Shaking up Oklahoma

Rattled on the Plains

Earthquakes and a looming budget crisis are shaking up Oklahoma.

By Cary Aspinwall

A few days after Thanksgiving, Oklahoma City residents huddled in their homes watching a thick layer of ice snap power lines and split stubby trees. Only a few days later, as the ice started to thaw and power was restored in most neighborhoods, a 4.7-magnitude earthquake shook the state a couple hours before dawn.

The epicenter was 100 miles north, in a region where oil and gas have for decades driven the state economy. Scientists suspect the practice of injecting deep into the earth the salty wastewater from the drilling process may be causing the earthquakes, or at least increasing the frequency.

Prior to 2009, the state had just two quakes per year. Now on average, quakes shake the state twice a day, more than anywhere in the lower 48 states, a fact that is stoking outrage among residents who are growing tired of worrying about the foundations of their homes and whether to buy earthquake insurance. The quakes are an unwelcome byproduct of the oil and gas industry, but they are also a powerful metaphor for a looming fiscal crisis driven by falling fuel prices.

When the Legislature convenes at the beginning of February, it will face a projected budget shortfall of at least $900 million. It’s an unpleasant reality in a state and capital city that, until recently, were enjoying unprecedented prosperity and growth, largely due to the oil boom. The state already absorbed a $611 million budget shortfall last year, so the shock waves from coming cuts will likely be felt even in corners of the state the floor-shaking tremors don’t reach.

Some school systems are considering four-day weeks to save money. Prisons may have to cut half their guards. The state’s health care authority may have to continue to reduce payments to Medicare providers.

None of this is welcome news for Gov. Mary Fallin, who was elected to her second term with 56 percent of the vote in November 2014 and has been flirting with a larger national profile. Fallin, 61, the chair of the Republican Governors Public Policy Committee, has been mentioned on occasion as a potential vice presidential pick. She’s already got a fan in Sarah Palin, who back in 2010 when Fallin was running for governor the first time, endorsed the candidate as a member of the “Mama Grizzly” club of conservative women. In September, Fallin spent time with Jeb Bush at a fundraiser in the capital city and gave Marco Rubio a tour of the Oklahoma City National Memorial when he visited the state to talk about energy policy.

But energy prices are putting a damper on the state mood. Oil has dropped 70 percent since 2008 and natural gas prices are at 14-year lows. Whatever boost to the state economy might have come from the Keystone XL pipeline, which would have transported Canadian crude through Oklahoma and created as many as 800 construction jobs, it was lost in November when President Obama rejected the project.

“Oklahoma has done a great job of diversifying its economy, but energy is still one of its top industries. Unfortunately, President Obama’s anti-oil and -gas policies have caused financial distress across all states with abundant energy resources,” Fallin said.

Fallin, who started her career in hospitality and real estate, is quick to point out the positive: Unemployment has decreased from 7.1 percent when she took office in January 2010 to 4.3 percent as of October. The state has $535 million in its savings account and has created 110,000 new jobs – scattered across a variety of sectors like transportation, trades and hospitality - over four years.

But if Obama is unpopular in this deeply red state, Fallin’s stock is not much better.

She currently ranks last in favorability among Oklahoma’s current and most well-known statewide elected officials, according to recent survey by Sooner Poll, an independent nonpartisan polling firm in the state. Among likely Oklahoma voters surveyed, Sooner Poll’s Bill Shapard said, Fallin finished ahead of only the president.

Shapard thinks it’s unlikely Fallin will be considered as a 2016 running mate for anyone in the Republican field. “We’re too small of a state, we’re too red of a state, so Republicans don’t really need Mary Fallin,” Shapard said.

She’s a second-term Republican governor in an energy-focused state, but the Republicans can go somewhere else to find someone who is more popular, such as New Mexico Gov. Susana Martinez, said Keith Gaddie, chairman of the University of Oklahoma’s political science department.

“In a state with a crisis like this, and the executive and legislative branches doing nothing to address it, it’s really not a case to put her on the ticket,” Gaddie said.

Fallin said she’s focused on budget challenges and growing the state’s economy. “As far as my plans after this term, I am confident there are still great rewarding career opportunities ahead!” she emailed.

Many wonder what will be Fallin’s legacy as governor. Even before the current budget crisis hit, Fallin had drawn national attention in 2014 for her response to a botched execution by lethal injection. Clayton Lockett writhed and groaned for 40 minutes before he died. In a statement acknowledging the execution took too long, Fallin chided the “out-of-state pundits (who) consistently forget to mention or even consider … Lockett’s victims.”

Earlier this year, news helicopters revealed that Fallin’s 28-year-old daughter, Christina, a musician and tattoo makeup artist, had parked her mobile home on the grounds of the governor’s mansion in Oklahoma City and was plugged into the building’s electrical power. Fallin’s political opponents filed an ethics complaint in November.

“It sends a stereotypical ‘We’re a bunch of dumb Okie hicks kind of image,” Shapard said.

But those were passing controversies compared to the earthquakes. Geologists are recording quakes of magnitude 4.0 or greater every 10 days.

Fallin, though, has been slow to point fingers.

In February, Fallin told a Tulsa newspaper investigating the rising number of earthquakes: “At this point in time, I don’t think we have enough information to truly understand what is causing earthquakes… A lot of it is just natural earthquakes that have occurred since the beginning of time...”

Fallin created a “Coordinating Council on Seismic Activity” in 2014 to study the issue, but the council has no plan to release any reports and its meetings remain closed to the public. Nearly half its members have ties to the energy industry.

In August, at a meeting she finally allowed the media to attend, Fallin seemed willing for the first time to acknowledge there is a “direct correlation” between increased seismic activity and wastewater disposal wells used by the oil and gas industry.

“My position has always been to be proactive while gathering fact-based, scientific information,” Fallin told POLITICO. She recently formed a “fact-finding” group to study potential uses for recycling and reusing what she calls “produced water.”

If more scientific information is the goal, it’s not coming from the state seismologist. Austin Holland left for a job in New Mexico this past summer and has not been replaced. Holland had said he felt pressured by some in the energy industry regarding his research at the Oklahoma Geological Survey, a state agency housed inside the University of Oklahoma’s Mewbourne College of Earth and Energy.

In a new interview with Al Jazeera America, Holland revealed that at a coffee meeting with Continental Resources oil billionaire Harold Hamm, he was told to “watch how you say things.”

Though Oklahoma’s deep reliance on its energy economy may have delayed acceptance of the science linking injection wells and earthquakes, “only a hardcore conservative in denial could argue there’s no link,” Gaddie explained. “It’s a scientific issue that’s also politicized, but now the science has pretty much prevailed over the politics.”

The University’s campus in Norman is far south of Oklahoma’s earthquake alley, but even Gaddie’s office hasn’t escaped damage. For 18 months, the political science department was evicted from the campus’s Dale Tower Hall building after a 5.1-magnitude quake destabilized it in 2010. “When it happens to you, you tend to notice,” Gaddie said.

The question is what to do about the problem. Pressure is mounting to shut down the wastewater wells, or at least limit the volume pumped into them. But the oil and gas industry fears that will only hurt their already bruised bottom line.

To add to the state’s woes, a report this month by the U.S. Bureau of Economic Analysis shows Oklahoma posted the worst performance among all states over the past quarter.

That’s scarier than any earthquake and raises a question for Republican lawmakers: Will Oklahoma have to follow in the footsteps of Kansas and reluctantly raise taxes?

That’s going to be extremely tough in a state that requires a 75-percent approval in the legislature or vote of its people to approve any tax increase, Gaddie said. Fallin said she has no plan to ask legislators to repeal the tax cut trigger she signed into law in 2014.

“History has shown over the decades that gradual tax cuts have spurred economic growth and have helped lower our unemployment rate to 4.3 percent,” she said. “We are working this year to fix the structural impediments and imbalances to our budget challenges.”

Critics say the problem is Oklahoma’s tax cuts are not triggered by an increase in actual revenue -- just projections. So in 2016, the state’s top income tax rate will fall from 5.25 percent to 5 percent, in spite of Oklahoma’s revenue shortfall.

The concept sounded good when oil soared to $150 per barrel, but there’s no mechanism to stop the tax cuts when revenue falls far short of earlier projections, Gaddie said.

State officials can’t claim they weren’t warned. Treasurer Ken Miller has been trying to raise the fiscal alarm since taking office in 2011.

A bigger problem, he said, is that lawmakers never learned to how to live with less.

More than $1 billion in non-recurring revenue has been used to fill budget holes during the past five years. Using such large amounts of alternative revenues to prop up the state budget is an admission by policymakers that they don’t have enough money to spend as they please, Miller said.

“We didn’t get into this situation overnight, and the solution can’t be implemented quickly either.”

Miller doesn’t believe the political will exists to rescind the tax cut.

State lawmakers made a similar mistake prior to the oil bust in the 1980s, when oil dropped from $40 per barrel to $11, Gaddie pointed out.

The state still bears scars from the 1980s bust, he said -- projects abandoned, towns that dried up, infrastructure that was never restored. In the early 1990s, however, Oklahoma City, decided it wanted to shed its image as a bleak metro area devastated by the 1980s collapse of oil and banks in the state.

City leaders dreamed big, passing a series of local sales taxes to fund civic improvements that transformed a drainage ditch into a boathouse-lined river. Now residents can fly high across the river on a zip line, or take a water taxi to a baseball game or dinner at a local brewpub.

Downtown redevelopment has thrived and a skyscraper completed in 2012 now looms over the skyline. The city snagged Seattle’s NBA basketball team, now the enormously popular Oklahoma City Thunder, which plays in the Chesapeake Energy Arena.

Still, it’s hard for residents not to worry about what will happen if oil prices don’t rebound. Chesapeake, a pillar of the local economy, already cut 15 percent of its workforce this fall and announced it wouldn’t put on its popular annual holiday light display this year.

The almost daily shudders are a physical reminder to residents of the capital that they are bound closely into the state’s economy. But the city has shown it’s willing to get creative when times are tough; and even the most conservative voters will endure higher taxes for amenities they want to have, Gaddie said.

“Oklahoma City has shown they don’t need the rest of the state.”