Overview

Resources and Consumption

Oklahoma is rich in energy resources. Many of the largest oil and gas fields in the country are found in the Anadarko, Arkoma, and Ardmore geologic basins and their associated shelves and platforms. Small coal deposits are also found in the Arkoma Basin and the Cherokee Platform, both in eastern Oklahoma. Oklahoma’s fossil fuel reserves make up part of the Mid-Continent Oil Region, a vast fossil fuel-producing region extending from Nebraska to south Texas and flanked by the Mississippi River and the Rocky Mountains. Oklahoma also has hydroelectric potential in several river basins, as well as wind and solar potential, primarily in the western portion of the State. The industrial sector is the leading energy-consuming sector in the State. Due in part to the energy-intensive oil and gas industry, Oklahoma’s per capita energy consumption ranks highly.

Historically, Oklahoma’s economy has been heavily dependent on the oil and gas industry. Several oil and gas exploration and production booms in the 20th century spurred rapid and sustained economic development in much of the State. Although the Oklahoma oil and gas industry has been in steady decline since the mid-1980s, the industry remains a considerable source of employment and revenue, in part because, in 1992, the Oklahoma State Legislature created the Commission on Marginally Producing Oil and Gas Wells to keep the decline in production to a minimum. The intent of the Commission is to help operators sustain production from marginally producing wells, which, in recent years, have accounted for over three-fourths of Oklahoma oil production and about one-tenth of the State's natural gas production. High prices for oil and gas also have slowed the decline.

Petroleum

Oklahoma produces a substantial amount of oil, with annual production typically accounting for more than 3 percent of total U.S. production in recent years. Crude oil wells and gathering pipeline systems are concentrated in central Oklahoma, although drilling activity also takes place in the panhandle. Two of the 100 largest oil fields in the United States are found in Oklahoma.

The city of Cushing, in central Oklahoma, is a major crude oil trading hub that connects Gulf Coast producers to Midwest refining markets. In addition to Oklahoma crude oil, the Cushing hub receives supply from several major pipelines that originate in Texas. Traditionally, the Cushing Hub has pushed Gulf Coast and Mid-Continent crude oil supply north to Midwest refining markets. However, production from those regions is in decline, and an underused crude oil pipeline system has been reversed to deliver rapidly expanding heavy crude oil supply — produced in Alberta, Canada, and pumped to Chicago via the Enbridge and Lakehead Pipeline systems — to Cushing, where it can access Gulf Coast refining markets. Cushing is the designated delivery point for NYMEX crude oil futures contracts.

Crude oil supplies from Cushing that are not delivered to the Midwest are fed to Oklahoma’s five refineries, which have a combined distillation capacity of over 500 thousand barrels per day — roughly 3 percent of the total U.S. refining capacity. Several petroleum product pipelines connect those refineries to consumption markets in Oklahoma and nearby States. One of the largest of these, the Explorer Pipeline, originates on the Texas coast and receives products from Oklahoma refineries before continuing on to supply Midwest markets.

Natural Gas

Oklahoma is one of the top natural gas producers in the United States and production typically accounts for almost one-tenth of the U.S. total. More than a dozen of the 100 largest natural gas fields in the country are found in Oklahoma, and proven reserves of conventional natural gas have been increasing in recent years. Oklahoma also has large reserves of coalbed methane in the Arkoma Basin and the Cherokee Platform in the eastern part of the State. Extraction of those resources has grown in recent years.

Most natural gas in Oklahoma is consumed by the electricity generation and industrial sectors. About three-fifths of Oklahoma households use natural gas as their primary energy source for home heating. Nevertheless, only about one-third of Oklahoma’s natural gas output is consumed within the State. The remaining supply is sent via pipeline to neighboring States, the majority to Kansas, including the natural gas trading hubs in Texas and Kansas. Almost 90 percent of the natural gas that enters the State arrives via pipelines from Texas and Colorado.

Coal, Electricity, and Renewables

Coal- and natural gas-fired power plants dominate electric power production in Oklahoma. Nearly all of the State’s coal is supplied by railcar from Wyoming. Oklahoma produces a substantial amount of energy from wind resources, and other renewable energy resources — hydroelectric dams and, to a limited extent, wood and wood-waste — also contribute about 7 percent of the electricity to the Oklahoma power grid. Just over one-fourth of Oklahoma households rely on electricity as their primary energy source for home heating.