Hillbillies making millions out of American gas rush

Leave it to the British journalists to look farther down their nose (with green envious eyes!) at Haynesville Shale mineral rights owners than the New York Times. Sunday's Observer featured a page 3 story titled, "Hillbillies making millions out of American gas rush."

Judy was, until very recently, a normal 61-year-old great grandmother from rural Arkansas who taught English at the local middle school and spent her spare time taking care of five troublesome terriers.

Now, in a story reminiscent of the 1960s sitcom The Beverly Hillbillies, she has joined a rapidly growing group of millionaires cashing in on a natural gas gold rush that is sweeping the American south.

Full article here: http://www.guardian.co.uk/business/2008/aug/17/gas.oil

Drive a natural gas powered car to increase demand for natural gas

An increase in demand for natural gas results in price increases. For Haynesville Shale mineral rights owners, this means bigger royalty checks. One way to bump up demand is to put more natural gas powered automobiles on the road. Currently, the Honda Civic CNG is the only production car sold in America that runs on Compressed Natural Gas (CNG). Great mileage and a fuel cost equivalent to gasoline of about $2 per gallon. 

Natural Gas Royalty Calculator

Like counting your chickens before they're hatched? Why not! Geology.com has a natural gas royalty estimator that allows you to dream about that mailbox money.

For example, let's say you leased 25 acres of minerals with a sweet 25% royalty and a nice Haynesville Shale well comes in at 4 million cubic feet day and the wellhead price of natural gas is $8.25 per thousand cubic feet day (or Mcf), you'd be looking at $117K in first year royalty payments.

Barnett Shale resident encourages Haynesville Shale communites to learn from their mistakes

Steve, A fellow blogger (West and Clear) and Fort Worth resident, shared some advice in the comments section that I feel is so prudent it should be featured as a post. I agree it is critical for the residents in the Haynesville Shale communities to learn from their neighbors to the west who live above the Barnett Shale, especially in the environmental impact department. CNN reported last week about the potential dangers of water contamination.

As a Fort Worth resident who lives over the Barnett Shale, I would encourage those in the Haynesville Shale to learn from our mistakes. We've made a lot of 'em

Fort Worth residents are not universally pleased with the Barnett Shale play. The problems are myriad.

First, our Mayor, Mike Moncrief, comes from a family that is legendary for its ties to the oil and gas industry. Over the past several years, he has shown himself to be more interested in protecting the interests of his friends in the industry rather than the safety and property rights of the people of Fort Worth.

The current drilling ordinance is a sham and current efforts to "improve" it are really just about smoothing over public concerns while maintaining the status quo. While suburbs like Southlake are adopting 1000-foot setback requirements to keep drilling sites away from homes and schools, Fort Worth regularly issues waivers to its 600-foot setback requirements. A waiver request from the industry has never been denied.

Second, an environmental impact study has never been conducted by the city (Fort Worth), in spite of the fact that we have some of the worst air quality in the country and the drilling process uses hundreds of trucks to transport water to drilling sites each day. Also, each of the 1,400 or so wells active in the city require around 5 million gallons of water to frack. This water comes out of the water from the Trinity River upstream from Dallas, so Big D, this is your problem, too. Even through it has only been a couple of years since a major drought when water restrictions were in full force, no one in the City of Fort Worth has stopped to consider the environmental impact.

[Editor's note: For the Haynesville Shale, from where will the water come? Caddo Lake? Are you paying attention Don Henley?]

Third, once all of that water is used to frack the wells, in needs to be disposed of. Although the industry says that it is just salt water, these companies do not disclose what other chemicals might be used. The reason? "Trade secrets." However, research from the EPA and other reputable organizations indicate that this water includes many chemicals that could present a danger to the people and environment. Although technologies exist to recycle this water, the industry prefers used disposal wells, also called injection wells, to shoot this wastewater into the ground under Fort Worth. Currently, a moratorium is in place to prevent this because the City of Fort Worth Environmental Department has serious concerns about the safety of this practice.

Finally, the most serious issue is the one that has the people of Fort Worth the most up in arms -- the issue of eminent domain. Currently, energy companies enjoy the eminent domain powers that public utilities enjoy for routing their pipelines. This means that when a gas drilling company decides they want to run a pipeline across your yard, you as a property owner have no due process. Under the current laws of the state of Texas, enforced by the Railroad Commission, you can't stop that. You can only go to court to decide how much you will receive to compensate you. And that's a good idea because their first offers are usually pennies on the dollar of actual value. For more on this, Google Billy Mitchell and Aledo and pipelines or Jerry Horton and Fort Worth and pipelines. There are things that cities can do, however. Southlake and Flower Mound have modern, state-of-the-art, pipeline guidelines. Fort Worth has nothing.

Natural gas is tremendous energy advantage that we have right here in our backyards. However, we need to produce the minerals in a way that protect the health, safety, property rights and quality of life of the people who live on top of this bounty. Right now, that isn't happening in the Barnett Shale. I urge people who live in the Marcellus, Haynesville and other shale plays across the country to learn from the mistakes of Fort Worth and ask the right questions and demand answers before signing a lease. There's no hurry. The deals from the companies only grow richer with time, and that gas isn't going anywhere. Take the time and do it right.

August 3, 2008 11:45 AM

Natural gas find in Louisiana makes Jed Clampetts of property owners

Energy firms have offered Chris Moreno $750,000 to drill for natural gas on his land on Caddo Lake, La., as well as 25% of whatever the wells yield, which could bring him an additional $900,000 a year. But the bids keep getting bigger, so he’s waiting.

The Haynesville Shale may be the largest field ever discovered in the continental U.S.

By Miguel Bustillo, Los Angeles Times Staff Writer August 1, 2008

SHREVEPORT, LA. -- Chris Moreno lost his job managing a print shop two years ago, just after his wife became pregnant and they'd started building a house on 40 acres near the shores of Caddo Lake.

He fretted he'd have to relinquish his humble piece of paradise, where he indulged his country boy's passion for hunting raccoons and catching catfish.

But now fortune has smiled on Moreno: He's poised to become a millionaire, all because of that 40 acres he bought eight years ago for $45,000.

Landowners here in the piney three-state junction known as Ark-La-Tex recently learned that in this energy-starved era, they may be sitting on the largest natural gas field ever found in the continental U.S. The discovery of the Haynesville Shale, which lies mainly beneath Louisiana but branches into Texas and Arkansas, was disclosed in March by energy companies, which had been quietly buying up drilling rights for months before telling the public.

The news has triggered a flurry of speculation as frantic as anything seen here since a gusher on a Texas hill named Spindletop in 1901 ushered in the modern oil industry. Hordes of landmen, leasing agents for the energy companies, have descended on Shreveport, the unofficial capital of Ark-La-Tex, dangling gaudy sums before landowners in hopes of getting permission to drill beneath their properties. Firms that earlier this year were leasing land for $200 an acre are now paying upward of $20,000 an acre, leaving thousands of homeowners dreaming of plasma TVs and sports cars.

The windfall is changing lives for people like Moreno, 38, whose big worry has become whether to take the money now or hold out in hopes of getting even more. Energy companies have offered him $750,000 upfront to drill his land, as well as 25% of whatever the wells yield, which could bring him an additional $900,000 a year. But the bids keep getting larger, so he's waiting. Chesapeake Energy Corp., one of the major players in the Haynesville Shale, recently told investors that it thought the deposit was the world's fourth-largest.

"They're throwing so much money around, it's easy to lose your mind," Moreno said. "Where do I draw the line? I do feel like my luck has changed overnight."

Never mind that only a few dozen wells have been drilled and the rest could come up dry. The mere promise of a big strike in natural gas, which has soared in price, has already brought hundreds of millions in investment dollars to Shreveport, a riverboat gambling hub. That's turned Ark-La-Tex into a particularly vivid example of how America's thirst for energy is creating wealth in a few lucky pockets of the country, even as high oil and gas prices drag the overall economy down.

Michael Long, a Shreveport councilman and third-generation veteran of booms and busts in this rollicking region, where fortune has often shifted with the price of oil, said now he knows how his Irish grandfather must have felt when he headed here with his four brothers a century ago in search of instant riches.

"This Haynesville fever has extended pretty far, pretty fast," Long said. "A lot of landowners are sitting there thinking, OK, I'm ready to make my million dollars."

The Haynesville Shale comes after the Barnett Shale, a similar natural gas find in the Dallas-Fort Worth area that has been extraordinarily productive and profitable. The Barnett Shale has spurred drilling in shopping mall parking lots and suburban subdivisions, and generated tens of thousands of jobs and more than a billion dollars a year in state and local taxes.

The Barnett and Haynesville formations are geologically similar, and companies have shown they can now extract gas from previously unreachable places, leading experts to predict that the Haynesville Shale will make fast fortunes in Shreveport and bring decades of lucrative royalty payments.

read the rest of the story here.

Haynesville Shale Mineral Rights: $20K/acre

Oklahoma's Chesapeake Energy gobbled up more acreage in the Haynesville Shale recently. International Paper agreed to sell sub-surface mineral rights on 13,000 acres for $263 million. For you home-gamers keeping score, that's an average of $20,230 per acre.

Source: Chesapeake Energy buys more acreage in Haynesville