Constraining the Choice Set: Oklahoma’s Limited Approach to Building Economic Resilience

This report is the third in a series that explores the strategies US oil- and gas-producing regions may pursue in building economic resilience—defined as the capacity to recover from negative economic shocks (Martin 2012)—to a changing energy landscape. Recent decades have seen dramatic changes in domestic oil and gas production that have produced a complex mix of local economic benefits, environmental and health damages, and long-term economic risks. Although international, federal, and state policymakers have developed strategies to support coal communities through an energy transition, oil- and gas-producing regions have received considerably less attention. This report, focused on the state of Oklahoma and its capital, Oklahoma City, is part of a larger effort to assess local priorities for economic resilience to inform policy development at the state and federal levels.In October 2024, we conducted semi-structured interviews with a range of local stakeholders during a 3-day research trip to Oklahoma City. We asked interviewees to describe their views on Oklahoma’s approach to building economic resilience and diversification, existing state or federal policies that advance those efforts, and what changes they would make to programs to improve the efficacy of existing policies. We also asked interviewees what barriers stood in the way of advancing their goals for economic development.Our interviews produced six main findings:Oklahoma is heavily dependent on the oil and gas industry but is not making major efforts to build economic resilience. This issue is particularly acute for the fiscal health of rural oil- and gas-producing communities and the State as a whole.Oklahoma City, on the other hand, has made considerable progress in diversifying its economy by attracting new industries and enhancing local public services and quality of life through a city tax initiative. The oil and gas industry remains an important part of the local economy, but is no longer the dominant economic force, reducing the city’s exposure to an energy transition.Poor education and healthcare services may impede economic diversification. Oklahoma persistently ranks near the bottom of US states for a range of outcomes relating to these issues, which deters employers. However, Oklahoma’s vocational programs are seen as a success in training workers for existing industries, including oil and gas.Politically divisive issues, including abortion and LGBTQA+ rights, may deter certain investments in Oklahoma. In recent years, certain social policies and rhetoric from state elected officials have complicated efforts to attract major investments and may push some residents to leave the state.Tribal nations within Oklahoma are seeking to take advantage of federal funding opportunities but continue to face challenges related to sovereignty and governmental capacity. Some Tribal governments generate substantial revenues from oil and gas production and are seeking to increase those revenues, which could further expose these communities to future fiscal shocks.Oklahoma’s state and local governments have had limited success accessing federal funds. Interviewees noted a combination of capacity limitations and a lack of desire among some political leaders to pursue certain federal funding opportunities as major contributors.These takeaways lead us to the following conclusions:A long-term reduction in global oil and gas demand poses major economic and fiscal risks for the state of Oklahoma, rural oil- and gas-producing communities, and some Tribal nations within the state. Oklahoma City is less exposed because of its successful diversification efforts.Not all fossil fuel-dependent states and tribes are pursuing, or are likely to pursue, strategies to build economic resilience. This suggests that direct federal efforts may be needed to support affected communities in a world where global demand for hydrocarbons declines.Providing quality public services and amenities is crucial to attracting and retaining businesses and workers. Failure to do so will make it more difficult to develop a diverse and robust economy.Non-economic policy issues, such as abortion and LGBTQA+ rights, can have substantial economic effects. A strong focus on these social policies can exacerbate the “big sort,” a nationwide trend of communities becoming more politically homogeneous, thereby deterring workers (and the businesses that employ them) with different political views.Capacity-building efforts are essential for local governments, Tribal nations, and states to take advantage of available federal funding opportunities. Public capacity is typically overwhelmed with “immediate demands,” making it difficult to develop long-term plans for economic resilience.