Christi Craddick & Brook Simmons on ITOP

Christi Craddick & Brook Simmons on ITOP

David Blackmon: It occurs to me that so much of the commission’s budget is funded from fees and taxes on the natural gas industry. I wanted to give you a chance to kind of talk about your outlook on that here over the next six months of this year.

Christi Craddick: We’ve all been having lots of conversations about our budget. For some of you who don’t know, we are fee-based, as you alluded to, in our budget, which means drilling permit fees and other fees that come into our agency. Our drilling permits are off right now by 70%, which really affects our budget. It’s a lot. We are averaging, of all permits, less than 20 a day. We were averaging about 50 a day before COVID. So that’s a huge drop for us. So, we are looking at our budget. And look, we’re a pretty small agency when you look at the scope of what we do in the state. We only have 841 people who work for us. And we think we do a pretty good job, but we are looking at our budget, and we know that we are going to be short on the dollars we’re bringing in.

Christi Craddick: And so certainty in our budget cycle is going to be really important again. And we expect our budget to be off. The fiscal year in Texas runs September to September. We expect the Railroad Commission budget specifically to be off this year. And we’ll expect that to continue next year, depending on what the recovery looks like. We’re very lucky in Texas to have what we call a rainy day fund which has severance taxes and oil and gas putting dollars into that fund that pays for that. I think that will give us some opportunity for the state overall to have some recovery in it. But as an agency, we’re looking to see how we’ve already cut certain things like buying new trucks.

Christi Craddick: We are continuing to do our IT upgrade. We are in the middle of an IT upgrade that will get us off a mainframe. We have got a good plan to move forward and really get our IT upgraded. Look, it’s transparencies, and it’s efficiencies for us in the long term. And we see real value in that and how we can manage our agency. Really, everybody wants our information. So, I do think we’re going to have some real budget challenges as an agency. And we started having conversations with legislators and industry so they can understand where we are. 

Kym Bolado: We’re seeing movement with new leadership, which is always exciting because you get a different vision and a different path forward. We’re also seeing just different things, unfolding, submerging. So you get this vibe that we’re going to see something different come out from these new leaderships that are taking over the association. So, I’m excited to see what your vision is. And so let’s begin with Oklahoma. Give us a little bit of history. How much of Oklahoma is involved in oil and gas? Define how much your state is really heavily dependent on oil and gas.

Brook Simmons: Anyone who has taken a look at Oklahoma understands that the central driver for Oklahoma’s economy is petroleum. Period. And the oil and gas industry affects every other job-creating category in the state. In 2018, the industry generated $65.4 billion in state GDP. It accounted for one out of every $3 in earned income. About one in five jobs, one third of the state’s total economic output. It generated $36.8 billion in household earnings in 2018, and provided more than 30.4 billion to land and mineral owners since 2003. And on top of that, there are all the taxes that flow from the industry to the state, to local governments, for teachers or public health, roads, bridges, prisons, etc. That was $1.13 billion in gross production taxes for fiscal year 2019, and more than $2.6 billion in taxes each year for the last decade. So you think about that sort of impact in the state of Oklahoma, where it is really quite literally the state’s life blood, and today we have nine or 10 rigs running. 


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