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Oil Boom Fueling Fortunes in Kansas

06/16/13 at 08:33 PM

Oil Boom Fueling Fortunes in Kansas

Oil in Kansas: New Gold Rush

Fred Hambright has seen a lot in his more than 60 years in the oil business, but nothing prepared him for the craze now sweeping the prairies of Kansas.

Kansas OilSince 1951, the 83-year-old Kansas landman has made a living buying up leases for oil drillers. Six months ago, Hambright says he was purchasing leases for $15 to $20 per acre. Now those prices have skyrocketed into the thousands of dollars.

Watch "World News" tonight at 6:30 ET and later on "Nightline" at 11:35 ET to see the full story.

"All of a sudden nice quiet, conservative Kansas has been invaded by the horizontal drilling people," Hambright said. "Some people have really hit it big. We've seen leases go as high as $1,700 an acre."

Hambright says the largest check he has written so far was for $900,000, but other landmen in this state have shelled out millions just for the right to drill.

The Mississippi Lime formation in Kansas is the latest ground zero in a gold-rush-style oil boom sweeping the U.S. New technology is turning lands once thought to be sucked dry of oil and gas into vast untapped reserves that could produce for more than 100 years.

From Pennsylvania and North Dakota to Texas, horizontal drilling and hydraulic fracturing are quickly turning the U.S. into an oil superpower. By some estimates, 2 trillion barrels of oil are waiting to be drilled -- nearly twice the reserves in the Middle East and North Africa.

The newer techniques can produce as much as 10 times more oil than a traditional well. Horizontal drilling works by digging 5,000 feet into the earth, then a mile across in several directions.

Using hydraulic fracturing, also known as "fracking," crews then blast sand, water and chemicals into the rock to draw out even more oil and gas.

Because of these new processes, Goldman Sachs predicts that in just five years, the U.S. could pass Saudi Arabia and Russia as the world's largest oil producer. Finally, a decades-old dream, talked about by every U.S. president since Richard Nixon, seems possible -- energy independence.

And in Kansas that independence will come with enormous prosperity -- thousands of jobs will pay $50,000 annually, tax monies will flood state and local governments and landowners will receive huge payouts -- first through leasing agreements, then if oil is discovered, through hefty royalty checks.

Landman Kenny Hoop spends most of his afternoons at the local courthouses in southern Kansas, searching through handwritten records scribbled down in land books. It's still the only way here to track down ownership of mineral rights to the thousands of acres of farmland mostly covered by wheat fields.

When he's not in a courthouse, Hoop drives the backroads of Kansas, meeting up with landowners who haven't already signed leases for the new horizontal wells. A knock on the door from Hoop can mean instant riches, even before any drilling begins.

"Depending on how much acreage they had, the bonus money got these landowners, mineral owners, millionaires overnight," Hoop says.

With so much competition for land, there's no time to waste. Hoop brings along his heavy electric typewriter so he can write up leases and get them signed on the spot.

Karl Willey signed one of those leases on hundreds of acres of wheat fields, earning more than $2 million.

His is one of the first wells in Sumner County, Kan., and already it's bringing in big royalty checks. He showed off the latest for more than $20,000.

Willey was all smiles as he pointed out the meter, keeping track of the oil and gas adding up to big money for this retired 70-year-old.

Farmers Allen and Debbie Francis struggled for 20 years on their land in Anthony, Kan. But leases on the property they own here and just across the border in Oklahoma have minted them new millionaires.

Their modest farm shows few signs of their new wealth. They've used the lease money to purchase new farm equipment, an RV and a house in town for their daughter.

The couple says they and their neighbors who have also received big payments have been playing it safe with the new riches.

"As far as people buying big yachts and stuff like that I haven't heard of anybody really," Allen Francis said. Though the new tractor they purchased for $174,000 costs about the same as a new Ferrari.

"I'd rather have the tractor," Allen Francis said with a laugh.

Debbie Francis says once the horizontal wells are drilled on their properties, the land could produce as much as $500,000 in oil and gas each month. But the Francises' insist the money won't change them.

"I'd keep farming," Allen Francis said. "I wouldn't quit. That's all I know is farming."

On Main Street in Anthony, the small town is beginning to show signs of the boom. Hotel parking lots are packed each night with the muddy trucks of the drillers and rent for one-bedroom apartments has skyrocketed from a few hundred dollars to $1,500 per month.

Prairieland Partners, a John Deere tractor dealer, is the closest thing this town has to a luxury car lot.

General manager Pat Myers says in the last year, the dealership has sold eight to 10 more big tractors than in years past. Myers says most farmers are paying cash, for the massive machines, costing between $225,000 and $350,000 each.

"Many of the farmers I deal with everyday are customers that we've dealt with for 20 years. Some of them have wanted to have new tractors for a long time and haven't been able to afford it," Myers said. "It's nice to see these guys able to do this after they've struggled for so long."

Susan Croft's family has farmed its 3,000 acres in Harper County for more than 50 years. Shell Oil has just begun drilling the first of several wells on the family's land.

Croft visits the site often, eagerly waiting to hear if Shell has struck oil. The royalty checks will add to the millions her family has already earned.

Croft has used some of that money to help her church and the local hospital, and she has also traveled the world. She says that when she they tells people where she's from, she faces a bit of a dilemma.

"I'm the only one from Kansas, and when people find that out, they are kind of sympathetic toward me. As though they're sorry that I have to live here," Croft said.

"I'm tempted to tell them about the tornadoes and hot weather, so everyone isn't tempted to come to our state," she said with a laugh.

WICHITA, KAN., May 10, 2012


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