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Kansas Geological Survey, Public Information Circular (PIC) 5
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History

Gas in the Hugoton embayment was discovered in 1922 in Seward County, three miles west of Liberal. Because this well did not produce oil, it was considered to have little value and remained unused for several years. In 1927, gas was discovered at the Independent Oil and Gas Company's Crawford No. 1, about 2,600 feet (790 meters) below the surface southwest of Hugoton, Kansas, in Stevens County (Furbush, 1959). This is now considered the center of the Hugoton producing area. By the end of 1928, five wells had been drilled in the field and the first pipeline was transporting gas to local markets. In 1929, Argus Pipe Line Company started construction of a pipeline to furnish gas to Dodge City, Kansas (Hinton, 1952). Construction of major pipelines in the 1930's encouraged further drilling in the area. Today, approximately 11,000 wells produce gas and oil in the Kansas portion of the Hugoton area, and thousands of miles of pipeline carry Hugoton gas to many parts of the U.S.

In the interest of conservation, efficiency, and fairness, Kansas oil and gas production has been regulated since the 1930's. Regulations governing well spacing and rates of production continue to change as new technology and more information become available.

In 1983, the Deep Horizons Bill, which encouraged deeper exploration below the shallower gas--producing zones in the Hugoton area, was passed by the Kansas Legislature. For many years, wells were drilled on 640-acre (2.59-square kilometers) spacing units, or approximately one well per square mile. In 1986, the Kansas Corporation Commission (KCC) ruled that the Chase Group rocks in the Hugoton field were not being efficiently drained of gas and that more wells were needed to improve production. At that time, the Commission estimated that an additional 3.5 to 5 trillion cubic feet of gas, or roughly 10 to 15 years of additional production (at 1985 rates), could be recovered from the Chase Group in the Hugoton field. The Deep Horizons Bill, in conjunction with the KCC ruling, encouraged drilling and has led to increased gas production and the doubling of oil production from southwest Kansas (fig. 4 and fig. 5).

Figure 4--Gas production in Kansas (BCF = billion cubic feet of gas).

Hugoton is largest producer of gas, peaking at 800 BCF around 1970; after dropping to 400 BCF, the production has been rising since the mid 1980s.

Figure 5--Oil production in Kansas (MBO = million barrels of oil).

Hugoton area fields produced around 10 MBO in 1994.

Importance to the State

The Hugoton gas area contributes significantly to the Kansas economy, both in terms of revenue and jobs. Since its discovery, the Kansas portion of the Hugoton gas area has produced almost 27 trillion cubic feet of gas. In 1995 alone, southwest Kansas fields produced 639 billion cubic feet (BCF) of natural gas, or 90% of the total gas produced in Kansas (fig. 4). In the same year, these fields produced 10 million barrels of oil (MBO), about 23% of the state's annual oil production (fig. 5). The combined worth of this gas and oil is estimated at $1.3 billion.

During that same year, the Hugoton area provided about $80 million in severance taxes to the State and probably an equal or greater amount from ad valorum, sales, and income taxes on royalty owners, companies, and employees. The State also receives other taxes that result from the activities of the oil and gas industry. These include indirect taxes on the goods and services purchased by the oil and gas industry and the taxes paid by downstream industries, those involved in refining, distribution, and manufacturing of hydrocarbon--based commodities, such as plastic and fertilizer. The oil and gas industry also pays property taxes to the counties.

Gas and oil production in the Hugoton area has been increasing, and the long--term producibility is the best in the state. Hugoton gas and oil production have both doubled in the last decade, resulting in production valued at $1.5 billion, which translates into $90 million in additional severance tax money to the State. This production increase is in sharp contrast to the steady production declines in the rest of the state and nation. Gas and oil production from the Hugoton area of southwest Kansas is important, if not critical, to the economic health of the region and the state.


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Kansas Geological Survey, Public Outreach
1930 Constant Ave., Lawrence, KS 66047-3726
Phone: (785) 864-3965, Fax: (785) 864-5317
bsawin@kgs.ku.edu
Web version Dec. 1996
http://www.kgs.ku.edu/Publications/pic5/pic5_3.html