Sumner County’s farmers, used to seeing months of hard work occasionally reduced to nothing more than scorched crops, learned this week they might have won the lottery.
Several hundred farmers and other rural landowners filled Memorial Auditorium to hear from the three big out-of-state oil companies: Shell Oil, Chesapeake Energy and SandRidge Energy. What they heard was pretty exciting: oil companies are paying farmers big dollars to lease mineral rights, with the prospect of significant royalty checks for decades if the companies find oil on their land.
A farmer getting $500 an acre for his section of land would get $320,000 for a three-year lease, and maybe more for an additional two-year option. Multiply that by hundreds of landowners and it’s enough to make a whole community’s head spin.
“I think it’s great,” said farmer Morris Meeker, who has 160 acres. “Anything we can do to get away from OPEC is good.”
He’ll likely see a benefit, too, he said. He sold his mineral rights before the recent land rush for $15 an acre. That contract comes up in June, and he’s got high hopes.
If the big companies hit oil in Kansas as they hope, it will mean thousands more jobs and millions more dollars in at least eight or 10 counties. The oil and gas industry already employs more than 10,000 people in Kansas.
The big three outside oil firms, and other smaller operators, have already been in Sumner County for a year buying up leases. What’s new is that they are just about to start drilling — and the oil companies say they will know within 12 to 18 months whether the Sumner County oil boom is short-lived or a long-term economic underpinning .
Chesapeake has the only horizontal well in Sumner County, near Caldwell, and it will go into production this week, so it’s too early to tell how successful it will be.
SandRidge has drilled 10 horizontal wells in Harper and Comanche counties, but none in Sumner County, yet. Shell’s first well is in Harper County.
Other companies, including Kansas-based companies, have already drilled a few horizontal wells in Kansas.
Latest hot spot
Sumner County is just the latest country along Kansas’ southern border to feel the attention of the big out-of-state oil companies.
These companies bring the latest technology and bags of money in the expectation that they can generate big payoffs from oilfields that appeared to be declining. They use horizontal drilling and hydraulic fracturing, which can cost $3 million a well — five to six times as much as a regular vertical well — but with the potential to drain the same area as 32 vertical wells.
“It has the opportunity to bring jobs and bring wealth back into south-central Kansas,” said James Roller of Chesapeake. “We think it’s tremendous opportunity for us all.”
Oil companies large and small have already gambled many tens of millions of dollars in a race to tie up the best land in Kansas . Some observers estimate out-of-state oil companies have tied up far more land than they can drill in three or five years. So they will have to come back to the property owners again because they don’t know were the good areas are, yet, in order to nose out the competition.
But the three major companies also sought to caution residents: it’s too early to say for sure how big this will be until they drill.
Erik Bartsch of Shell said his company plans to drill 20 to 30 wells in the county over the next 12 to 18 months to get a feel for what kind of flow they will see. He said he couldn’t say what the break-even point was, but they would be pretty happy with average flows of 300 barrels a day, he said.
He based that on SandRidge’s public announcement that it is averaging about 300 barrels a day from horizontal wells in nearby areas of Oklahoma. That amount generates a very quick payback on the investment, even including the cost of trucking the oil until a pipeline can be built.
However, some longtime Kansas oilmen say privately that they are skeptical such flows are likely in Kansas, where oil-bearing layers of the Mississippian Limestone are thinner than in Oklahoma..
The three representatives also wanted to reassure residents that they would be careful with the county’s water, land, air and roads.
“We’re not going to be part of any operation that going to damage your water,” Bartsch said. “We’re going to prove it to you.”
The Sumner County residents were curious going into the meeting and excited going out. They said they hope this will bring resurgence in struggling Sumner County.
“I think we are all hoping this will be huge,” said landowner Mary Wright.