Wes Ferguson

New gas gold rush grips the area

“Natural gas find in Louisiana makes Jed Clampetts of property owners”

– The Los Angeles Times, Aug. 1

“A no-holds-barred, all-American gold rush for natural gas is under way in this forgotten corner of the South … Jalopies are being traded in for Cadillacs, plans for swimming pools are being hatched in rusty trailers.”

– The New York Times, July 29

* * *

The way the big-city newspapers tell it, every land-owning yokel on the wrong side of the state line is getting rich these days.

Our neighbors in northwestern Louisiana are lucky. They live on top of what many believe will be the largest natural gas discovery in the United States. It’s called the Haynesville Shale, except when it’s called the Bossier Shale, and it stretches into a good chunk of East Texas.

And the land rush is on.

In the mad scramble for drilling rights, property owners in Louisiana are cashing in lease checks for up to $20,000 an acre. Some got swindled early, signing over acres for as little as $200 a pop, but others are holding out for much more.

“There’s a lot of people getting some money over there,” said Rob Thompson, owner of RWT Land Services in White Oak.

Thompson employs around 70 leasing agents, known as landmen, and he said about half of them are working to secure rights for petroleum companies in the Haynesville Shale.

Nobody is sure how big it is, but geologists say the formation could reach underneath much of the East Texas counties of Harrison, Panola, Rusk, Marion, Nacogdoches and Shelby. Maybe throw in the panhandle of Gregg County, north of Lake Cherokee.

“It covers a big, broad area, and the potential is there,” said Jamey Walker, vice president for exploration at R. Lacy Inc. in Longview. “We’re talking about something that could have a huge impact in our industry and also in the local economy.”

‘All leased up’

Word is flying about all the instant millionaires running around Louisiana. So why aren’t average East Texans caught up in the same hysteria?

Two reasons: First, landowners in Louisiana are much more likely than Texans to own the mineral rights to their property. That’s because of the states’ vastly different property rights laws.

In Texas, if you own the minerals, they’re yours no matter who owns the surface land. But in Louisiana, if you own the minerals but not the land, you have 10 years to start producing them. If you don’t, you must turn over the mineral rights to the surface landowner.

Second, East Texas has been the site of extensive natural gas drilling since the 1940s. Much of the land is already claimed.

“In areas like Panola and Harrison, I don’t see how there’s anything left to lease,” said Walter Priddy, a geologist and mineral appraiser based in Henderson. “Those counties have been leased up for years because of the Cotton Valley and Travis Peak formations.”

The Cotton Valley and Travis Peak have been steady natural gas producers for years. The Haynesville is larger and deeper – more than two miles below the surface – and until recently, it was too expensive to extract.

“Only since natural gas prices have gotten to levels they have now has it become economically viable,” Walker said.

“We’ve always known it was there. There’s always been tremendous gas shows when we drilled through it, but until the last 10 years we just didn’t have the technology to produce it.”

Waiting and watching

Walker said his employer is “waiting, watching and learning” from the bigger petroleum companies, such as Chesapeake Energy and Penn Virginia, that already are spending millions of dollars to drill test wells in the shale.

“We’re in the play, and we’ve got a lot of properties in Panola County, but the play is in its infancy right now,” he said.

“We don’t want to haul off and spend $6 million to $7 million on a well until we’re convinced it’s economically viable for us.”

Others aren’t so wary. The behemoth in the business, Chesapeake, expects to complete a new Haynesville well every five days.

Its first 11 horizontal wells are producing 45 million cubic feet of natural gas per day – enough in one day to supply 850 Longview homes for a year.

Last month, Dallas-based Exco bought the local oil and gas producer Geo-Vest for $252 million, largely because of the Kilgore company’s potential Haynesville sites. Other companies are replacing old pipelines that can’t handle the tremendous volume and pressure of the new wells.

“You’re talking about wells with a magnitude 10 times what a normal well would be,” Walker said.

He said R. Lacy will drill a couple of test wells into the shale within the next few months.

It will be about a year, he said, before the industry knows the extent of the Haynesville “play,” an industry term that just means the exploration and extraction of oil reserves from a region.

“These plays never seem to pan out as big as people thought they would, because it’s typical that there will be sweet spots, areas where there is really good production, and a whole bunch of areas that will turn out to be uneconomical,” he said.

“But people won’t know that until they’ve spent the money and drilled the wells.”

Wes Ferguson

91 responses to “New gas gold rush grips the area”

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