Kansas oil industry says high electric rates and rising costs threaten marginal wells and local tax revenue

Dana Reath, chair of the Kansas Independent Oil and Gas Association (CIOGA) and an engineer who works for Brexco, told the House Committee on Energy, Utilities and Telecommunications that rising electricity prices and higher operating costs are squeezing marginal oil and gas wells in Kansas and could force some wells to be shut in permanently.

Reath said the average Kansas oil well produces about 2 barrels of oil per day and the average gas well about 21 Mcf per day, making many wells financially marginal. He used a Brexco-operated well southwest of Hays (the Copeland well) as an example: royalties are about 16.5 percent of gross revenue, electricity costs for that well run about $676 per month and net profit on the example well was roughly $168 per month. "Every oil and gas well is like a small business," Reath said, arguing that modest increases in operating costs can erase profit and lead operators to permanently shut a well.

Why it matters: Reath emphasized that oil and gas production generates local income and tax revenue. He said Kansas oil and gas contributed more than $186 million in oil and gas taxes in 2023 and cited, as one company…