Kansas oil boom has produced mixed results for southern counties
11/16/2013 2:33 PM
11/16/2013 2:33 PM
Mike Lanie cruised along SW 80th Road, a dirt road in the gently rolling farm land a few miles from the Oklahoma border, showing off the source of Harper County’s developing prosperity.
About every quarter of a mile on both sides of the road for miles was a neat SandRidge Energy oil well pumping quietly. In one spot, crews running horizontal drilling rigs across the road from each other were putting in the company’s latest wells.
“It just seems to keep on going and going,” said Lanie, the county’s economic development director, and then notes that this line of wells sits on land owned by one person who likely collects enormous royalty checks every month: “This guy has truly been blessed.”
Harper County remains one of the few clear winners in a Kansas oil boom that, so far, has turned into more disappointment than fast fortune for most of Kansas.
In 2010 and 2011, Kansas seemed poised for a gold rush across wide swaths of southern and western Kansas as large out-of-state oil exploration companies bought up leases at 10 times previous prices and everybody from farmers to country appraisers tried to estimate the windfall. But over the past year, most of those companies threw up their hands, cut their losses and pulled out, victims of the complexity of drilling horizontal wells in the Kansas Mississippian formation. The biggest blow came when Shell Oil in September confirmed that is looking to sell its 45 wells and 600,000 acres of leases.
Only SandRidge and a couple of others have remained, and they have sought to be more focused and cost efficient. SandRidge has said it will focus on Harper, Barber and Comanche counties, on the Oklahoma border, even though it has hundreds of thousands of acres of leases sprawling across a dozen counties to the north and west.
Oil production across the state is on a pace to fall below 2012, and is only up about 9 percent from five years ago.
Because it has been so quick, the economic impact left by the horizontal drilling companies has been pretty weak and localized. Anthony and Harper have seen some new construction, mostly housing, along with the general increase in wealth from oil lease payments and royalty checks.
A few other counties report some benefits – and some big disappointments.
In Kingman County, immediately north of Harper County, county appraiser Rick Batchellor said that he heard in January that a large number of horizontal wells were scheduled to be drilled in the county. None ever was.
“Our boom was kind of a bing,” Batchellor said.
Harper County has seen two new hotels, several apartment developments, a truck wash and a hardware store go up in the last year. Housing is tight and the restaurants are full, said Lanie.
Vap Construction built 160 apartment units on the south side of town, Lanie said. Mobile home parks in the county are full. Some of the county’s aging housing stock has been fixed up as rentals.
Overall, Lanie estimated, Harper County has seen more than $20 million in new construction in the last two and a half years.
The Shell announcement was a blow, he said, because the company was so generous. But he said he is confident that Shell’s departure really doesn’t change anything. Oil production in the county is set to rise by 50 percent this year over last year, and quadruple over 2009. The oil under the Shell leases is still down there and the technology to get it out will only improve.
“Somebody will get it,” he said.
One of the oil beneficiaries is McDermott Family Hardware, on K-2 at the north entrance to Anthony.
Ted McDermott was raised in Anthony, left the state and helped develop four businesses. But family remained in Anthony and when he heard that the local True Value Hardware was for sale a year ago, he bought it and moved it to a big new store on the north end of town.
He didn’t buy the store with the intention of capitalizing on the oil boom, but he realized very quickly that would be a big piece of his business, he said. He stocks equipment such as giant pipe wrenches and flame-retardent clothing, and gear to equip recreational vehicles. Items aimed at oilfield workers are his best selling category of goods, he said.
And it’s not just oil workers. He can feel the money flowing into some residents’ pockets, too, he said.
“You can tell when somebody gets it,” he said. “We’ll sell a whole houseful of appliances – they just got their lease check.”
But even in Harper County, there have been some who are suffering for their big bets.
Greg Esping, owner of Vantage Construction in Harper, built 28 high-end apartments and a community building in Harper to house Shell oilfield managers.
He had planned to put in dozens more as Shell’s presence grew.
With Shell pulling out, he’s having to scramble, renting the units out individually and for short periods. He’s been renting out the community building for local functions.
“There’s no hard feelings,” he said. “I knew upfront they weren’t sure they were staying.”
He’s hoping now that Shell will get the leases sold quickly so somebody else will come to town to develop them.
“I’m not sorry I built them,” he said. “We needed it. And now that we’ve got it, the community will benefit.”
Another non-winner, so far, is Comanche County, two counties west.
It has seen a pretty strong uptick in oil production, but it is still sorting out a mess caused when the former Comanche County appraiser Kim Lauffer raised the property value of mineral rights in the last three years by 1,000 percent to, she has been quoted as saying, reflect current market value.
Tax collections rose sharply, but oil companies protested to the state court of tax appeals, saying that the rate increases were arbitrary, said Coldwater attorney Charlie Herd. The county lost some cases and settled others. Lauffer’s contract wasn’t renewed in July.
This year, the county government is having to return nearly $1 million in tax it had collected, out of a $6 million annual budget, said county commission chairman Larry Harvey. Fortunately, the county hadn’t committed the money to some big project, he said.
“We are not really hurting, but we’re not getting ahead like it looked we were,” he said. “It would have helped pave or repave some roads.”
Although Pratt County has seen no growth in oil revenues in recent years, Dave Howard, city manager of Pratt, which is northwest of Harper County, said his city has seen some economic overflow from oil services companies. And there’s more to the energy picture than oil: The Pratt Energy ethanol plant reopened; construction workers are coming into the area to build a new gas pipeline, as well as the V-Plan new high voltage line; and, in a year or two, more are expected to work on nearby windfarms. Plus, of course, farm incomes in the area have generally been strong in recent years, despite the drought.
The city of Pratt has seen three new hotels in the last six years and another in the planning stages. Sales in the city have risen about 10 percent in each of the last two years, according to the state.
The taxes have helped to pay to repair the bricks in a downtown street and do some other projects. Those are projects Pratt couldn’t have afforded five years ago, Howard said.
So, while there was no boom, there was no bust, either. Oil will be a part of the local economy, but not its only – or even primary – driver
For reference, Howard recalls his time living in Casper, Wyo. which has seen very good times from oil and very bad times. The slow and steady growth that is happening in Pratt, as in much of Kansas, is better, he said.
“Our boom started and it has cooled down, but by no means did it collapse,” Howard said.