The recent announcement of a large natural gas deposit in northwest Louisiana, called the Haynesville Shale, could be this century's gold rush - or a fool's gold of hype. The only certainty at this point is that some fortunate landowners already are grinning all the way to the bank.
The Haynesville Shale in northwest Louisiana is being described as one of the richest fields of natural gas ever discovered in this region. But most experts and those connected to the industry agree it's too early to say if the discovery will transform the landscape and economy of parishes that sit atop it.
The shale's boundaries are still up for interpretation. But the hot zones appear to include all of DeSoto Parish, the mid to southern regions of Caddo and Bossier parishes, the southern tip of Webster, the western end of Bienville Parish, most of Red River Parish, the upper parts of Sabine and Natchitoches parishes and sections of East Texas.
If the shale holds the amount of natural gas that is being predicted, it could mean millions for some landowners, a boom in the natural gas production business in this region, and a trickle-down bounty for communities, schools and others.
"The economic impact will be absolutely monstrous if it's as big as it can be," said Don Briggs, president of the Louisiana Oil and Gas Association.
What if the Haynesville Shale turns out to overshadow the East Texas Barnett Shale, which until now has been the granddaddy of all natural gas fields?
"We don't know how that will look. It's going to take a little time," Briggs said. "However, there's obviously enough evidence with the preliminary test that certainly has sparked an immense fever of excitement about drilling in the Haynesville Shale, and it could be very big. The economic impact to the northwest part of the state and the state of Louisiana will be very substantial."
He added: "I think ... you will see at least 70 rigs running up there next year. That's a good number, with about 40 running now. You'll see that almost double. Every rig has a direct employment rate of 184 jobs, so indirectly you're talking about a lot of new employment, sales taxes to the parishes. You're talking about royalty payments to the landowners and you're talking about leasing to the landowners."
The need for more energy in the United States is behind the push to explore these natural gas fields. Louisiana is a net consumer of natural gas, consuming all of what's produced in state.
"We have a tremendous need for it with all of the petrochemical industry that we have. That's a power source. ... The heart of the natural gas industry flows through all of Louisiana and flows through the rest of the country. Twenty-five percent of all natural gas for the country flows through Louisiana," Briggs said.
It could take several years before the potential, or lack thereof, of the Haynesville Shale is fully realized. Drilling likely will shift from the standard vertical wells to more expensive horizontal wells, requiring more manpower, equipment, expertise and time. Predictions are it will take another year or so before knowing if it's a viable commercial opportunity.
But in the interim, the quick influx of lease bonus checks probably means new homes, cars and shopping sprees.
Still, the frenzy has landowners already in a quandary. Some who snapped up early lease offers before word of the Haynesville Shale leaked out are kicking themselves for accepting what they now believe were low payments.
"I saw my neighbors were getting not so good deals so I decided to start people talking," said Stonewall area property owner Kassi Fitzgerald, who on April 26 led an informal gathering to share what she learned through her own research. "I'm concerned about the small landowner."
The registered nurse expected only her neighbors would show up. The 300 to 400 people who descended upon Stonewall were evidence of the interest. Another 500 to 600 people turned out for a separate seminar led by a Texas oil and gas consultant that afternoon near Mansfield.
The announcement
The race for the play - an oil and gas industry term for staking out opportunity - quietly has been under way for about two years with one company, Oklahoma-based Chesapeake Energy, putting more than 200,000 acres in northwest Louisiana under lease with plans to add another 300,000 acres. Industry officials say another company, Cubic Energy, has been drilling on the shale for four years.
With Chesapeake ahead in the play for land, other companies are wasting little time catching up. Petrohawk Energy Corp of Houston has acquired more than 70,000 acres in northwest Louisiana.
Other companies snatching up lease acreage include Encana, Questar, Camterra, Fossil Operating and Shell Western, according to information from the Louisiana Office of Conservation. An informal list at the DeSoto clerk's office adds Comstock, El Paso, Pin Oak, Sun Coast, Audubon Gas and Winchester.
The Louisiana Office of Conservation will not weigh in on the natural gas leasing fever, Commissioner James "Jim" Welsh said. The state office issues drilling permits and holds public hearings to establish production units but it does not regulate leasing activity, the location or the payouts.
"The companies furnish to us what they are required to furnish. A lot of the information that's being circulated right now, we can't verify," Welsh said.
That's one of the issues that makes the Haynesville Shale a still unknown. With no independent verification of the significance of the underground natural gas reserve, the general public, and more specifically landowners, are relying upon industry officials for information.
Well operators are understandably guarded about their production efforts and thus the potential commercial aspect. Information gathered in the test holes is proprietary. Companies do not have to begin reporting production numbers to the state until after the well is completed, its infrastructure is in place and the harvesting begins. Sometimes that can take two months, said Todd Keating, Office of Conservation engineering director.
All is not rosy
Quick riches and visions of bulging bank accounts are foremost in the minds of many. But some folks in Frierson don't see dollar signs. Instead, it's the opposite end of the rosy picture - the belching machines, congested traffic, bright lights and unexplained rumblings that well activity brings.
And the prospect of even more wells popping up across DeSoto Parish only opens the door to the potential of more problems. More than two dozen Frierson families are only four months removed from a well explosion that kept them from their homes between Christmas and New Year's.
"We're afraid of what's going to happen. ... We thought we could sell and get out of here. But we contacted an appraiser and she said it's definitely going to be a deduction because of what's in the back yard. So we probably couldn't get for it what we owe. We benefit absolutely none from what's going on. Our property is devalued," said Dawn Williams, whose family was one of those displaced by the well explosion on Stonewall-Frierson Road.
In November, Interstate 10 near Baton Rouge was closed for more than a week after a well blew. Proposed legislation that would have prohibited new drilling within 1,000 feet of interstates has been killed.
However, a moratorium restricting new drilling operations within a quarter-mile of interstates is in effect until the end of May. An ad hoc committee is working under state conservation office commissioner Jim Welsh's direction to come up with drilling safety regulations. Nothing has been finalized to this point, Welsh said.
Fitzgerald, who hopes to organize her Stonewall area neighbors in their dealings with the oil and gas companies, also cautions those who sign leases to include clauses that will address safety concerns, such as fencing and the location of access roads. She has suggested that photographs be taken of the house and property so that it can be restored if damage occurs.
"We just need to stop and think, talk to our neighbors. We don't need to get so overly greedy that we forget to look at the whole picture," Fitzgerald said.
Billy K. Lemons, principal consultant with Resource Analyt and Management Group of Nacogdoches, Texas, believes it's important to remember that the "oil and gas industry is not our enemy. Much to the contrary is true."
"It takes two to tango, and we are strong believers in free enterprise and the free market system. We champion those ideals, and we admire anyone who is brave and determined enough to sink millions of dollars into a hole in the ground without knowing for certain what's going to come out of it, if anything but salt water."
With all parties working together, the Haynesville Shale likely could "blow the socks off of northwest Louisiana," Lemons said.
The Haynesville Shale in northwest Louisiana is being described as one of the richest fields of natural gas ever discovered in this region. But most experts and those connected to the industry agree it's too early to say if the discovery will transform the landscape and economy of parishes that sit atop it.
The shale's boundaries are still up for interpretation. But the hot zones appear to include all of DeSoto Parish, the mid to southern regions of Caddo and Bossier parishes, the southern tip of Webster, the western end of Bienville Parish, most of Red River Parish, the upper parts of Sabine and Natchitoches parishes and sections of East Texas.
If the shale holds the amount of natural gas that is being predicted, it could mean millions for some landowners, a boom in the natural gas production business in this region, and a trickle-down bounty for communities, schools and others.
"The economic impact will be absolutely monstrous if it's as big as it can be," said Don Briggs, president of the Louisiana Oil and Gas Association.
What if the Haynesville Shale turns out to overshadow the East Texas Barnett Shale, which until now has been the granddaddy of all natural gas fields?
"We don't know how that will look. It's going to take a little time," Briggs said. "However, there's obviously enough evidence with the preliminary test that certainly has sparked an immense fever of excitement about drilling in the Haynesville Shale, and it could be very big. The economic impact to the northwest part of the state and the state of Louisiana will be very substantial."
He added: "I think ... you will see at least 70 rigs running up there next year. That's a good number, with about 40 running now. You'll see that almost double. Every rig has a direct employment rate of 184 jobs, so indirectly you're talking about a lot of new employment, sales taxes to the parishes. You're talking about royalty payments to the landowners and you're talking about leasing to the landowners."
The need for more energy in the United States is behind the push to explore these natural gas fields. Louisiana is a net consumer of natural gas, consuming all of what's produced in state.
"We have a tremendous need for it with all of the petrochemical industry that we have. That's a power source. ... The heart of the natural gas industry flows through all of Louisiana and flows through the rest of the country. Twenty-five percent of all natural gas for the country flows through Louisiana," Briggs said.
It could take several years before the potential, or lack thereof, of the Haynesville Shale is fully realized. Drilling likely will shift from the standard vertical wells to more expensive horizontal wells, requiring more manpower, equipment, expertise and time. Predictions are it will take another year or so before knowing if it's a viable commercial opportunity.
But in the interim, the quick influx of lease bonus checks probably means new homes, cars and shopping sprees.
Still, the frenzy has landowners already in a quandary. Some who snapped up early lease offers before word of the Haynesville Shale leaked out are kicking themselves for accepting what they now believe were low payments.
"I saw my neighbors were getting not so good deals so I decided to start people talking," said Stonewall area property owner Kassi Fitzgerald, who on April 26 led an informal gathering to share what she learned through her own research. "I'm concerned about the small landowner."
The registered nurse expected only her neighbors would show up. The 300 to 400 people who descended upon Stonewall were evidence of the interest. Another 500 to 600 people turned out for a separate seminar led by a Texas oil and gas consultant that afternoon near Mansfield.
The announcement
The race for the play - an oil and gas industry term for staking out opportunity - quietly has been under way for about two years with one company, Oklahoma-based Chesapeake Energy, putting more than 200,000 acres in northwest Louisiana under lease with plans to add another 300,000 acres. Industry officials say another company, Cubic Energy, has been drilling on the shale for four years.
With Chesapeake ahead in the play for land, other companies are wasting little time catching up. Petrohawk Energy Corp of Houston has acquired more than 70,000 acres in northwest Louisiana.
Other companies snatching up lease acreage include Encana, Questar, Camterra, Fossil Operating and Shell Western, according to information from the Louisiana Office of Conservation. An informal list at the DeSoto clerk's office adds Comstock, El Paso, Pin Oak, Sun Coast, Audubon Gas and Winchester.
The Louisiana Office of Conservation will not weigh in on the natural gas leasing fever, Commissioner James "Jim" Welsh said. The state office issues drilling permits and holds public hearings to establish production units but it does not regulate leasing activity, the location or the payouts.
"The companies furnish to us what they are required to furnish. A lot of the information that's being circulated right now, we can't verify," Welsh said.
That's one of the issues that makes the Haynesville Shale a still unknown. With no independent verification of the significance of the underground natural gas reserve, the general public, and more specifically landowners, are relying upon industry officials for information.
Well operators are understandably guarded about their production efforts and thus the potential commercial aspect. Information gathered in the test holes is proprietary. Companies do not have to begin reporting production numbers to the state until after the well is completed, its infrastructure is in place and the harvesting begins. Sometimes that can take two months, said Todd Keating, Office of Conservation engineering director.
All is not rosy
Quick riches and visions of bulging bank accounts are foremost in the minds of many. But some folks in Frierson don't see dollar signs. Instead, it's the opposite end of the rosy picture - the belching machines, congested traffic, bright lights and unexplained rumblings that well activity brings.
And the prospect of even more wells popping up across DeSoto Parish only opens the door to the potential of more problems. More than two dozen Frierson families are only four months removed from a well explosion that kept them from their homes between Christmas and New Year's.
"We're afraid of what's going to happen. ... We thought we could sell and get out of here. But we contacted an appraiser and she said it's definitely going to be a deduction because of what's in the back yard. So we probably couldn't get for it what we owe. We benefit absolutely none from what's going on. Our property is devalued," said Dawn Williams, whose family was one of those displaced by the well explosion on Stonewall-Frierson Road.
In November, Interstate 10 near Baton Rouge was closed for more than a week after a well blew. Proposed legislation that would have prohibited new drilling within 1,000 feet of interstates has been killed.
However, a moratorium restricting new drilling operations within a quarter-mile of interstates is in effect until the end of May. An ad hoc committee is working under state conservation office commissioner Jim Welsh's direction to come up with drilling safety regulations. Nothing has been finalized to this point, Welsh said.
Fitzgerald, who hopes to organize her Stonewall area neighbors in their dealings with the oil and gas companies, also cautions those who sign leases to include clauses that will address safety concerns, such as fencing and the location of access roads. She has suggested that photographs be taken of the house and property so that it can be restored if damage occurs.
"We just need to stop and think, talk to our neighbors. We don't need to get so overly greedy that we forget to look at the whole picture," Fitzgerald said.
Billy K. Lemons, principal consultant with Resource Analyt and Management Group of Nacogdoches, Texas, believes it's important to remember that the "oil and gas industry is not our enemy. Much to the contrary is true."
"It takes two to tango, and we are strong believers in free enterprise and the free market system. We champion those ideals, and we admire anyone who is brave and determined enough to sink millions of dollars into a hole in the ground without knowing for certain what's going to come out of it, if anything but salt water."
With all parties working together, the Haynesville Shale likely could "blow the socks off of northwest Louisiana," Lemons said.
Source: TheAdvertiser
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