Record Eagle Ford permits issued in December, Chesapeake most active – Oil & Gas Financial Journal

January 3, 2011 Leave a comment
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Successes in shale to be shared

September 7, 2010 Leave a comment

As predicted several years ago, water has become a critical limiting factor as the natural gas industry expands from one shale play to the next, according to Gary Hanson, director of the Red River Watershed Management Institute at LSU-Shreveport.

Hydraulic fracturing is required in all of the gas shale plays and it is crucial that industry continues to work with northwest Louisiana communities and voluntarily use predominantly surface water or the Red River Alluvial Aquifer instead of the limited Carrizo-Wilcox groundwater for fracing.

“By addressing our water concerns in a proactive manner and allowing development to proceed in a responsible way, we are a model to other areas of the country where unfortunately, fear, instead of facts, is driving resistance to shale gas development,” Hanson said.

As a result of Louisiana’s success, Hanson has been invited to several water and energy venues in the Southwest and on the East Coast to share the story and lessons learned. In one of the sessions set next month in Pennsylvania, Hanson will be joined by Lt. Gov. Scott Angelle, state conservation Commissioner Jim Welsh and Mike Mathis of Chesapeake Energy.

Other conferences will be in Houston, Pittsburgh and Baltimore. The Baltimore event in October, sponsored by the Water Research Foundation, is pulling together experts to evaluate water quality concerns related to hydraulic fracturing. One of the speakers will be Robert W. Puls, director of research for the Environmental Protection Agency’s Ground Water and Ecosystem Restoration Division.

“It is a real honor to be asked to participate in this expert workshop formed to evaluate hydraulic fracturing and gas shale development,” Hanson said.

As an example of what other area’s of the nation are facing, Hanson notes in the Marcellus Shale, which stretches into Pennsylvania and New York, poor groundwater aquifers exist and major river systems are being used for well stimulation.

New York has a drilling moratorium in place, and “well-meaning groups have incited the public to a point that regulators and scientists, whom I have spoken with, say it is basically impossible to get out objective facts about gas well drilling and hydraulic fracturing. Their greatest concerns are landscape change, excessive water use and fears that fracing may contaminate their drinking water and environment. Facts, not fear, should drive the development efforts,” Hanson said.

In south Texas, the Eagle Ford play is drawing a lot of interest from the oil and gas industry. It extends 250 miles from southeast of Austin to the Mexican border.

In much of the play, existing deep water wells are being utilized for drilling and stimulation because it’s too expensive to drill water wells. In areas near the border, no groundwater exists, so limited surface water is used. Also, encounters with Mexican drug runners and human traffickers make it dangerous for water transfer specialists to work there.

“Caddo, Bossier, DeSoto and Webster parishes, as well as the Red River Waterway Commission, Sabine River Authority, city of Shreveport, Metropolitan Planning Commission and LSUS should be commended for their efforts to preserve and protect our water resources here in northwest Louisiana,” Hanson said.

The state’s Legislature and Department of Natural Resources acted in a proactive manner by developing groundwater legislation here in Louisiana about six years before the Haynesville boom started. Recent water policies, including the newly adopted surface water use law, are being driven by the Haynesville activity.

However, DNR’s approach shows “institutions that are typically considered rigid and inflexible can in fact become flexible and adaptive with the right leadership,” Hanson added. “In an unprecedented manner, but typical of his hands-on management style, Scott Angelle (interim lieutenant governor) has chaired numerous and lengthy Ground Water Commission meetings throughout the state. This has given Louisiana residents, statewide, the opportunity to attend and have their water concerns heard.”

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Permian Basin, Eagle Ford Shale are hot drilling centers in Texas

September 7, 2010 Leave a comment

By Jack Z. Smith

DALLAS — Two Texas geological provinces — the venerable Permian Basin of West Texas and a young upstart, the Eagle Ford Shale in South Texas — are red-hot centers of drilling for oil and other petroleum liquids, investment bankers said here Thursday.

The Permian Basin, where operators are centered in the Midland-Odessa area, is thriving as a result of steady, respectable oil prices in the range of $70 to $80 per barrel, said Sylvia Barnes, head of energy investment banking and a managing director for Madison, Williams and Co. Barnes said energy producers there are also successfully employing technological advancements such as horizontal drilling and hydraulic fracturing that became staples of pioneering U.S. shale-gas plays.

“Since the first half of 2009, we’ve really seen oil activity on fire,” Barnes said. In that time, the drilling rig count in the Permian Basin has skyrocketed from 95 to 289, about a 205 percent increase, she said in a presentation at Hart Energy’s Strategies and Opportunities Conference at the Sheraton Dallas Hotel.

Houston-based oil field services firm Baker Hughes reported last week that the number of rigs drilling for oil in the U.S. had soared to 672, the highest count since Jan. 8, 1988.

The soaring Permian drilling activity is a major driver for the accelerating U.S. oil rig count. In the Permian, more advanced well drilling and completion technologies are having “a profound effect” in boosting production, Barnes said.

Highly successful wells have been drilled in the Wolfcamp, a once-obscure, largely ignored layer of packed limestone below the heavily drilled Spraberry Trend in the Permian.

Improved fracturing techniques have contributed heavily to boosting output of the Wolfcamp wells.

With natural gas prices dropping below $4 per 1,000 cubic feet, the Eagle Ford has become an increasingly appealing area because substantial portions of it also offer opportunities to recover higher-priced oil, condensate and natural gas liquids such as ethane and butane.

Energy companies from large to small are taking stakes in the Eagle Ford, where approximately 90 rigs were running in mid-August, a level of activity roughly on par with North Texas’ Barnett Shale, the largest gas-producing area in the U.S.

The Eagle Ford has become “a very active marketplace for transactions” and “large-acreage positions are garnering premiums,” said Chris Simon, a managing director and energy investment banker for Raymond James & Associates.

“There are still 13 to 14 deals out there on the market,” he said. “It’s going to be a very active area for deals for the rest of this year,” he added.

“In the most-sought-after areas” of the Eagle Ford, “we’ve seen the lease bonuses get to $3,000 to $3,500 an acre,” Simon said.

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August 31, 2010 Leave a comment


A review of the following unconventional plays, namely, Barnettte Shale, Fayetteville Shale, Bakken Shale, Haynesville  Shale, Marcellous Shale, Woodford Shale, Cotton Valley,  Eagle Ford Shale, Niobrara Shale, Utica Shale and Piceance-Uinta.




Barnettte Shale
The Barnett shale in north-central Texas lies in the Fort Worth Basin. Discovered in the 1950s, the Barnett was not commercially viable until the 1980s. Some geologists believe the formation could hold 30 trillion cubic feet of natural gas. A significant part of the drilling has occurred in the Fort Worth metro area, and Chesapeake Energy actually secured rights to drill beneath the Dallas-Fort Worth International Airport. Drilling in the Barnett shale intensified in the past decade as modern horizontal drilling and hydraulic fracturing techniques were perfected for drilling in shale. Devon Energy, Chesapeake Energy, XTO Energy, and EOG Resources are among the larger players in the Barnett shale. Two years ago, 70% of all US gas shale production came from the Barnett, but that percentage of the total has been declining as production has risen in other plays.
Fayetteville Shale
The Fayetteville shale is located on the Arkansas side of the Arkoma Basin and cuts a swath through the north-central part of the state east to the Mississippi River. The Fayetteville shale play could hold  15-20 Tcf of natural gas.  Chesapeake Energy is the second-largest lease holder in the Fayetteville shale play, followed by Petrohawk Operating Co. and XTO Energy, which was recently acquired by Exxon Mobil. Southwestern Energy of Houston was first to enter the Fayetteville shale play and today still has nearly three times the natural gas production of its nearest competitor in the formation.  Southwestern has sold some of its Fayetteville assets to XTO Energy.
Bakken Shale
The Bakken shale is primarily an oil play. Located in the Williston Basin, however not all of the basin includes the Bakken Shale. The play runs through Montana and North Dakota and Montana, as well as Saskatchewan and Manitoba in Canada.  Reserves estimates are in the range of 3.5 to 4.0 billion barrels (Bbo) of recoverable crude oil in the Bakken, which would make it a very large il field in the US outside Alaska. The Sanish-Three Forks area is located below the Bakken shale zone and is potentially another new oil reservoir. Brigham Exploration Company. has been active in this area. Natural gas is also found in some parts of the Bakken.  Reserve estimates range from 1.8 to 2.0 Tcf of gas and another 150 MMb of natural gas liquids. Major players in the Bakken include EOG Resources, Continental Resources, GeoResources Inc., Resolute Energy Corporation, ONEOK Partners LP and EnerPlus Resources.
Haynesville  Shale
The Haynesville shale play runs through North Louisiana, North Texas, and the south Arkansas. Some industry experts believe the Haynesville shale could ultimately produce 30 to 40 trillion cubic feet of natural gas and will out produce the Barnett shale in less than five years. The reason is the formation thick and also very thick at higher reservoir pressure. The depth and high pressures make drilling expensive, but the payout is believed to be worth the cost. Chesapeake Energy is the major acreage holder and gas producer in the Haynesville, other smaller operators, including Houston-based PetroHawk Energy, have acquired significant positions and are increasing production quickly.
Marcellous Shale
The Marcellus Shale play runs 600 miles North-South through northern Appalachia, primarily in the states of Pennsylvania, West Virginia, New York, and Ohio. It is part of the Devonian black shale and the thickness of the gas-producing rock is as much as 900 feet. Reserve estimates are in the 45 to 50 Tcf range which makes it the biggest gasfield in the US North America. The location near the Eastern US urban areas makes the Marcellus so desirable. Range Resources was one of the early players in the Marcellus and still has a huge position in the play. Statoil of Norway has signed a joint venture with Chesapeake Energy to work together in the Marcellus.
Woodford Shale
The Woodford shale play is located in Oklahoma and has been under development in the last 10 years. Devon Energy drilled the first well into the Woodford shale formation in 2005, and since then numerous petroleum companies have acquired acreage and launched their own drilling programs. Current estimates are that the Woodford shale holds approximately 4 Tcf of natural gas. Other players include Newfield Exploration of Houston and Devon of Oklahoma City which are the largest gas producers in the play.
Cotton Valley
The Cotton Valley subsurface formation is a tight gas play in North Texas and North Louisiana located just above the Haynesville/Bossier Shale.  It is Upper Jurassic and Lower Cretaceous in origin and consists of sandstone, limestone, and shale. The depth of the Cotton Valley formation is roughly 7,800 to 10,000 feet. Although it is mainly a natural gas play, some oil has been produced in parts of the Cotton Valley. Some of the more active players are Petrohawk Energy, Goodrich Petroleum, Exco Resources, Forest Oil, XTO Energy (ExxonMobil), Questar, Penn Virginia, Cabot Oil & Gas, Devon Energy, and El Paso Corporation.
Eagle Ford Shale
The Eagle Ford shale formation is situated in South Texas runs from Laredo to Houston Texas. It is located directly below the Austin Chalk.  The Eagle Ford produces both natural gas and oil, but it is the oil-producing and gas condensate areas that is active at this time. Average thickness is about 500 feet. The more active part of the region is mainly in McMullen, Maverick, Dimmit, La Salle, Karnes, Live Oak, and Atascosa counties. Apache Corp. and EOG Resources are two of the largest lease-holders. Other major players include Petrohawk, Swift Energy, ExxonMobil, ConocoPhillips, Murphy Oil, Chesapeake, Cabot Oil & Gas, and Pioneer Natural Resources.
Granite Wash
The Midcontinent Granite Wash is a series of tight gas plays (Lard Ranch, Buffalo Wallow, Stiles Ranch, and Colony West) that extend along North Texas and South Oklahoma. There is some oil production in the Granite Wash, mainly in Oldham and Gray counties in Texas. The reservoir is about 160 miles long and 30 miles wide. Both horizontal and vertical drilling to produce reserves from this long time target. Economic flow rates are achieved by multi-stage, slickwater fracture treatments and close attention to costs. There are over 2600 operating wells in the Granite Wash. The most active operators are Chesapeake Energy, Newfield Exploration, Penn Virginia, Cimarex Energy, Questar, Linn Energy, Forest Oil, Apache Corp., BNK Petroleum, Devon Energy, and Cordillera Energy Partners.
Niobrara Shale
The emerging Niobrara Shale formation is situated in the Denver-Julesburg Basin in North Colorado South Wyoming, Nebraska, and Kansas. As a new play it is in the early stages of development and companies have been busy leasing land for future drilling. It has been compared by some to the Bakken shale formation in the Williston Basin. Samson Oil & Gas is one of the earliest companies to establish a position in the Niobrara, Other operators include EOG Resources, Anadarko Petroleum, SM Energy, Noble Energy, Chesapeake Energy, Whiting Petroleum, Quicksilver Resources, MDU Resources, and Bill Barrett Corporation.
Utica Shale
The Utica shale formation is located in North New York State and also in Canada (Quebec). The play could extend as far south as Pennsylvania and overlap with the Marcellus shale. Reserve estimates range from about 5 to 60 Tcf.  Most of the activity is taking place in Canada as the state of New York has been reluctant to grant drilling permits to date. Some production rates have tested up to 1 million cubic feet per day.
The Piceance and Uinta basins are situated in North Utah and North Colorado. Both the Piceance and Uinta are tight sandstone gas resources plays. The primary target of gas development has been the Cretaceous Williams Fork formation. The Williams Fork is a several-thousand-foot thick section of shale, sandstone, and coal deposited in a coastal plain environment. The low permeability sandstone reservoirs and limited areal extent of the reservoirs has made conventional gas wells uneconomic in the past. Major players include Chevron, Encana, ExxonMobil, Noble Energy, Bill Barrett Corporation, Antero Resources, Delta Petroleum, Laramie Energy, and Harvest Natural Resources.
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Barnett Shale air samples mapped online

August 31, 2010 Leave a comment

By Aman Batheja


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‘ & –>Air-monitoring data collected by the state is now accessible on an interactive map of the Barnett Shale region.

The Texas Commission on Environmental Quality launched the online map Friday. It allows users to pinpoint at street level where air samples were collected and see the results of tests on those samples.

Green dots show samples that had no elevated levels of pollutants. Blue and red dots show samples that exceeded the commission’s standards for long- or short- term exposure, respectively.

“The public needs access to this complex scientific data and we’ve developed a tool that is timely, meaningful, and easily accessible,” said Mark Vickery, the environmental commission’s executive director.

The map can be viewed at The commission plans to update the data at least once a month.

State Sen. Wendy Davis, D-Fort Worth, announced Friday that she is planning to co-host a public workshop with the commission this fall focusing on how the public can use the agency’s new online tools. The commission is also planning an open house in the area in October.

In recent months, the agency has come under fire for not testing the region’s air until last year, nearly a decade after drilling began in earnest. It also drew criticism when an audit showed that staffers had not released results of tests that found higher-than-normal concentrations of benzene at gas sites in Fort Worth.

Also Friday, the commission said it is standing by the data collected from its air monitor in the Denton County town of Dish after the mayor publicly questioned its accuracy. A recent town-funded study found levels of benzene and toluene at higher levels than those reported by the air monitor.

The equipment in Dish was evaluated by the Environmental Protection Agency, which found no problem with it, according to the commission.

The equipment is also being audited by the University of Texas, which operates the monitor under contract with the commission.

Aman Batheja, 817-390-7695

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No word on how Texas agency will pay for Barnett Shale monitors

August 31, 2010 Leave a comment

Houston (Platts)–30Aug2010/533 pm EDT/2133 GMT

    Although environmental regulators in Texas last week promised to double
the number of monitors testing the air in the Barnett Shale gas-producing
region of North Texas, to date the agency has not said how it plans to raise
the approximately $2 million to pay for the monitors.

     In a press conference August 23 at the Fort Worth City Hall, officials
with the Texas Commission on Environmental Quality joined state lawmakers and
city officials to announce plans to add eight automated gas chromatograph
monitors to the seven already in operation in the Barnett Shale region.

     Terry Clawson, TCEQ spokesman, told Platts that the cost to install the
new monitors, including purchase of the equipment and site preparation, would
be between $1.2 million and $1.4 million, while the cost to operate them for
one year is expected to range from $560,000 to $800,000.

     However, the TCEQ has not identified where it would get the funds to pay
for the monitors.

     The question of funding comes at a time of belt-tightening for the state.

     Governor Rick Perry and state legislative leaders have called for state
agencies to cut their funding requests in the current budget by about $1.2
billion and to submit proposals for an additional 10% in budget cuts in the
next two-year budget cycle.

     The federal Environmental Protection Agency contributed about $660,000 of
the approximately $1 million cost of the installation and operation of two
AutoGC monitors, one each in the North Texas towns of DISH and Eagle Mountain
Lake, as well as several nitrogen oxide monitors in those towns, according to
EPA spokesman Joe Hubbard.

     In exchange for its funding of those monitors, the EPA will have
oversight responsibility and also access to the data collected, but the
federal agency does not have a similar funding agreement with the state for
the proposed eight new AutoGC monitors, Hubbard said.

     Representative Byron Cook, chairman of the Texas House Committee on
Environmental Regulation, said the TCEQ has "multiple sources that are
available to them," to fund the installation and operation of the new
monitors. He said the development of a system to conduct air monitoring across
the multi-county Barnett Shale Region is a high priority for the state.

     "We've been working with them for quite some time to come up with a
proactive position with respect to what's going on in the Barnett Shale and
the need to ensure that the public has adequate information.

     "That's why this regional air-quality monitoring system is so important,"
the Corsicana Republican said.

     However, Representative Lon Burnam, a Democrat from Fort Worth, charged
that Cook and Senator Troy Fraser, chairman of the Senate Committee on Natural
Resources, with playing politics with the issue of protecting the air quality
of North Texas.

     He called last week's press conference a "faux photo opportunity"
orchestrated by Cook and Fraser "to pretend that they're doing something as we
approach the general election." Burnam, who has been an outspoken critic of
TCEQ's efforts to protect air quality in the Barnett Shale region, said the
agency would be hard pressed in these current tight-fisted fiscal times to
find a source of financing for the installation of the monitors. "Show me the
money," he said.

     Several sources have suggested that the natural gas industry could be
called on to contribute in some way toward the installation of the monitors.

     Burnam said he would look favorably on that idea, as long as the industry
did not retain any degree of control over the monitoring efforts as a result
of partially funding the installation and operation of the monitors.

     "I think it should be in the form of fees from the industry," he said.

		--Jim Magill,

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Leica Viva Succeeds in Competitive Gasfield Surveying

August 24, 2010 Leave a comment

(Norcross, Ga., 18 August 2010) Leica Geosystems, in cooperation with Geomatic Resources LLC, has been working with progressive surveyors to get real time market feedback on its Viva system. Viva tightly integrates GNSS receivers, total stations, laser scanners, data collectors, and other essential measurement technology by providing common system interfaces, interchangeable batteries, and consistent point management across all types of work and equipment. The two firms recently worked with Frontier Surveying Company, a Fort Worth based firm specializing in gas field support, to bring Leica Viva to the highly competitive Barnett Shale region.

The Barnett Shale is a geological formation that may contain up to 30 trillion cubic feet. But the gas is difficult to extract and much of the Barnett Shale lies beneath Fort Worth, Texas, one of the largest metro areas in the United States. Sharp increases in natural gas prices have made extraction economically feasible and the Fort Worth area is currently experiencing one of the world’s great energy booms. From a surveyor’s point of view, the two biggest sources of work are the boundary work associated with gas extraction pads, and support surveying for pipeline construction. Leica Viva has been outstanding in both areas, according to Senior Project Manager Allen Peloquin: “There are a lot of firms chasing this work”, he says, “and we depend on outstanding technology for a competitive edge. Upgrading to Viva has definitely been a good move for us.”

Peloquin says that Viva’s GNSS receivers, which are optimized for network RTK, have been especially reliable. They come equipped with modems and radio systems to take advantage of SmartNet, a subscription based service offering GNSS Network RTK corrections throughout Texas, operated by Leica Geosystems. The network coordinates feeds from more than 90 Leica Geosystems receivers in Texas—there are more than 30 stations just in the North Texas area, providing continuous network RTK corrections to all GPS brands on the market. “We have a base and rover for all seven crews,” says Peloquin, “so we can always work, whether or not we’re in the network’s area of coverage. But most of our bases are now working full time as rovers.”

“GNSS capacity has made a big difference for us,” he adds, “We’ve had jobs in the past where we lost money because we couldn’t get lock—that doesn’t seem to happen anymore. In fact, sometimes I’ll be in the truck and the ‘little lady’ (the Viva’s voice notification recording) will speak up from the back and tell me we have lock. It’s impressive.”

By extending the reach of GNSS work, and smoothly tying together all aspects of survey work, Leica’s Viva ISS has helped Frontier to grow rapidly and gain market share in the highly competitive extraction industry.
For additional information about Leica Viva, click here

For additional information about Frontier Surveying click here.

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Texas Commission on Environmental Quality to use new equipment to monitor air around Barnett Sha…

August 24, 2010 Leave a comment
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How fast will natural gas drilling come to Dallas?

August 24, 2010 Leave a comment

01:22 PM CDT on Sunday, August 22, 2010


By RANDY LEE LOFTIS / The Dallas Morning News

A bit of nearly abandoned industrial land holds a different future for Dallas. Which future is anybody’s guess.

The expected drilling of Dallas’ first natural gas well at the former Dallas Naval Air Station, with others on the way, could help bring cleaner energy to the nation – and desperately needed income to the city, which owns the site.

Or it could mean more air and water pollution, noise, traffic and safety risks – the same worries that have mobilized entire neighborhoods in Tarrant County to oppose some drilling plans, in at least one case successfully.

Since 2008, when Dallas leased selected city-owned tracts for gas drilling and adopted an ordinance to govern drilling both on city land and elsewhere, other cities in the Barnett Shale gas field have refused residents’ calls for a temporary halt to new wells.

Now that drilling is starting to move into Dallas – other parts of western Dallas County already have nearly two dozen wells – some residents want to slow it down.

Oak Cliff artist Raymond Crawford has organized a residents group to monitor gas drilling in Dallas. He wants the city to boost its oversight and regulation of drilling and issue no drilling permits until it forms a task force to study such concerns.

He doesn’t expect that to happen. The city says drilling is safe and well-regulated. Besides, leasing city-owned land to gas companies has already brought Dallas $34.9 million without even one well being drilled. On top of that, the city will get 25 percent of the proceeds once gas starts flowing.

“We know the gas is there; we know the city needs the gas for the revenue,” Crawford said. “But there’s a lot of loose ends that continually come unraveled and need to be wrapped up.”

Drilling could pull Dallas for the first time into bitter national debates about the environmental costs of energy and the adequacy of rules for drilling.

Those fights have been going on for years in cities to Dallas’ west, where companies have drilled thousands of wells in the Barnett Shale, the geological structure that now provides 7 percent of the nation’s gas.

Unlike old-fashioned Texas rigs on wide-open pastures or empty rangeland, the Barnett Shale boom has taken place in cities and suburbs, sometimes next to backyards and schools.

With drilling equipment, trucks, tanks and compressors moving down their streets, residents of Tarrant and adjacent counties routinely pack public meetings. Many have become self-taught experts, mastering obscure terms such as fracking and the “Halliburton Loophole.”

Fracking is short for hydraulic fracturing, the controversial practice of jamming millions of gallons of water underground at high pressure to break up the shale and release the gas. The “Halliburton Loophole” is environmentalists’ derisive term for the industry’s exemptions from mandatory disclosure of chemicals used in fracking. The industry says it’s made the chemicals available when required.

“Nobody ever imagined that we would ever be doing oil drilling or natural gas drilling in an intensely populated area like Fort Worth, Texas,” said Gary Hogan, a Fort Worth neighborhood leader who estimates that he has addressed 60 community meetings about the Barnett Shale.

So far, Dallas has no such experience or controversies. There’s been one community meeting, organized by Crawford and allies and held Aug. 11 at an Oak Cliff church. About 50 people came. The group plans more meetings.

Mass protests might be unlikely for the city’s first prospective well, which Exxon Mobil subsidiary XTO plans on some unloved and unlovely land left to the city when the Navy pulled out. It’s about 1,000 feet from the nearest homes, far beyond the 300-foot minimum protection zone the city established. The nearest homes are also across the Dallas city limits in Grand Prairie.

However, the well site is also next to Mountain Creek Lake, first built as a reservoir for a power plant but now an outdoors asset for the city’s western reaches. Another city-owned site due for drilling is near Joe Pool Lake, the Army Corps of Engineers reservoir in southwestern Dallas County.

If gas crews move into neighborhoods elsewhere in Dallas, as they are doing in other parts of western Dallas County, public worries could grow.

A recent community meeting on drilling in Grand Prairie drew 400 people, said Susan Read, a community activist in that city’s Westchester neighborhood, in far southwestern Dallas County.

Some left when they realized the meeting wasn’t about how to lease out their land, she said. But most stayed to get a grass-roots education about concerns over the gas boom, from noise to property values.

“It sounds kind of like science fiction when you first explain the process to people,” said Read, who is helping the Westchester Homeowners Association push for a moratorium on drilling in Grand Prairie.

But if you talk to the city or the industry, she said, “They want us to believe that everything will be fine.”

No boom yet 

Conventional wisdom says western Dallas County won’t see the drilling frenzy that Tarrant and neighboring counties have seen. There’s simply less gas in the Dallas County portion of the Barnett Shale.

By the time it reaches Dallas County, “the Barnett Shale is starting to play out,” said Ed Ireland, executive director of the Barnett Shale Energy Education Council, an industry group based in Fort Worth. “I suspect there will never be a lot.”

Since 2000, when Barnett Shale drilling began picking up, Texas regulators have issued 8,192 permits for drilling gas wells in Tarrant County; in Dallas County, 172.

Most permits expire unused after two years. In Dallas County, 78 permits are valid now, meaning companies could drill if they also obtain any required local permits.

But there are signs of an upswing, possibly tied to recovering market demands. So far this year, the Railroad Commission has issued as many new permits in Dallas County as in all of 2009.

The county now has 25 operating wells, all outside the Dallas city limits and almost all at or near Dallas/Fort Worth International Airport or in the county’s far southwestern corner.

Tarrant County has more than 2,400 producing wells.

Dallas County real estate records suggest that gas companies and Dallas County landowners who control their land’s mineral rights see the potential to make money.

Sole landowners – individuals, companies or churches – or groups of owners, often family members, have signed 208 leases or lease amendments for gas drilling since 2002. One-third came in the past two years. On 85 other properties, owners have sold mineral rights outright.

In a typical lease, the owner gets a signing bonus and a 25 percent royalty, or percentage, of the income from the gas. Leases usually expire in three to five years if the company hasn’t begun drilling.

When a whole neighborhood agrees to drilling, the 25 percent is divided among all homeowners who signed. In Hogan’s western Fort Worth neighborhood, the predicted total income for the owner of a 90-by-125-foot lot was $13,425 over the 20-year life of the well, about $56 a month.

Big landowners can get big checks – in Dallas’ case, $34.9 million up front for the 2,243 acres included in city leases in 2008. Exxon Mobil subsidiary XTO and Trinity East Energy, a subsidiary of Keystone Exploration, were the bidders.

Each company hopes to start drilling soon. XTO has applied for a city permit and is awaiting City Council action. At Trinity East, “we are in the beginning stages of the permitting process and all that that entails,” president Stephen Fort said.

The city decision will be based on Dallas’ 2008 drilling ordinance. Like those in other cities, it regulates zoning, hours when drilling can occur, noise, traffic and safety.

In Fort Worth, years of city regulation have taught gas companies to take complaints such as excessive noise more seriously, said Tom Edwards, Fort Worth’s senior gas-well inspector.

“At the very beginning, everybody was just, ‘Oh, tell them to get over it; we’ll be done in a few weeks,’ ” Edwards said. “No, that’s not what the rules say. There is a science to it, and you can fix it.”

Whose rules? 

As more Dallas County residents learn the details of gas drilling in their neighborhoods, they’ll find that the broader issues, chiefly air and water pollution, are generally beyond cities’ control.

They’re regulated by state agencies. In Texas, that would be the Texas Commission on Environmental Quality, whose three commissioners are appointed by the governor, and the Texas Railroad Commission, whose three commissioners are elected statewide.

Federal authority is limited; for example, hydraulic fracturing isn’t regulated under the Safe Drinking Water Act.

For controlling air pollution from oil and gas exploration and production, the Environmental Protection Agency has typically deferred to the states.

That might change. Congress has ordered the EPA to study hydraulic fracturing; an EPA public meeting on the topic in Fort Worth last month drew 600 people. The agency also agreed this year, in a lawsuit settlement with environmental groups, to review and possibly tighten its air pollution rules on exploration and production.

Environmentalists and many Barnett Shale residents are demanding a stronger federal role. Texas regulators and the industry they regulate are pushing back.

“Regulating oil and gas exploration and production activities has traditionally been the province of the states, which have had effective programs in place for decades,” Victor Carrillo, chairman of the Railroad Commission, told EPA officials at the Fort Worth meeting.

“Congress should maintain the status quo and let the states continue to be responsible, to responsibly regulate oil and gas activities, including fracturing,” said Carrillo, a lame duck because he lost the Republican primary for re-election this year.

Richard Varela, a former executive director of the Railroad Commission, said the state agency has kept the public safe without federal oversight.

“I can attest that the protection of freshwater aquifers throughout the state … is one of the agency’s primary regulatory functions and one that receives the highest priority,” said Varela, who now works for the Texas Independent Producers and Royalty Owners Association.

Parker County Judge Mark Riley said the industry shares the blame for its negative problems and the pressure for federal intervention. But he added that he doesn’t want the EPA to come in.

“I’m opposed to federal intervention any further, and I believe that the state agencies and our Legislature will take care of their responsibility,” Riley said. “We don’t need the federal government involved in our lives and our economy.”

Scores of people who live in the counties that have experienced gas drilling for years told the EPA that state and local rules haven’t kept them safe.

“The locals won’t like guidelines from above, but we at this local level have had very little attention to environmental impacts of gas drilling from either the local or state level,” said Fort Worth activist Elizabeth Willis. “The federal government seems to be our only hope.”

Sharon Wilson, a Wise County landowner who runs a drilling-watchdog website – Bluedaze: Drilling Reform for Texas at txsharon.blogspot .com – told EPA officials that they’re crucial to protecting North Texans from gas companies and from inattentive Texas agencies.

“We need you here,” Wilson said. “We need you on the ground. We need you now.”

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North Texas cities weigh benefits, risks of Barnett Shale gas drilling

August 2, 2010 Leave a comment

By WENDY HUNDLEY / The Dallas Morning News

As the debate continues over the health and environmental effects of natural gas drilling, the drilling boom is bringing an influx of income to municipalities in the Barnett Shale.



A Williams Production rig drills for natural gas in Flower Mound. Town officials say funds yielded from drilling have been used for expenses associated with the drilling.

That additional revenue can come in handy at a time when the economy is putting the squeeze on many local budgets.

In many cities, tax revenue from mineral properties is only a drop in the bucket of the total tax rolls.

“But we’ll take the drop,” said Diana Ortiz, Grand Prairie’s chief financial officer, echoing the sentiments of many city officials.

Dallas may be looking to gas drilling for relief from its 4.3 percent drop in property valuations as the expansion of Barnett Shale drilling edges eastward.

Several specific-use permits have been approved on private property along Dallas’ western edge, and XTO Energy is seeking permission to drill at Hensley Field near Mountain Creek Lake. If the company’s request is approved, it would be the first request to drill on city property and could bring millions in bonuses and royalties.

In Arlington, those earnings have been used to fund a nonprofit organization that provides grants to charities, cultural organizations and city programs.

The Arlington Tomorrow Foundation was created in 2007 using 90 percent of the signing bonus from a lease agreement to drill on city-owned property. The foundation has been permanently endowed with 50 percent of the royalties from that lease (the other half goes into the city’s general fund).

So far, the foundation has distributed $5 million for grants to refurbish Habitat for Humanity homes, underwrite a Boys and Girls Club gang prevention program, build playgrounds and support other community programs.

“It was an unexpected windfall that the city leaders used to serve the people of Arlington,” said Carolyn Mentesana, executive director of the foundation.

Grapevine has also received a $400,000 signing bonus for drilling on city property, said John McGrane, administrative services director. He said the funds have been placed in escrow until officials decide how to use them.

The city, where gas wells can be seen next to the Grapevine Mills Mall, has received less than $200,000 a year for the last two years in tax revenue from private land that is leased for drilling. That money goes into the general fund and debt fund, McGrane said.

This is the first year that Grand Prairie has realized any proceeds from taxes on mineral properties valued at $49.3 million, Ortiz said. Of that amount, the city will receive $330,000 to help fund city services and pay down debt.

Like other cities, Grand Prairie is facing declining revenue from sales tax, building permit, property taxes and other sources.

The new funding from minerals “is helping us offset some of that loss,” Ortiz said.

The city’s tax rolls are down 3.02 percent this year. Without the influx of new tax revenue from drilling, “we would have been down 3.54 percent,” she said.

In Denton County, half of the top 10 taxpayers are in the gas and oil industry.

But the $2.3 billion value of mineral property represents only about 4-5 percent of the total $52 billion tax roll, said Rudy Durham, Denton County’s deputy chief appraiser.

The real value of the minerals is that they help keep property tax rates low, he said.

In the tiny town of Dish, he points out, half of the total valuations come from mineral property. The tax rate? Only 18.1 cents per $100 valuation.

Some cities are finding that the costs associated with gas drilling may offset the gains.

Since 2003, Flower Mound has received almost $800,000 in oil and gas permit fees, property taxes and a one-time bonus for rights to drill on town property.

But town officials say those funds have been used for expenses associated with drilling – hiring companies to conduct environmental testing, two lawsuits filed against the city by gas and pipeline companies and ongoing monitoring of drilling sites.

“I would estimate our expenses in the life of gas drilling in Flower Mound have outweighed any revenue the town has received,” town spokesman Michael Ryan said.

And concerned residents say it’s hard to put a price tag on the potential health and environmental risks of gas drilling, and impact on the value of surrounding properties.

“There are so many dangers that we hear about,” said Flower Mound resident Sue Ann Lorig. “I want everybody’s health and property to be protected.”

Dish Mayor Calvin Tillman said the drilling revenue has helped renovate Town Hall, build a library and park and has kept the tax rate low. “It’s certainly been a benefit to get that,” he said. “But it doesn’t come without consequences.”

In the past year, the $30,000 revenue has been eaten up “in legal fees and to clean up the compressor,” he said, referring to a large natural gas compressor station on the edge of the small town that’s crisscrossed by a series of underground transmission lines.

“The compressor station destroyed one end of town,” he said, adding that nothing can ever be developed on the transmission lines. “That’s cost us millions in taxable values.”

While he doesn’t deny that gas revenue have benefited the town, “the hidden costs are the property devaluations and the stunting of growth,” Tillman said.

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