Blog Post

Managing Oil-Gas Activity Costs a Challenge in Southern Kansas

Apr 2, 2015 | Daniel Raimi

Oil and gas activity has surged in south-central Kansas over the past several years, led by production from the Mississippian Lime formation in neighboring Harper and Barber counties. Large-scale production from the Mississippian has also occurred across the border in northern Oklahoma, as we described in a previous blog post.

Harper and Barber counties have hosted oil and gas production for decades, but the scale of activity in recent years has outpaced any previous drilling activity. As a result, both counties have seen large increases in revenue from property taxes on oil and gas property, along with large increases in demand for road repair across each county’s road system.

For both counties, keeping up with road maintenance issues caused by oil and gas industry traffic has been a challenge, and revenues from oil and gas property have not always been enough to provide the needed repairs. The state of Kansas collects a severance tax on oil and gas production, but allocates very little revenue from this tax to local governments. Indeed, a share of the revenues from the severance tax is designed to be sent to county governments, but in recent years state officials have appropriated these funds for other uses.

The result is that, despite increased revenue from oil and gas property along with several other smaller revenue sources, officials in both counties say they’ve struggled to adequately maintain their roads. They expect these challenges to grow in the coming year as lower oil prices mean that their revenues from oil and gas property taxes are likely to decrease substantially.

The Harper County courthouse in March 2015

A final concern in this region is related to earthquakes, a previously rare phenomenon that has been preliminarily tied to the increased volume of oil and gas wastewater injected into underground wastewater injection wells. Oil and gas production from shale typically produces large amounts of wastewater, and researchers from the U.S. Geological Survey (among others) have suggested that large volumes of wastewater injected near dormant fault lines may have caused a sharp increase in small earthquakes in certain regions, including southern Kansas, north Texas, central Oklahoma, and eastern Ohio.

A recent inspection of the Harper County courthouse found that frequent small earthquakes had significantly damaged the building, which is more than 100 years old and one of the tallest buildings in the county. This is relevant to local government finance because these damages will increase the costs of future maintenance and, if earthquakes continue, may force county government offices to move to a safer structure.

This research was carried out at the Duke University Energy Initiative with support from the Alfred P. Sloan Foundation.