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Counties set to sue for oil money

10/29/2013

By MIKE CORN

mcorn@dailynews.net

As many as 55 oil-producing Kansas counties will be filing a lawsuit today in Shawnee County District Court, claiming the state is improperly withholding money they have been promised.

The counties -- numbering approximately 55 out of 69 eligible -- claim they are only receiving about half what they are entitled to under legislation creating an oil and gas valuation depletion trust fund. The fund was designed to help counties soften the blow to tax revenues as oil production starts to wane.

Ellis and Russell counties, two of the top five oil-producing counties in the state, have agreed to join the lawsuit.

The counties first had to give at least 30 days notice to the state that a lawsuit was pending.

That notice was given Oct. 1, when counties received checks from the state for oil and gas revenues.

Melissa Wangemann, general counsel for the Kansas Association of Counties, said the lawsuit will be filed by Topeka attorney John Frieden.

In a telephone interview, Frieden said the lawsuit would be filed today on behalf of approximately 55 counties that meet the $100,000 threshold for participation in the depletion trust fund. The KAC, she said, is helping to provide information to counties.

Oil- and gas-producing counties, she said, knew a hit was coming to the depletion fund, but the lawsuit will contend it's coming a year earlier than expected.

Under a compromise deal worked out by the Kansas Legislature, money flowing back into the trust fund was supposed to drop from 12.41 percent to 6 percent, but Wangemann said the change wasn't supposed to take place until fiscal year 2014.

The state Division of Budget apparently took the position that since the payments are being made in fiscal year 2014, the reductions should begin immediately.

Wangemann said the Oct. 1 payments were for fiscal year 2013 and should reflect the full 12.41 percent reimbursement.

The 6 percent reimbursement rate, she said, wasn't supposed to take place for another year.

"So it was a surprise," Wangemann said when counties started receiving distribution checks.

The compromise agreement had been worked out after Gov. Sam Brownback proposed entirely doing away with the payments when he submitted his budget proposal to the Legislature in January.

With the filing deadline looming, commissioners in both Russell and Ellis counties signed off on joining the lawsuit at separate meetings a week ago. Thomas County commissioners agreed to join the lawsuit earlier this month.

In Ellis County's case, Administrator Greg Sund said the county was supposed to receive approximately $330,000, but instead only received about $160,000.

That's about how much Russell County expected to receive as its portion.

Ellis County is the state's largest oil-producing county, pulling nearly 3.5 million barrels of oil from the ground in 2012. Russell County is the state's fourth largest oil-producing county, pumping 2.1 million barrels in 2012.

Interim Russell County administrator John Fletcher said the lawsuit is expected to be filed sometime this week.

"We just decided at the last meeting to join in on it," Fletcher said of the commissioners voting to join the lawsuit.