Picture Courtesy of Greg Lovelady
Having grown up in Western Kansas I understand how important Oil and Gas production is to the Kansas economy. My dad was a rough neck and pipe fitter. My parents raised nine children on his salary. I loved it when he would take me to a drilling site to off load pipe or drop off equipment. Sometimes a caterpillar would have to tow us in if we followed a rain. He cussed it, I loved it. Of course I got to stay in the cab while he got out in over ankle deep mud.
This is my fourth year serving in the Kansas legislature. I have always been assigned to budget committees. In the House I was on the Appropriations budget committee. Now in the Senate I serve as Vice Chair of the Ways & Means budget committee. In the private sector I was trained as a financial analyst. I remain interested with any kind of trend or percentage. When we are out of session I spend extra time going through budgets trying to get my arms around the States $14 billion appropriations. Most of time it feels like I have my arms around a big marshmallow, just barely able to touch my fingers.
One trend that I monitor is the oil severance tax receipts. We are all aware of the increased oil production activity in Kansas. A drive through Western Kansas is evident from the rigs, oil wells pumping, and service trucks on the road. Over 6,400 permits to drill oil and gas wells were issued in Kansas in 2013. The Kansas oil and gas industry invests over $1 billion annually into Kansas. As a result Kansas oil and gas industry supports nearly 67,000 jobs which results in over $3 billion in family income.
An average annual 27% increase in tax collections is impressive. It shows the important role oil production is playing in the Kansas economy. What should also be noted is the contribution the Oil industry makes as part of the state's overall tax collections. As a percentage of overall taxes collected oil severance taxes have grown from .8% of total taxes to 1.5% of total taxes collected. Doubling since 2010. This is the result of higher oil prices and increased production.
The following table shows Kansas crude oil production compared to other oil producing states.
The figures above represent barrels of oil per day being pumped. New methods of drilling such as horizontal and fracking have really increased the production capacity in the U.S. Kansas oil production is robust and growing.
The one major difference between Kansas and the other oil producing states is Kansas does not have a direct producer open access pipeline to Cushing Oklahoma. Cushing is where most North American oil is gathered and distributed to the rest of refineries and markets. It is referred to as the "Demand Market" for most North American oil. From Cushing the oil moves towards the Texas Coast through large diameter pipelines.
The map below shows the major pipelines traveling through Kansas transporting other states and Canadian oil to Cushing Oklahoma where it is marketed. Colorado, Wyoming, and Canadian oil pipelines pass through Kansas without any Kansas on ramps for Kansas produced oil. Think about I-70 with no on ramps.
Kansas Oil producers, especially the independents, are demonstrating the ability to increase production on an annual basis. I have asked the Governor's office as well as the Department of Commerce to inquire with the pipeline owners to determine if Kansas could have an on ramp access point. The job and economic potential for Kansas to participate at a larger scale in the oil production renaissance occurring in the United States is dependent on large part in getting our oil to the demand market at Cushing, Oklahoma in the most economical way. Pipelines are the most efficient and safest way to accomplish this.