, monetary interest received by nonfinancial business, and rental income received by persons not primarily engaged in the real estate business. 6 Natural gas pricing data is available as a service from Natural Gas Intelligence (www.naturalgasintel.com). 7 Property taxes are generally paid one year in arrears. Because property taxes are typically levied at the local level, consolidated reporting at the state level is not readily available and is often only produced on a biennial basis with a significant reporting lag. 8 Arkansas no longer breaks down property valuations for oil and gas-related assets after FY2015. 9 For example, see: https://okpolicy.org/end-special-tax-break-oil-gas-producers/ 10 The report is available online at: https://www.idl.idaho.gov/oil-gas/2016-oil-gas-taxation-comparison_rev.pdf 11 For example, see: https://okpolicy.org/end-special-tax-break-oil-gas-producers/ 12 See: https://www.ok.gov/tax/documents/2016%20statbook.pdf. The calculation includes two categories: Refineries, Gasoline Plants, Gathering and Compressor and Other Oil, Gas, and Mining Property. Refineries are removed from the total by dropping the valuations in the first category in counties that are home to a refinery. 13 See: http://www.ndnrt.com/image/cache/oil_tax_report_final.pdf 14 We find severance tax revenue of $27.74 million vs. $41.25 million in the Idaho report and ad valorem taxes of $45.45 million vs. $57.74 million in the Idaho report. For Utah, see: https://tax.utah.gov/econstats/revenue#reports and https://propertytax.utah.gov/general/annual-report. 15 For Alaska, see: http://tax.alaska.gov/programs/programs/reports/Annual.aspx?60650&Year=2017 and http://tax.alaska.gov/programs/programs/reports/Annual.aspx?60018&Year=2017 16 For access to the BEA data, see: https://www.bea.gov/data/gdp/gdp-state 17 For details on the BEA methodology, see: https://www.bea.gov/sites/default/files/methodologies/0417_GDP_by_State_Methodology.pdf. For detailed coverage of taxes, see: https://apps.bea.gov/scb/2018/04-april/0418-preview-2018-comprehensive-nipa- update.htm 18 BEA tracks employer contributions as a component of employee compensation. 19 Oil and gas activity represents more than 99% of total mining sector (NAICS 21) tax payments in Oklahoma in 2016. Oil and gas tax payments represent $2.433 billion of $2.454 billion in total mining sector payments. 20 We are using the mining sector as a proxy for oil and gas in this sector. Oil and gas represents approximately 99% of the activity in the mining sector in Oklahoma. 21 The share of state and local taxes paid to the state in which a firm is located depends upon the tax filing practice of each firm. 22 The BEA GDP dataset tracks 81 NAICS industry sectors. 23 A simple bottom-up calculation performed annually for the Texas Oil and Gas Association finds oil and gas firms paid total state and local taxes and state royalties in Texas totaling $11 billion in FY2017 and $9.4 billion in FY2016. This is not a comprehensive accounting of all taxes paid by the industry but includes only those easily identified as paid directly by the industry. See: https://www.txoga.org/release-texas-oil-natural-gas-industry-paid- 11-billion-taxes-royalties-2017-2016/ 24 The BEA data on tax payments does not appear to capture the full production tax and extraction tax in North Dakota. This will understate the calculated effective rate in the state considerably. The effective rate in North

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Oklahoma Oil and Gas Activity and Tax Contribution 93 | P a g e Dakota when both the production and extraction taxes are included could be as high as 12-13%, but still well below the rate in Oklahoma. 25 See: “Oklahoma Oil and Gas Industry Taxation.” RegionTrack Inc. Available online at: https://www.regiontrack.com/www/wp-content/uploads/RegionTrack-OK-Oil-Gas-Taxation-20180121.pdf 26 General sales taxes are defined as used in the Census Bureau’s State and Local Government Finance database. Use taxes are treated synonymously with sales taxes. Gross receipts taxes are included in many states, particularly New Mexico. 27 Available online at: https://www.census.gov/govs/ 28 For more details on the tax apportionment approach used in the IMPLAN input-output model: see https://implanhelp.zendesk.com/hc/en-us/articles/115009674528-Generation-and-Interpretation-of-IMPLAN-s- Tax-Impact-Report 29 The size of the sales tax share in each state can be affected by the availability of special sales tax exemptions on the purchases of oil and gas-related goods and services. Oklahoma does not provide a general exemption of oil and gas-related purchases from sales and use tax. 30 For detailed revenue and expenditure reports, see: https://sdeweb01.sde.ok.gov/OCAS_Reporting/StateReports.aspx 31 For the full apportionment rules for gross production tax in Oklahoma, see: http://www.oscn.net/applications/oscn/deliverdocument.asp?cite=68+O.S.+1004 32 For a summary of current and historical apportionment, see: https://www.ok.gov/tax/Forms_&_Publications/Reports_&_Statistics/Apportionment_Charts_&_Formulas/index.ht ml 33 For a description of the Common Education Technology Revolving Fund, see: http://www.oscn.net/applications/oscn/DeliverDocument.asp?citeid=456863 34 See the following IHS report by for more details on production reporting issues in Oklahoma: https://penerdeq.ihsenergy.com/dynamic.splashscreen/documents/OK_Production_Data_Update_Sep2014.pdf

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NOTES Oklahoma Oil and Gas Activity and Tax Contribution

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NOTES Oklahoma Oil and Gas Activity and Tax Contribution

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