Shale-rich Oklahoma expecting budget squeeze

OKLAHOMA CITY, Oct. 27 (UPI) -- The governor of emerging oil and gas state Oklahoma signed an executive order calling for preparations for what's expected to be a challenging budget year.

Gov. Mary Fallin signed an executive order calling on all state agencies, boards and commissions to outline plans to cut non-essential expenses by 10 percent for the rest of the fiscal year and for the 2017 fiscal year, which begins July 1, 2016.

"I'm asking every agency to start planning for potential spending cuts, and to develop a strategy that protects essential services," Fallin said in a statement. "It's important we get ahead of this issue as we enter a difficult budget year."

In a September report, State Treasurer Ken Miller said tax revenue for the state dropped 3.5 percent in August for the fourth straight month of decline. Consistent with 10 straight months of reporting, the department said tax collections from oil and gas production in the state were lower, a trend attributed to weak figures for August.

"If there is good news in the August gross receipts report, it's that the oil price decline hasn't yet erased all of the economic gains of the past year," Miller said in the latest report.

The American Petroleum Institute, a lobbying group for the industry, touted Oklahoma as a shale pioneer in early 2015, saying its oil production of 315,000 barrels per day and gas production of 5.2 billion cubic feet per day would put it in the top 20 percent of global producers if it were an independent nation.

Energy consultant Wood Mackenzie said Oklahoma shale was on par with the Eagle Ford basin in Texas and the Bakken shale in North Dakota with production expected to pass 1 million barrels of oil equivalent per day by 2020.

Lower crude oil prices, however, have left energy companies with less money to invest in exploration and production, a situation reflected in the number of drilling rigs in service at any given time. There were 90 rigs in service in Oklahoma for the week ending Oct. 16, down 55 percent year-on-year.

The state government says the energy industry is its largest private-sector employer. Last month, Chesapeake Energy, which has headquarters in Oklahoma, said it was cutting 15 percent of its workforce, or around 750 employees.

Fallin's executive order doesn't mandate spending cuts, but prohibits things like all but essential out-of-state travel for state employees. Written plans for spending cuts are expected by Dec. 1.