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Oil and natural gas production drives electricity boom

Filed by KOSU News in Feature.
February 18, 2013
 

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No one has a choice on where they’ll find oil or natural gas. Often, it’s out in rural Oklahoma. With the current energy boom, that’s adding a new dimension to drilling in the state. To run the 500 to 700 horsepower pumps, it takes energy…a lot of it. Electricity providers are scrambling to keep up with the demand…

Kay Electric Cooperative covers the very northern part of central Oklahoma, going from Medford to the west, to Schidler to the east, and narrowing as they go towards Perry in the south. In just the last couple months, they’ve doubled capacity from 40 to 80 megawatts, and more is coming. Austin Partida is with the co-op.

“Our two year forecast, probably if capacity is available, easily, we could very easily be at 400 megawatts. And that is an outrageous number. But it is possible, with the numbers that we’ve seen.”

Now. they’re an extreme case.

“Kay Electric is changing on the hourly basis. When I got here 4 and a half years ago, we had 40 employees. Right now, we have up to 50, in the process of hiring two more. Two years ago, we had one contractor…right now, we have 4 contractors working with us.”

Going east to Indian Electric Cooperative, halfway between Stillwater and Tulsa, it’s busy, but you can take a breath. Pockets of craziness, not nearly as widespread and explosive as Kay’s growth. Here’s David Wilson, Manager of Member Relations.

“We’re currently working on a feeder that’s going to be 15 miles to an oil producer. It’s going to take by the time it’s all said and done, about a year to get that line built. When it goes through all its process and everything. And that’s just to build the line.”

All of this comes because of rapidly increasing oil and natural gas drilling. Take Grant County. In January of 2012, they reported production of about 950k thousand cubic feet of natural gas. By May of last year, they were up to 10 million.

“Us letting them know what’s going on. Because you know, we can only supply so much power. It comes from our power suppliers. And that’s the crucial part right now in this whole piece of the puzzle; there’s not enough power to serve all these right now. Yeah, that issue is being worked out, but it doesn’t happen overnight.”

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“You’re looking at the wilderness in the best way you can describe it I guess. You just got open fields, trees, animals running around. You see the occasional car come by, but most of the time, it’s just the outdoors.”

Matthew Cates is on a team for a contractor hired to extend the lines, trying to keep up. He says they can only go so fast, compared to the energy producers…

“It’s just outside their town, and there’s a lot of it going on. You can drive down one road one day, and turn around and come back three hours later and they’re putting another rig up. It’s booming out here pretty quick.”

He’s working about 20 minutes due west from Stillwater, for Central Rural Electric Cooperative. They’re even split between residential and commercial customers, about 50-50. For Kay though, it’s nearly 85 percent commercial. With business booming on that side of the equation, rates really haven’t budged.

“They’re seeing the benefit because we won’t have to raise rates. We haven’t raised rates in, oh man, probably seven, eight years here at Kay Electric. We’re meeting our margins through the oil and gas, so we’re not having to ask our residential members to pay more.”

Even at Indian Electric, a 9% jump in commercial business has helped offset losses on the residential side. Warmer winters recently have cut into that business.

 

I reached out multiple times to Chesapeake, Devon, Sandridge, and groups that represent the industry. No one would go on tape for this story, but they say they share any plans they have for drilling in the area, in order to get lines built as quickly as possible.

 

But all of this could present a risk for electric cooperatives. Energy goes through boom and busts. To serve the boom, you have to build lines out to remote locations. Costs run somewhere around 20 dollars a foot, that’s a hundred thousand dollars per mile. Back in the 1980’s, many got stuck with the bill when drillers went bankrupt. So now, they require payment upfront.

“We go to what are called a central metering point. We go to one point, and then they pick it up and they build it out from there. So then it’s their infrastructure from that point on.

“We just build to a certain point and then they go to each individual well, because it’s much more economical for us as a co-op. Instead of having to build to each location, they get to foot the bill for that.”

Oil and natural gas companies may be bearing the costs, but there’s still risk attached to every line that goes up. You don’t want cleanup from an ice storm or tornado to be complicated years after oil and natural gas companies have ceased heavy duty operations.

“We’re very concerned that if it does go under, there’s going to a lot of lines in the air. A whole lot of lines in the air.”

At Kay, they say that’s so far away, they’re not sure what would happen. Meanwhile, David Wilson at Indian Electric Cooperative says they require the companies to essentially retire the lines.

Swings in the energy market can come quickly and without much warning. But there’s some predictions this latest boom won’t begin to slide down for another seven or eight years. Until that time comes, Matthew and the rest of his crew will keep going, planting poles one by one.

One Response to “Oil and natural gas production drives electricity boom”

  1. Zaphod says:

    Perhaps a way to generate capacity more close to the well site would be to mandate construction of one windmill for every well site drilled. Even though this would not generate much power, the site of a windmill hand in hand with oil and gas well would greatly boost the public view of these dirty unsafe well sites. And once the oil and gas is exhausted in 10 or so years and the oil company goes under, leaving a mess to clean up and debt to write off, there would still be something of value to liquidate.

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