Kansas oil and gas producers tell Utilities Committee rising costs, regulation and low rig counts threaten marginal wells

Dana Reath, chair of the board of the Kansas Independent Oil and Gas Association and a Wichita production company employee, told the Utilities Committee that Kansas oil and gas output generated roughly $2.4 billion in production value in 2023 and about $3.0 billion in family income.

Reath said the industry paid roughly $186 million in taxes in 2023 and broke that figure into components she attributed to severance and ad valorem taxes: about $48 million in severance and $137 million in ad valorem payments. She also said producers pay a per-barrel and per-Mcf fee that supports the Kansas Corporation Commission’s Oil and Gas Conservation Division. "Every oil well is like a small business," Reath said, arguing the combination of small average well yields and rising input costs makes many wells financially marginal.

Why it matters: Reath told the committee marginal wells supply local jobs and royalty payments that support rural communities, schools and co-op electric loads. She used a southwest-of-Hays example well that she said produced about 2.3 barrels a day, generated roughly $4,033 a month in revenue, and faced monthly electricity costs averaging $676 — a line-item that, she said, can quickly push a small well under breakeven as power rates rise. "Kansas is really a very well regulated state," she said of the Kansas Corporation Commission, while noting some proposed federal methane rules and other costs could be onerous for operators.

Details from the presentation and Q&A: - Production and taxes: Reath presented the $2.4 billion production figure and $3.0 billion family-income estimate for 2023; she said industry taxes in 2023 totaled about $186 million (approximately $48 million severance; $137 million ad valorem). - Average well output: She reported the statewide average oil well produces about 2 barrels per day and the average natural gas well about 21 MCF per day. - Example economics: Reath described a typical marginal well making roughly $4,033 monthly revenue, with electricity the largest operating cost in her example ($676/month average). She warned that rising electric rates and other input cost inflation can render such wells uneconomic and lead to shut-ins. - Labor and wages: Reath said entry-level field positions start at about $25.50 an hour with a drug test and basic fitness requirements. - Fracturing and drilling: In response to senators’ questions, Reath said hydraulic fracturing has been used in Kansas since the 1940s; horizontal-drilling activity in Kansas has been limited and she estimated fewer than 10 horizontal wells may be drilled in a typical recent year because the geology and economics were not favorable. - Rig count and restart costs: Reath told Senator Thompson that when rigs and wells are shut down, restarting them can be capital-intensive and many rigs do not return to service, reducing drilling capacity. - Plugging and state programs: Reath said the Kansas Corporation Commission has been active in plugging abandoned wells using federal funds and state programs and described Kansas as "one of, if not the best performing state" at administering those plugging funds, based on her discussions.

Committee reaction and next steps: Senators asked technical and policy questions about rig economics, fracking, pipelines and tax treatment of renewables. The presentation closed with Reath offering to answer further questions; the transcript records no committee vote or motion tied to her testimony.