News From the Oil Patch: Kan. county gets 1st Keystone tax revenue

By JOHN P. TRETBAR

Ten years after the Keystone Pipeline began moving oil sands through our state, Kansas governments are now receiving their first tax allocations from the operator. According to reporting in the Abilene Reflector-Chronicle, Dickinson County received its first allocation last month of more than $639,000. Another distribution of the same amount is expected in May.  Another $767,000 will go to other taxing entities in the county, including townships, cemeteries and school districts. The company operating the pipeline was granted a ten-year tax exemption before the pipe was completed. Counties have complained they've missed out on millions in tax revenue during the last decade.

Crude prices in the Sunflower State rose three dollars on Friday. Kansas Common crude at CHS in McPherson starts the week at $83.25 per barrel. That's up nearly five dollars from the first of the month and the best price in McPherson since August of 2014. The benchmark crude futures contract in New York was up slightly in midday trading Monday after settling Friday at $93.10 per barrel, also the best price in more than seven years.

Drilling activity in Kansas based on spudded wells has a good head start on last year at this time. Independent Oil & Gas Service reports 100 wells drilled so far this year, up from 54 at this time last year. That's an increase of 85%. So far this year, 43 active operators have drilled wells in Kansas, up more than 26% from this point last year. 

The Kansas Geological Society met February 8th to recognize and name three new oil fields and one “infield wildcat” field. Those include the McBroom North field operated by Black Oak Exploration in Russell County.

Baker Hughes reported a big increase in drilling activity across the U.S. Friday. The weekly Rotary Rig Count was up 19 oil rigs and two gas rigs, for a total of 635 active drilling rigs. The count in Texas was up 13 rigs. North Dakota, Oklahoma and Pennsylvania were each up three. Utah was up two rigs.

The Rig Count in Kansas was down slightly. Independent Oil & Gas Service reports 14 active drilling rigs in eastern Kansas, down four from last week, and 25 west of Wichita, which is up one. Operators were preparing to spud a new well on a lease in Ellis County.

Kansas regulators okayed 11 new drilling locations last week, with two new drilling permits east of Wichita, and nine in Western Kansas. That's 123 new permits so far this year.

Operators completed 30 new wells in Kansas last week, bringing the total for the year to 180. Independent Oil & Gas Service reports 15 in eastern Kansas and 15 west of Wichita, including newly completed wells in Barton, Ellis and Russell counties.

Crude prices are up nearly thirty dollars a barrel since August, and that's pumping up gasoline prices to levels we haven't seen since 2014. The national average is now over $3.47 per gallon, an increase of more than 17 cents per gallon over the average price a month ago. The auto club AAA says the average across Kansas is a nickel higher than last month at $3.34 per gallon. 

US Oil-by-rail shipments were down 20% from a year ago. The Association of American Railroads reports 9,148 carloads of petroleum and petroleum products during the week through February 5th. That's down nearly 500 tankers from the week before. Canada reports 8,340 carloads. That's down slightly from a year ago, but down more than 1,000 carloads from the week before.

The government this week ramped up predictions for both production and consumption of crude oil, both here and abroad. EIA's Short Term Energy Outlook predicts US output will set a new record of 12.6 million barrels per day next year.

US production last week increased 13,000 barrels per day over the week before, to average 11.556 million barrels per day. That's up more than half a million barrels over the same week a year ago. US crude imports dropped by 700,000 barrels per day last week to 6.4 million barrels per day. Over the past four weeks, imports averaged nearly 13% more than the same four-week period a year ago.

US crude-oil inventories dropped by nearly five million barrels last week. As of February 4th, the government reports stockpiles of 410.4 million barrels, or about 11% below the five-year average for this time of year. Gasoline stockpiles dropped by 1.6 million barrels and are about three percent below the five-year seasonal average.