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Taking lessons from Texas
TheNewsOutlet.org
FORT WORTH, TEXAS
At the Forth Worth Chamber of Commerce, two men are deep into a conversation about a national oil-and-gas company that just moved in across the hallway.
The company, which specializes in hydraulic fracturing, or fracking technology, has just leased space across the hall from the office of Mike Berry, the chamber’s natural-gas task-force chairman. “They got money,” Berry says. “Big money.”
Bill Thornton, chief executive officer of the chamber, said the people who founded many of these natural-gas-drilling companies will create, build and sell three or four energy-related companies in their careers.
It’s business that Fort Worth aggressively seeks. And the energy business is good in North Texas, thanks to the Barnett Shale.
From royalty checks for leasing public property to billions of dollars in business investments, natural-gas production in the Barnett Shale accounts for about 8 percent of the Dallas-Fort Worth area’s economy. It’s been Fort Worth’s anchor industry for the past 10 years and is responsible for nearly 40 percent of economic growth, according to business leaders and industry experts.
It has created an estimated 120,000 jobs in Dallas-Fort Worth and across Texas in the past decade.
It’s a business model many would like replicated in Northeast Ohio and Western Pennsylvania.
The Barnett Shale play covers 5,000 square miles in 23 counties around Dallas and Fort Worth. The sedimentary rock, more than 323 million years old, is up to 500 feet thick. It lies 5,000 to 8,000 feet below the surface.
The Barnett Shale provides 8 percent of America’s natural gas. It is arguably the largest domestic reserve of on-shore natural gas.
By comparison, the relatively untapped Marcellus Shale covers about 95,000 square miles, and the even less-explored Utica Shale play covers 170,000 square miles.
John W. Barnett homesteaded land in San Saba County in the late 1800s. Although there are no producing gas wells in San Saba, geologists first discovered the thick, black shale near a stream on Barnett’s property.
Getting the gas out would take nearly a hundred years of technological advancements birthed in the Barnett region. The developed methods include horizontal drilling and hydraulic fracturing, or fracking, which are now used in Ohio and Pennsylvania to extract rock-bound natural gas.
Drilling in the Barnett Shale began in the 1980s. The first well was horizontally drilled in 1996 as natural-gas prices began to surge. But the bulk of the gas production really took off during the mid-2000s.
As of early March, 15,731 wells, both vertical and horizontal, have been drilled into the Barnett Shale in 24 counties, with permits issued for a 25th county, according to the Texas Railroad Commission.
P2, a consulting company that provides financial and accounting information to more than 1,200 global energy companies, estimated that 2,600 leases were signed monthly in 2011. The Barnett reserves are less than halfway developed, Ireland said.
In all, 237 operators drill the Barnett Shale. The top five, which accounted for 80 percent of total gas production last year, are energy companies including Devon Energy Production Co. LLP, Chesapeake Operating Inc., XTO Energy Inc., EOG Resources and Quicksilver Resources Inc.
The businesses pervade the high- rises of downtown Fort Worth, a city swelling from a 38.6-percent population spike over the past decade.
The city lies atop the methane-rich rock of the Barnett Shale, yielding pipeline-ready natural gas that producers say needs little to no refining. Nearly 11,000 acres of city-owned land, including parks and one of the nations busiest airports, have been leased for $160 million in royalties and bonuses since 2005.
Approximately 70 drilling rigs scurry across the 24-county landscape, spending about two weeks at a site drilling and an additional five days of fracking. The 175-foot-tall rigs can be seen from universities, neighborhoods and even Cowboys Stadium in Arlington.
It’s been said by drillers that there are no dry holes, only money-making holes, in the Barnett Shale.
“That’s given us an incredible security blanket during these crazy recessionary times in the last three years,” Thornton said.
The study by the Fort Worth Chamber of Commerce’s forecasting firm, The Perryman Group, indicates 100,268 jobs have stemmed from natural-gas production in the Barnett Shale in the past decade. It said an additional 20,000 Barnett Shale jobs were created elsewhere in Texas.
The Perryman study estimated that the city received about $170 million in mineral taxes and taxes stemming from business gains in 2011. That represents nearly a third of the city’s annual income this year.
Drilling in the Barnett Shale hit a 20-year low in 2011 with 3,008 gas wells completed, according to the Texas Railroad Commission, which oversees permitting and drilling in Texas.
Fort Worth business leaders and city officials, however, say the local economy has remained unaffected.
They attribute the city’s recession-proof economic growth to a diversified economy, which includes one of the busiest airports in the nation and an extensive network of universities, institutes and community colleges.
But the Barnett Shale is losing a little luster.
The declining price of natural gas has led drillers to halt, at least temporarily, additional Barnett Shale drilling in Texas.
Instead, they are attracted to areas such as Ohio’s Utica shale, where they can extract natural gas plus lucrative liquids such as ethane, propane and butane.
Such liquids are more valuable to energy companies than low-priced natural gas, at least right now.
Berry, the president of Hillwood Properties, is developing 17,000 acres in a northern suburb of Fort Worth.
He and other business leaders said they aren’t worried about gas-and-oil companies operating elsewhere. They say that the corporations will always call Texas home.
“We were basically the shale-gas headquarters,” Berry said. “If I can keep my headquarters, my people and my infrastructure here in Fort Worth and put three guys on an airplane every week to go hit the Marcellus, to fly up and go stay in a hotel in Youngstown ... that’s pretty efficient versus picking up half my company and moving it up there.”
Many Texas-based companies are employing this tactic in Ohio and elsewhere, Berry said.
Every two weeks, driller Sean Nagelmueller, his brother, Warren, and about a dozen others are flying either from Dallas-Fort Worth to Pittsburgh, or in reverse. Nagelmueller works a two-week “hitch” of 12-hour days on a rig in Washington County, Pa.
He earns about $130,000 a year and receives health benefits for his wife and 18-month-old daughter back in east Texas. With his $51 daily living allowance and a $2,600 monthly bonus, Nagelmueller said he makes $50,000 more than a friend working an oil rig in Texas.
He dropped out of high school in 2004 and took a $13.25-an-hour job as a floor hand, the lowest position on the crew.
He began working in the Marcellus and Utica shales in Pennsylvania in 2009 after his Texas oil rig was idled.
Along with moving crews into the liquid-rich plays of Ohio and Pennsylvania, companies are reopening Texas oil fields and slowing the production of existing gas wells until the demand increases and prices rebound.
Project Manager Justin Bond, who works at Oklahoma-based Chesapeake Energy Corp.’s regional office in north Texas, explained the company’s strategy concerning where it concentrates drilling efforts.
“It’s no different than a farmer who’s deciding if he’s going to plant a whole crop that year or just leave it alone,” Bond said.
The company makes a cost-benefit analysis, factoring the labor needed to increase production by pumping or refracking a well against the market value of natural gas.
But the stymied production isn’t ruffling too many feathers in Fort Worth.
Industry and business analysts expect the city and the Barnett Shale region to ride the coattails of a natural-gas boom that has left a lasting impression on the local and state economy.
“Even though we have slowed down [drilling] the last couple years, the economic impact has never really slowed down,” said Ed Ireland, president of the Barnett Shale Education Council. “It just continues on.”
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