Kansas City Illustrated; Kansas Oil Industry and Tax Rates; Del Brinkmen Interview

As my wife told me she pulled up to the date it took $7 a change of heart. He wasn't sure. How to feel about it she was certainly happy that it didn't take a lot of money but she also realizes what the effect it's had on. The people we've had working for us we've lost and people that you know were our friends in the workforce for a long time. And we certainly didn't like that situation. Admittedly Steve Gustavsson is not one of the big players in the Kansas oil industry like most other operators in the eastern part of the state. His shallower Wells can't compete with the big producers in south central and south western Kansas. Nonetheless he estimates his company has invested some 2 million dollars in this field south of Ottawa. And what was a staff of nine has had to be cut back by a third recently as oil prices have plummeted from around $27 a barrel at the first of the year to $12 this spring. My company over the years I talk to Hardwick. The amount of money it costs to get the oil out of the ground to get a bill out of the

ground run about 10 to 11 dollars a barrel so you can see today we're at that point. If it goes any further then we're talking about having to shut production down laid entire staff in just wait and see what the market is going to do if it goes down any further than that. Then we're talking about the next major of applying all the wells out in just. You know shutting the doors literally. At that point the big problem becomes the capital that's required to reopen the wells. Considering that some think some operators might be overreacting to the market's current slide. The first people that will react and maybe already have. To plugging some wells out are actually been shutting production in might be the operators that would have. A lot of debt to take care of with banks or or whoever they have got the money for. We've

seen them. Now having to turn over these fields back to the banks and once the banks have them they're not in a position to run these fields. And don't want to be in a position to run the fields and in order to not have to place more money against the debt that are already in them. They might be at this time shutting wells in and actually preparing for. For plugging. But the operators that are in the business. That make their livelihood off of it we don't see at this time any indication of plugging the wells out this year. But certainly if the market continues next. Gustavsson likens the situation to the farm crisis. Only these events he says have transpired much more quickly. To protect the domestic oil industry. He would like to see the federal government place an import tax on foreign oil as well as some of the guidelines from the Environmental Protection Agency. At a state level he hopes the number of wells exempted from the severance tax will be increased. In the halls of the revenue

department. That's not an idea that's been particularly well received. I think we're probably kidding ourself if we think that the severance tax is going to make or break the difference between keeping a well open or not. I think if if price is clearly the predominant factor and that the situation with the severance tax were at this level we're talking maybe 50 cents a barrel and on a 5 5 barrel a day well that's that's that's two dollars and fifty cents. I just don't believe it. It will be a determinant of whether a well shuts down or not. The second is that. While I can appreciate the difficulties in the oil and gas sector and it said Certainly it's a high risk. Sector that I'm not sure that every time some sector feels economic difficulties we should approach a solution

to it through the tax structure. But don't think for a moment that the problems of the oil or gas industry aren't on Secretary Duncan's mind opposing the increase just last week he was forced to once again revised downward for the state's revenue projections for the next 15 months and that revised downward to the tune of about 55 million dollars or for a fiscal year 1987 or about 3 percent of the projections while the biggest drop is in severance tax collections substantial revisions have also had to be made in income and sales tax figures an indication of the effect oilfield layoffs may have on the flow of cash. Two business researcher Charles Kreider it's all further indication that Candice is seriously eroding economy. Really this is not a short term problem that's going to be solved in the next few months and it's not going to be solved only if something good out there happens. If only Saudi Arabia would raise the price of oil. Or if Congress had passed the right farm bill or if we would have an import tax on oil or whatever.

Something out there good happening is not going to rescue Kansas Grider says his research has turned up plenty of structural weaknesses in the state's traditional industries agriculture oil and general aviation. Given that the state has an older than average population and a rural image it's going to take some work to attract new head of AID of businesses and give them access to cutting edge technologies. The problem for Kansas is that we are a state of small businesses and small businesses cannot afford to do the research necessary. That's true in the oil and gas industry. It's true throughout the state with the exception perhaps of the general aviation industry. That means most of the research in the state side in general aviation will have to be done in the educational institutions and the state will have to make an investment to see if that occurs. And in addition the universities will have to respond in part to have a portion of their research dedicated in an applied sense to problems relating to Kansas

industries. That's the kind of talk that precipitated Gov. Carlin's so-called investment supposal with increased funding for public schools Regents institutions state water plan and other measures that he said would build for the future. The catch was that the 150 million dollar package would require a 1 cent sales tax increase while the Senate. It was relatively quick to approve such a measure. The House of Representatives ball last week as both Democratic and Republican leaders searched in vain for some sort of consensus. The House voted down even a White House and even one factor may have been the specter of fall elections. I think they're overreacting because I believe that if the people of state of kiddush are convinced that we need the money for the programs that they want. I don't think to be a problem with with adding the the once in sales tax. I use an example four years ago when we raised more taxes in a

one time than any time in their history state of Kansas and I the people realized we needed that money. They realized we were this great. Responsible. And it was not there when you back as your man of the Senate Ways and Means Committee is faced with the only happy prospect of starting back at square one to put together a budget that won't leave the states in the balance is in jeopardy. It can be done he says but he fears it's a scene that will be replayed again and again in the following years unless some action is taken. What measure he values that the package he puts together won't contain is the so-called tax on mid to upper level incomes that unpopular in Johnson County Tax was sunset last year but has been receiving at least token support from some rural legislators. I don't there's no use being made about Mr. Densher we probably have one to discussion with it's not going to pass the Senate I'm confident of that and I think the governor will be to it if it does get there.

I think there was a recognition a very clear recognition that if the state does not do something to increase economic development the tax base will continue to erode and not be large enough to support the kind of public services that Kansans desire from from the government they have the option essentially to get this explainer to make an investment now that has the possibility of increasing the tax base. Or do we accept a slow growing tax base with the prospect of ever increasing rates of taxation go out into the future. Representative. Acheson will change to No. Well we've had some problems at the University of Kansas.

Investigated whether or not we were operating under the rules. I think by a large University of Kansas program is a very good one and a very clean one. But the enforcement approach at the end takes it means that they single out schools occasionally because they can't possibly begin to cover all schools at all times of all things. You could get into an argument about whether since we're so close to the NCW office they tend to look at us a little bit more but obviously we we intend to have a top notch cleanly run program in and keeping it there with all the interest that exists and the pressures that exist is kind of tough. So I've been called on a couple of times to look at some things but by and large I think it may be that an individual here and there is created a problem for the university but by and large I'm very pleased with the way the programs operated.

Were you pretty surprised to hear Jack Hartman's analysis of the way things were going these days when he came out a few months ago. Well I think what Jack was saying is kind of what I said earlier that the pressures have grown. The demands are there to have visible running programs and I've often used explanation in the analysis that in in a basketball program for example. At the end of the year half the teams win half the teams lose every game. There's going to be a 50/50 break. And the fact that not everybody can win or have a winning record means that there are some problems and the Jack I think is just commenting on that kind of pressure that especially in a school. Those schools that have enjoyed success as Kansas State has over the years can't really accept anything less than success. I guess that's one of the next questions.

Is this a curve that's going to go up or is there some point where it's going to do well to put that in perspective for myself I've gone back and read the history of the University of Kansas and I've looked at the history of various conferences in intercollegiate athletics generally the kinds of things that we're facing that are more intense the pressures are more intense but they've always been there. And anytime you have competition outward competition as you do in intercollegiate athletics I think you're going to have the kinds of problems they're just growing in number and intensity maybe but they're not new problems. Making it big time. Do you think there are things that maybe they have not even begun to imagine the formula for putting together. Well I'm not familiar with what exactly they have done but I think there are always some things that you can't anticipate.

It appears what I do know about it that they have thought about the advantages of having a prominent visible program. The attention it brings to Kansas City and to the school and the fact that it has on the overall spirit maybe even the economy and to a certain extent. I think there are some things about recruiting and organizational structure coaching the kind of the intangibles that we all really think we can figure out from time to time but we never really knew about it we all thought Larry Brown would. It was a great coach in that he would be successful whether things have changed in basketball and recruiting enough that that he might not be successful at Kansas. No one knew. But he has put together all of those things in just the right way a lot of psychological and I think those are the things you just can't measure ahead of time and the things that Larry Brown through his experience

has been able to anticipate whether or not all that will go together quickly or whether it will take a while. It's something that I guess all of us will wait and see. It will certainly cost a lot of money. Thing that I guess college cannot escape this. Basketball is now showing a great return you get into that Double-A tournaments and win some games and before you know it you've made enough money for the conference. In our case that it's comparable to some of the big football bowl games and that didn't used to be the case. So you invest money I guess with the not necessarily with the hope you're going to bring a great return but the total package and activity is at least going to break even. We know you're about to change jobs here in a while. Will that affect your faculty representative status at all. It probably will in the long run in the immediate future. The chancellor and I have talked about it and there are some ongoing things that.

I would like to to finish up and some things that I'm involved in the conference. I don't think that is probably a good idea for a person who's in the Academic Affairs vice chancellorship to remain in that position very long and so all those things are worked out. I probably will will step out of this but in the meantime I think I have some things to contribute that may help bring the bridge the gap that some people think exist between academics and athletics. Help that a bit before I pull out of this. I'm curious of specific things. Well I think every university of eventually has to develop a pretty well structured and developed program of academic counseling. And there are records record keeping all of the things that we do for every other student. We do also for athletes and the way all of that fits together I think is very important. Some schools tend to let it

slide and let let the athletes fend for themselves academically. We don't do that at Kansas we build a very good program I think. And I think many other universities are realizing that that to bring students in and use up their athletic eligibility and then kind of cast them back to the to society is not really what a university is all about so we've made a commitment I think that when we bring a student in Whether we bring them in for for the marching band or for the school newspaper or whatever reason they're at the University of Kansas for athletics that we owe them a chance to succeed. And the programs that we have in place for all students are available certainly for athletes but there are some some pressures of practice and the schedules that athletes keep that have to be integrated into their academic life. And those are the kinds of things that we're working on through faculty committees and other groups that

are concerned that we don't create problems for the athletes and therefore for the university and in a cumulative way then for intercollegiate athletics and university generally.