Shale Play Produces a Financial Boon for Boy Scouts, Game & Fish Commission

The roster of royalty beneficiaries in the Fayetteville Shale Play is dominated by individuals. But among the surprise winners in the natural resources sweepstakes are the Quapaw Area Council of the Boy Scouts of America and the Arkansas Game & Fish Commission.

The local BSA group and the state agency have collected checks from natural gas concerns totaling more than $40 million during the last five years.

The Quapaw Area Council owns the mineral rights on 1,800 acres in the heart of the gas-rich formation that stretches across north-central Arkansas. The holdings are part of its 3,200-acre Gus Blass Scout Reservation in northern Faulkner, southern Van Buren and western Conway counties.

During 2006-10, the Quapaw Area Council received more than $5.8 million from gas production on its property from Seeco Inc., a subsidiary of Southwestern Energy Co. of Houston.

Even with the precipitous drop in natural gas prices, wells drilled by the Texas firm have provided a nice stream of revenue for the largest Boy Scouts group in Arkansas. In the last three months, royalty checks have totaled $45,900 in June, $31,500 in July and $41,400 in August.

"Our financial needs have grown dramatically," said John Carman, Scout executive for the Quapaw Area Council. "It's really been a godsend for us."

Even at 12.5 percent, the state minimum royalty rate, the gas money presented a windfall that allowed the council to upgrade its facilities at Camp Rockefeller, 3 miles west of Damascus, and improve the road network on the higher-used areas of the Gus Blass Reservation.

The list includes new standing seam metal roofs for all camp buildings, concrete pads to accommodate more than 200 tents and permanent frames, a refurbished kitchen for the dining hall and a new climbing tower. A backhoe and tractor with a bush hog highlight a list of new maintenance equipment.

"It has provided us with a whole lot of opportunities," said Terry Sharp, finance director for the Quapaw Area Council.

The QAC, which has grown to cover 39 counties in central and northeast Arkansas, is touted as one of the most successful BSA councils in the nation. Camp Rockefeller has hosted an ever-increasing number of youth at its summer camp program.

Four one-week sessions of summer camp attracted 842 Scouts in 2009 and 1,178 in 2010. The program was expanded to five weeks in 2011 (1,276) and 2012 (1,525). Six weeks in June and July are planned for 2013.

Until recently, gas royalties were divided equally among three budgeting allocations: annual operating expenses, camp construction/repair projects and endowment fund.

With the completion of facilities improvements, the distribution of natural gas revenue has shifted to 51 percent endowment, 42 percent annual operating expenses and 7 percent camp construction/repair. Building a sizable endowment fund as a long-term financial foundation was viewed as an important part of capitalizing on the uncertain ebb and flow of royalties.

"We're aware that gas revenue is a temporary situation," Carman said.

G&FC Royalties

Four years ago, the Arkansas Game & Fish Commission struck a $29.5 million deal to lease 11,500 acres in its Gulf Mountain and Petit Jean River wildlife-management areas.

The most lucrative part of that deal is a $28.3 million lease on about 4,000 of the 14,000 acres in the Scott Henderson Gulf Mountain Wildlife Management Area, about 12 miles southwest of Clinton.

This Van Buren County property was part of the $4.75 billion acquisition of Chesapeake Energy Corp.'s Fayetteville Shale assets in 2011 by Australian conglomerate BHP Billiton Ltd.

"Everyone thought it would be a super, super boom, but we were real restrictive in our leases," said Loren Hitchcock, director of the Game & Fish Commission. "We only granted access to the gas companies for certain times of year, working around hunting season."

About 99 percent of the money from the Chesapeake/BHP lease has been earmarked or spent, according to Hitchcock.

"The biggest thing that hasn't been spent is the $14 million set aside to retire a bond issue," he said. "The earliest we can do that is July 2014."

The windfall generated about $5 million spent on deferred maintenance items, about $4 million to purchase property across the state, $3 million for the Minimum Flow Project on the White River, $1.5 million to help pay for the Bayou Meto Project and $1 million to help fund the Arkansas Water Plan.

The Bayou Meto Project, overseen by the U.S. Army Corps of Engineers, has two main points of emphasis: conserving aquifer groundwater and controlling flooding in the Bayou Meto Wildlife Management Area.

Pumping stations will improve irrigation for area farmers with water from the Arkansas River and allow for better water control on public hunting land to protect timber and wildlife habitat.

"As that job progresses with the federal government, we've committed to provide $8 million over the life of the project," Hitchcock said.