DALLAS — Oklahoma’s two-year streak of monthly revenue growth was halted in March by a drop in energy production tax collections due to a prolonged fall in natural gas prices.
The state collected $920.6 million in March, down $2.6 million from the same month in 2011.
Treasurer Ken Miller said Tuesday that revenue from the gross production tax, which includes state levies on crude oil and natural gas at the wellhead, was off 36% from last year.
Gross production taxes on oil and natural gas generated $67.7 million in March, he said, a drop of $1.5 million from February and $38.1 million from March 2011.
Sales tax collections totaled $332.9 million, up 15% from March 2011. Sales tax receipts are the only major revenue source that outperformed the previous year.
High crude oil prices kept production tax collections from plummeting, Miller said, but revenue from the natural gas sector has been falling for four months. “Undoubtedly, the strong price of crude oil is helping to compensate for the downturn in natural gas prices,” the treasurer said.
Energy production tax revenues totaled $205.6 million in the first quarter of 2012, a drop of 19% from the first three months of 2011. Sales tax collections over the period totaled $1 billion, an increase of 12.6% from 2011.
Miller said the exact percentage of the production revenue generated by natural gas has yet to be calculated, but it was 51% in October and 35% in February.
“While one month does not a trend make in overall revenue collections, four continuous months of decreasing gross production collections is getting trendy,” he said.
March collections reflect market activity in January, when natural gas prices were higher than they are now.
“We should expect a period of shrinking natural-gas tax collections until prices rebound, especially if the price triggers a lower extraction tax rate,” Miller said.
If the average monthly price falls below $2.10, Miller said, the assessed tax rate drops to 4% from the current 7%. The spot price for natural gas at the Henry Hub in Louisiana, where most Oklahoma gas production is marketed, was $1.90 per 1,000 cubic feet on Monday, Miller said.
If gas prices stay low, Oklahoma will need to review revenue estimates for fiscal 2013. “Next year’s official revenue estimate reflects natural gas at $3.64,” Miller said. The predicted price was lowered from $4 in February by state officials.
Estimates for fiscal 2012 were based on an average price for natural gas of $4.10. Revenue from the natural gas tax over the first eight months of fiscal 2012 is $21.3 million less than expected.
The energy sector accounts for about a third of the state’s economic activity, the treasurer said, and a decline in production due to the drop in natural gas prices could affect the overall economy.
“If the energy industry does pull back its volume, it’s going to need fewer people,” Miller said.