2000 Kansas Energy Report
Open-file Report 2000-69

This report will examine the history, current status, and future of energy in Kansas. Total energy consumption continues to grow in Kansas. However, Kansas is more energy efficient than 20 years ago. In 1998, 70% less energy was required per dollar of gross state product than it was in 1977. Growth in total energy consumption slowed after 1980, while the State’s economy has continued its rapid growth. Kansas and the U.S. are rapidly changing how energy is delivered as we move to increased dependence on electricity. Over the last 40 years, electricity's share of Kansas energy consumption has doubled from 15% to nearly 33%. With the restructuring of the electric industry and increasing uncertain environmental requirements, today’s additions to baseload electric generation capacity are overwhelmingly combined-cycle or combustion turbine technology fueled by natural gas. This has resulted in an extremely rapid and accelerating growth in demand for natural gas for electric generation.

Natural gas and petroleum remain the most important energy resources in Kansas, accounting for nearly all primary energy produced in the state. Energy production in Kansas peaked in 1967 at 1573 trillion BTU’s. In 1999, primary energy production had declined to approximately 912 trillion BTU’s. Natural gas production peaked in 1970 at 900 billion cubic feet (bcf). Petroleum production peaked in 1956 at 124 million barrels (bbls). Of the U.S. states, Kansas is ranked 7^th in natural gas production and 8^th in oil production. In 2000, hydrocarbon production responding to increased wellhead prices is estimated to have increased slightly from 1999 to over 34.3 million barrels of oil and 550 billion cubic feet of gas. The current year wellhead value of hydrocarbon production will increase over $1.4 billion from 1999 to an estimated wellhead value of $3.046 billion. The increased wellhead value of oil and gas production will have a positive impact on the Kansas economy and state and local tax revenues, and should be felt across the gas and oil producing counties of southeast, central, and western Kansas. However, this positive impact will be balanced by potentially serious effect of increased energy costs and potential spot shortages on the Kansas agricultural, chemicals industry, and general consumer economy. Shortages and price spikes are possible in natural gas and to a lesser extent in petroleum distillate products.

Energy is increasingly a national and global market dominated by high technology, high capital requirements and large integrated companies. Small and mid-sized companies, which must continue to innovate in order to compete, dominate the Kansas energy system. To meet the rapid changes in energy demand, Kansas must work to increase energy supply to prevent shortages and maintain reasonable costs. Kansas and U. S energy supply will continue to be dominated by fossil fuels. However, an economic and measured approach that integrates new energy sources (e.g., wind and ethanol production from agricultural production) into the Kansas energy system can have a positive impact. Increased synergy and efficiencies are possible among all the various aspects of the Kansas energy system.

In the short-term, Kansas and the U.S. are facing another hydra-like energy crisis that seems to grow new heads every day. With high prices and tight supplies of natural gas and distillates, we are facing a "Winter of Discontent." In the past, similar short-term energy situations have resulted in changes of energy policy that did little to alleviate the fundamental problems of supply and demand.

For over 100 years, energy production has been a key component to Kansas' economy. For much of its history, Kansas has produced more energy than it has consumed. The gap between production and consumption, however, has narrowed to the point where in any given year there is no guarantee that Kansas will be a net energy exporter. Changes in technology, government, business, and price have provided, and will continue to provide, challenges and opportunities for the Kansas energy sector.

The last quarter of the 20^th century, in particular, saw dramatic changes in:

• Health of the oil and gas industry;
• Structure of the electricity industry;
• Energy consumption and efficiency.

This report will examine the history, current status, and future of energy in Kansas.

The direct production and distribution of energy constitutes approximately 4.1% of the Kansas gross state product₁. In addition, energy is an essential input into all industrial, agricultural, commercial, transport, and household activities. The composition of Kansas’ energy supply and demand balance has changed significantly as continued growth in demand is met and as:

• The relative growth rates for fuels change as a result of government intervention, price fluctuations, and technologic change;
• The connectivity (interdependence) of national and global energy markets increase;
• The method of energy delivery moves toward increased dependence on electricity;
• The structure of the power industry changes; and
• The importance and the pace of technology change in energy production and consumption increases.

Updated January 2001
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