Barnett Shale in Texas: Example of Unconventional Energy Play

by Robert Francis  on Monday, Aug. 27, 2007 12:00 am  

The tall, imposing drilling rig that appeared just east of downtown Fort Worth in the summer of 2006 didn't quite overshadow the towering skyscrapers of the city, but symbolically it might as well have.

Fort Worth - currently the fifth fastest-growing city in the United States among those with more than 100,000 people - sits atop one of the fastest-growing energy plays in the country, known as the Barnett Shale. Work in the Barnett Shale Play began to have a real impact in 2006, and any skeptics appear to be hiding under the nearest shale rock.

"This is going to be here a long time," Mayor Mike Moncrief said. "Our grandchildren will still be reaping the benefits of this."

Others began to take notice as well. The Barnett Shale has become more than just the hottest natural gas play in the nation; it has become one of the hottest news stories as well. The New York Times, The Washington Post, The Wall Street Journal, National Public Radio and ABC News have all done stories on the swath of gas-laden black rock known as the Barnett Shale.

The Barnett Shale is a rock formation more than 7,000 feet beneath ground level. It is considered to be the largest unconventional resource play in North America, and some say it may rival Alaska's North Slope in potential gas resources. Active drilling in the area now covers about 20 counties and more than 7 million acres in North Texas. Current natural gas production is estimated to be about 2 billion cubic feet per day from more than 6,000 wells. About 170 rigs are running night and day to tap into a potential reserve base of 26 trillion to 30 trillion cubic feet of gas.

Signs Seen in the '80s

That drilling activity didn't occur overnight. In the early 1980s, George Mitchell and his company, Mitchell Energy, were intrigued by the widespread gas indications as they drilled for other energy targets in the area.

There were plenty of challenges. But horizontal drilling improvements and new fracing technologies have started to crack - sometimes literally - the secrets of the Barnett Shale.

Mitchell Energy's assets were eventually acquired by Devon Energy Corp. of Oklahoma City, which is currently the largest driller and producer in the Barnett Shale. Devon has 30 rigs running in the Barnett Shale and reached its 2007 production goal of 800 million cubic feet per day in the second quarter.

Other large players in the Barnett Shale include Fort Worth-based XTO Energy Corp., EOG Resources Inc. of Houston and Chesapeake Energy Corp. of Oklahoma City.

And as the Barnett Shale Play began to attract attention, and energy companies, oil and gas property values soared. In 2000, the Texas comptroller of public accounts calculated those values at $1.2 million for Tarrant County. In 2005, those values grew to $741.8 million.

Some of that growth has slowed after an 11 percent drop in natural gas prices in 2006. For example, mineral values in Tarrant County are up only 18 percent in 2007, after doubling in each of the previous two years.

The economic impact in North Texas has been enormous. Dr. Ray Perryman, president and CEO of The Perryman Group, an economic research and analysis firm based in Waco, Texas, released a 140-page report in May on the Barnett Shale. According to the study, gas production in the Barnett Shale underlying Fort Worth and in the surrounding counties accounts for $5.2 billion in annual economic output and more than 55,000 permanent jobs.

Fort Worth in the Middle

All this activity has not gone unnoticed by area residents, particularly since the fast-growing city of Fort Worth sits smack dab in the middle of the play. It is not uncommon for drilling rigs to appear almost overnight in a neighborhood. As a result, several cities have adopted regulations on drilling within city limits.

Fort Worth's buffer between residences and gas wells was 300 feet, but following a natural gas well accident in a nearby city that killed a local contractor, the city's Gas Well Drilling Task Force increased that distance to 600 feet in May 2006.

Not everyone thought that was enough, but several cities have followed Fort Worth's lead.

While some energy companies have steered clear of urban drilling, one area company is making it its niche. Dale Resources LLC of Dallas, founded by Larry Dale, focuses on tapping into the Barnett Shale in city limits with minimal disruption to the city and its residents.

"Where a company drilling in a rural section can get a 250-acre tract with one signed lease, we may have to have more than 600 signed leases to accomplish the same thing," said David Buchanan, director of community affairs at Dale. "It's a much more complicated process."

Also complicating drilling in the Barnett Shale is the huge amount of water necessary for the fracing process. A frac for a horizontal well uses between 80,000 and 100,000 barrels of water, according to the Texas Railroad Commission, the state agency that regulates the oil and gas industry. This need for water, coupled with a drought that lasted throughout 2006, focused criticism on energy companies operating in the play.

Several Barnett Shale energy companies have formed a group to tackle the growing issue of water use in the biggest gas-drilling play in Texas, and the Texas Railroad Commission has also sponsored research on the issue.

(A version of this article previously appeared in the Fort Worth Business Press. To learn more about the Barnett Shale Play, visit www.fwbusinesspress.com.)

 

 

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