One of the country's fastest-growing oil fields is facing a power struggle.
Producers are trying to recover oil and natural gas from the Mississippi Lime formation and other fields in northwest Oklahoma and western Kansas, but their efforts are being slowed by insufficient access to electricity.
“These are typically very rural areas that don't have a lot of existing load,” said Brian Hobbs, vice president of legal and corporate services at Western Farmers Electric Cooperative. “As this development is going on, the power requirements are increasing very rapidly. It requires a significant build out of infrastructure.”
Western Farmers supplies the electricity needs of more than two-third of mostly rural Oklahoma through its 19 electric cooperatives throughout the state.
The utility is building 135 miles of new transmission lines in northern Oklahoma to help meet some of the sudden new power needs.
But for the oil companies, the new lines cannot be built fast enough.
New oil boom
The Mississippi Lime is a dense rock formation. Like with shale plays and other hard rocks throughout the country, producers are using technology improved within the past decade — including horizontal drilling and hydraulic fracturing — to recover the oil and natural gas that could not be produced economically just a few years ago.
Oil companies can use electric generators to drill and complete the Mississippi Lime wells, but the pumps needed to suck the oil to the surface require vast amounts of power.
While the power demand can vary widely, one section with three oil wells and a water disposal pump typically can use nearly one megawatt of power, or about as much electricity needed to power 1,000 homes, said Steve Slawson, vice president of Slawson Exploration.
Slawson controls acreage in Logan County on the edge of the Mississippi Lime.
“One reason we bought the acreage in Logan County is because it was closer to the metro area with better infrastructure,” he said. “But we still will have to spend several million dollars extending the electric lines to our wells.”
The infrastructure construction problem is an issue of two very different time tables.
Transmission lines are a large-scale, regional issue. Any new line, substation or large user must be balanced with other lines and systems throughout the region.
Many of the changes must be approved by the regional Southwest Power Pool, a regional regulatory body that manages the electricity grid in Oklahoma and six other states.
The power pool first requires regional studies and other processes that can take years to complete.
Oil and natural gas producers don't have that kind of time.
Producers typically buy three-year land leases. If they do not drill and produce from a well on the land within that three-year window, the lease expires and the company loses its investment.
Oklahoma Corporation Commissioner Dana Murphy is a member of the Southwest Power Pool's Regional State Committee and has led efforts to speed up the power line planning and construction process.
“Things have improved somewhat, but we're still having issues with some of the things that need to be approved by the SPP,” Murphy said. “We're trying to find a better way to streamline the information from the producers up through the utilities and to the SPP.”
Oklahoma City-based SandRidge Energy Inc. is one of the largest players in the Mississippi Lime formation and one of the first companies to develop the area.
To address the electricity infrastructure shortage, SandRidge has built its own substations and distribution lines that connect to the cooperatives' existing transmission lines or will connect to planned transmission lines.
“Building our own electrical substations and power grids allows us to develop the Mississippian play at the lowest cost and most efficient manner,” said Matt Grubb, SandRidge's president and chief operating officer. “Reliable electricity in rural areas is key to success, as we need it to run our equipment with minimum down time and quick turnaround times enabling us to maximize production.”
By taking on the construction projects themselves, producers can speed up the process.
While the large companies can afford to pay for the infrastructure upgrades that can run as much as $400,000 per mile for high-capacity power lines, smaller companies often have a tighter budget and fewer wells to justify such a large investment.
The answer, Slawson said, is cooperation.
“These operators need to talk to their neighbors,” he said. “If I'm drilling 10 acres here and you're drilling six acres there, let's go in together. But in many cases, the operators still aren't talking to each other.”
Smaller operators can install substation meters to ensure that they each are paying the proper amount for the power, said Gary Alison, CEO of Oklahoma City-based Tri-State Industrial Group, which provides power line construction and other services for the energy industry.
“If there were peace in the kingdom, smaller companies could easily co-op together,” Alison said.
“You can easily meter the specific usage per client,” he said.