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The latest EIA’s release of natural gas production statistics once again highlighted the surprising resilience of the U.S. gas supply. Despite the dramatic reduction in drilling activity, the Lower 48 production stayed essentially unchanged in May and June. Among notable details, the report shows that Louisiana natural gas production increased in June by 0.25 Bcf/d or 3.0% as new wells came on line and production resumed from some shut-in wells. This follows a 2.0% increase in May, based on the revised data.

The Louisiana data is important as it is dominated by volumes from the Haynesville shale (in my estimate, the field accounts for over two thirds of total Louisiana gas production). While the increase is minor on the U.S. scale, it is nonetheless notable, for two reasons.

Arguably, the Haynesville is the economically marginal field in the U.S. natural gas supply “merit order” and its volume dynamics can be viewed as a barometer of the aggregate gas supply direction. Indeed, if production from a very large economically marginal field (that accounts for close to 9% of total Lower 48 production) is not showing signs of decline, it is difficult to expect volume contraction from more economic fields. In this regard, the EIA report indicates that as of June, the inflection point in the U.S. natural gas fundamentals was yet to be achieved. The report yields no empirical evidence in favor of an imminent price recovery thesis. In June, the market continued to be very well supplied, and therefore the sub-economic price remained necessary to incentivize supply contraction. EIA’s data comes with a two-month lag. However, given the large storage surplus combined with a massive backlog of shut-in production and wells waiting on completion or tie-in, two months would not have been sufficient to turn the situation around. In my opinion, the report supports the view that weak natural gas price environment may persist, most likely through the end of the year.

The Haynesville production data also manifests a striking breakdown in the relationship between production volumes and active rig count that traditionally has been an important leading indicator in natural gas supply models. The Haynesville volumes have remained mostly immune to the dramatic reduction in drilling activity. The field’s rig count peaked two years ago at around 186 rigs and currently stands at 30 horizontal rigs, according to Baker Hughes’ latest (September 7) report. By some estimates, the rig count may in fact be even lower. EXCO Resources (XCO) estimated the number of active rigs at 25 as of August, and at least one scout report put the rig count at 23 as of last week.

Given the steep hyperbolic decline typical of shale wells, one would expect the sharp cut backs in drilling to have already caused the field’s production to roll over. Surprisingly, this has not been the case. The Haynesville volumes did contract by approximately 0.6 Bcf/d during the months of January and February, mostly as a result of massive production shut-ins by Chesapeake Energy (CHK) and EnCana Corporation (ECA), two very significant operators in the field. However, by June half of the lost output appears to have been restored. Additional production volumes are likely to return online during the second half of the year.

Based on my analysis of several operators’ field development economics in the Haynesville, including EnCana, QEP Resources (QEP) and EXCO Resources, it appears that a NYMEX price of $3.0-$3.25 per MMBtu is currently the cost-of-capital breakeven range at the well level within the field’s core. While development economics are improving due to declining service costs in the area and possible proliferation of the longer lateral wells, a higher natural gas price is clearly required to revive drilling activity in the field. In my analysis, development economics become compelling above $4.00 per MMBtu in the field’s best areas.

There is little doubt that with the field’s rig count below 25, and falling, the Haynesville production will soon start showing signs of decline. However the decline is likely to be much slower and shallower than is often portrayed by Wall Street research.

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Oil and natural gas exploration company QEP Resources Inc (QEP.N) said one of its units has agreed to buy crude oil properties in North Dakota from multiple sellers for about $1.38 billion in cash to grow its core acreage in the Williston Basin.

Dwindling natural gas prices have pushed oil and gas companies to shift focus to more lucrative oil and natural gas liquids. In the April-June quarter natural gas prices have fallen 46 percent from last year to average $2.40 per million British thermal unit.

The sellers include Energy company Unit Corporation (UNT.N) and Black Hills Corp (BKH.N).

QEP expects the transaction to close by September 27 and add to earnings in the fourth quarter.

“We expect the growth potential of these assets to have a significant impact on our overall production and more specifically on our crude oil production,” QEP Chief Executive Chuck Stanley said in a statement.

The properties, which are located in Williams and McKenzie counties of North Dakota, have an aggregate net proved and probable reserves of about 125 million barrels of oil equivalent, the company said in a statement.

The transaction will raise QEP’s net acreage in the Williston Basin to about 118,000 acres.

Denver-based QEP raised its full-year adjusted core-earnings forecast to between $1.40 billion and $1.45 billion from its earlier forecast range of $1.35 billion to $1.40 billion.

QEP also raised its production outlook to between 310 billions of cubic feet equivalent (bcfe) and 315 bcfe from its prior forecast range of 305 bcfe to 310 bcfe. The company raised its annual budget to between $1.50 billion and $1.55 billion from $1.45 billion to $1.50 billion earlier.

Shares of QEP, valued at $4.83 billion, closed at $27.18 on the New York Stock exchange on Thursday.

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The key argument often used by natural gas bulls is that the dramatic reduction in rig counts in the dry gas producing shales will translate into a rapid drop off in supply and lead to the price recovery toward the $5 level, and possibly higher. The Haynesville shale, where the rig count has declined from the peak of over 180 rigs two years ago to approximately 27 currently, is often presented as the most compelling evidence supporting that argument.

The key argument often used by natural gas bulls is that the dramatic reduction in rig counts in the dry gas producing shales will translate into a rapid drop off in supply and lead to the price recovery toward the $5 level, and possibly higher. The Haynesville shale, where the rig count has declined from the peak of over 180 rigs two years ago to approximately 27 currently, is often presented as the most compelling evidence supporting that argument.

The view has been advocated by several prominent industry CEOs, including Chesapeake’s Aubrey McClendon and Ultra Petroleum’s (UPL) Michael Woodford. During Ultra’s 2Q earnings conference call on August 2, Michael Woodford re-iterated his macro perspective on natural gas: “Capital is being withdrawn from natural gas investment as seen in the rig count reduction and pressure pumping softness. Production lags capital expenditures and the decline in production is imminent. We see $4 gas in 2013 and $5 gas in 2014.” With regard to Haynesville specifically, he commented: “We have a view that says: production supply is about to shrink pretty rapidly. I think there are some comments out yesterday, with some companies that announced and talked about the Haynesville, that they would see a 10% per quarter reduction in their production. I think it is plus or minus 40% for the year. If you apply that to the 6 Bcf per day of Haynesville production, it is 2.5 Bcf per day of annual rate reduction, so I think we are about to see a drop off in supply.” Michael Woodford was referring to the earnings callremarks by QEP Resources (QEP) the night before.

2.5 Bcf per day is a big number, particularly given that Haynesville is just one producing field of many, albeit a significant one. If that rationale held, the $5 natural gas outlook would probably be conservative. However, a more rigorous look at the Haynesville operating data leads to somewhat different conclusions.

In less than four years since its discovery announcement, the Haynesville production went from zero to almost 7 Bcf per day, by some industry estimates, or over 10% of the total US natural gas production, demonstrating the exceptional productivity of this field as well as the scalability of the supporting operational infrastructure including oilfield services, gathering systems, and pipeline off-take. The rig count peaked at about 186 rigs during the summer of 2010 but has been in a steady decline ever since. There are currently approximately 27 rigs working in the play, about evenly split between the Louisiana and Texas portions of the play. Of these rigs, approximately 11 rigs, including 8 run by Anadarko (APC), are focusing on the liquids-rich part of the Haynesville, mostly in Panola County of Texas. The other approximately 16 rigs are targeting dry gas.

Based on the analysis of the well distribution profile by vintage, I estimate that the field-wide base production decline is currently in the 2.5%-3.0% per month range. Applying the decline rate to the estimated base production of 6.5 Bcf/d, the base production drop off equates to 165-195 MMcf/d per month. How many new wells per month would it take to offset the base decline?

For illustrative purposes, let’s assume that half of all wells are being completed in the liquids-rich area or in the less productive Tier II part of the play (to hold acreage) with an average first-month restricted dry gas flow rate of 4.5 MMcf/d per well, while the other half of the completions are concentrated in the dry gas sweet spots and flow at an average first-month restricted rate of 7.5 MMcf/d (my analysis of recent completions data leads me to believe that these assumptions are conservative). This translates into a total of 27 to 33 wells that need to be put in-line per month to maintain the base production flat. In a pad development mode, one rig can yield as many as 10 wells per year. In the delineation mode, rig productivity is lower and I assume a yield of 8 wells per rig-year. These calculations result in a total of 36 to 45 rigs required to keep the production flat, assuming no completions are deferred. These figures will likely decline with time as the operational productivity and completion techniques continue to improve.

The graph below illustrates this analysis. It shows the number of wells added to the “producing” category for the past two years in the Louisiana part of the play (the Louisiana Haynesville data are more available and consistent than the Texas Haynesville data). During that period, the producing well count in the Louisiana Haynesville went from approximately 570 at the end of July 2010 to approximately 2,038 at the end of July 2012. Data is subject to frequent adjustments and reporting delays and therefore should be thought of as approximate. The red line on the graph shows the calculated number of wells that would have been required to be brought to sales during each month in order to keep the Louisiana Haynesville production flat at that time.

During the period from August 2010 through January 2011, the number of new producing wells averaged over 70 per month, or four times the minimum number of new wells required to keep the production flat. As a result, during that period the aggregate production from the field showed strong growth.

Well additions slowed in February 2012 and crossed below the minimum required new wells line in June, for the first time since the field’s inception.

The analysis implies that the field’s production should have grown all the way through May 2012, although the growth pace would have slowed substantially at the beginning of the year. In actuality, Haynesville pipeline deliveries peaked in November-December last year, with the field’s production declining by approximately 0.4 Bcf/d during the first quarter. The difference to the model is explained most likely by the January 2012 decision by Chesapeake (CHK), the largest operator in the field, to curtail as much as 1.0 Bcf/d of its Haynesville and Barnett production throughout the year, with as much as 0.5 Bcf per day curtailed in January or possibly even earlier. Also in January, Chesapeake announced the decision to defer new well completions and pipeline connections whenever possible. Other operators may have joined Chesapeake with similar measures as natural gas prices continued to roll over.

Another important factor in this equation is the inventory of wells waiting on completion or pipeline connection. In the Louisiana part of the play that number stood at approximately 250 wells at the end of July 2012, according to Louisiana Department of Natural Resources (LDNR). In light of the math presented above, this is a significant backlog. Assuming for illustrative purposes that 100 wells, or 40% of the total inventory, will be brought to sales within the next 12 months, the rig requirement is effectively reduced by approximately 10 rigs during that period. While the backlog in the Texas portion of the field is difficult to estimate, it is clear that it is also sizeable.

The staggering conclusion of this analysis is that the 27 rigs currently working in the Haynesville, in combination with some reduction in the drilled but not producing well backlog and the unwind of the production curtailments, may be sufficient to keep Haynesville production at its current level for at least a year, or even longer.

The natural gas industry needs the Haynesville and other dry gas fields to reduce their contribution to the total supply so that the rapid production growth from the more profitable liquids-rich areas can be accommodated. Therefore, more rigs must go on the sideline in the Haynesville and elsewhere so that the production can show tangible declines. That is unlikely to happen with natural gas prices above $4. At that price, dry gas sweet spots in the Haynesville can deliver solid returns (30%+ IRR at the well level, in my estimate). The liquids-rich part of the field will be even more profitable. In addition, the economics of the play will likely continue to improve, due in part to the lower services cost, but more importantly, as a result of the better wells being drilled. Encana (ECA) reports that it has already reached its cost of supply target in Haynesville and can drill economic wells (9% rate of return) even at $3 Henry Hub.

With the well productivity like in the Haynesville, $5 natural gas may not be a realistic economic assumption for the foreseeable future. $4 may also prove to be unsustainable, despite the recent strength of the forward curve.

Currently active rig count in the Haynesville shale by operator:

• Anadarko Petroleum: 8 rigs
• Exco Resources (XCO): 5 rigs
• Petrohawk / BHP Billiton (BHP): 5 rigs
• XTO Energy/ExxonMobil (XOM): 4 rigs
• Chesapeake Energy: 2 rigs
• EOG Resources (EOG): 1 rig
• Royal Dutch Shell (RDS.A): 1 rig
• Valence Operating (private): 1 rig

Most active operators in the Louisiana portion of the Haynesville shale by the number of producing wells to date (% of total):

• Chesapeake Energy / JVs with Plains Exploration (PXP) and Goodrich Petroleum (GDP): 30%
• Petrohawk / BHP Billiton: 11%
• EXCO Resources: 11%
• Encana: 11%
• Royal Dutch Shell : 6%
• QEP Resources: 5%
• Comstock Resources (CRK): 5%
• El Paso / Apollo Group (APO): 5%
• EOG Resources : 2%

Companies that have substantial leaseholds in the play but have no rigs running at the moment:

• Devon Energy (DVN)
• Forest Oil (FST)
• GMX Resouces (GMXR)
• SM Energy (SM)
• Goodrich Petroleum

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Gregory Kallenberg, who made one of the first documentaries on the natural gas boom, has returned with a series of short films, called the Rational Middle Energy Series, which were introduced last week at the 2012 Aspen Ideas Festival.

The Rational Middle Energy Series is a set of several 10-minute films that discuss the role of energy and the challenges of meeting energy needs, while also addressing  environmental and economic concerns.

“The films are trying to provide balanced information for a public that needs to know about an incredibly important topic,” Kallenberg said in an interview with the Houston Chronicle. “My feeling about our energy future is that it has to be sustainable and affordable and as environmentally friendly as possible. Energy is so entwined in our lives — we need to start discussing how to create an energy future.”

The first three films — “What’s the Rational Middle”?, “Energy 101″ and “What’s At Stake” –  premiered at the Aspen festival and are also available on a public website,www.rationalmiddle.com. Kallenberg expects to launch the next short film on July 11 in Shreveport and then release a new film each week throughout the summer.

The message behind the films, Kallenberg explained, is that the United States stands to gain by trying to depolarize the discussions about energy.

“I think that there is this natural distrust that has always existed between certain elements of the environmental side — that the energy industry will never deliver energy in a fair and responsible way — and the energy industry, which has a natural defensive posture,” Kallenberg said. “Those are the high, shrill voices that are out there, but we are entering this amazing time, where people are sick of it. What the rational middle wants to do is get to place where you understand what the real risks are of an industrial process like hydraulic fracturing.”

Kallenberg said that the inspiration for the series came while he was working on his first energy-related documentary, Haynesville, which explored how the development of the Haynesville shale impacted various people and communities in Louisiana.

“When I started working on Haynesville, I saw that many people were confused and underinformed or misinformed,” Kallenberg said. “One of the things we are trying to do is to back it up and discuss what we consider the real risks. Drilling is an industrial process – it is a disruptive process. There are other things you have to watch for – what you have to be vigilant about is the construction of the well, that the casing is sound, and that some of the chemicals are not spilled on the surface. But if the gas industry does their job right, I am convinced there is a way to make the hydraulic fracturing pretty safe.”

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A natural gas gathering system located in the village of Ashland was dedicated today by owner Chesapeake Energy with village residents and elected officials in attendance.

Called the Football Gas Gathering System (GGS), the facility will transfer natural gas to interstate pipelines then distribute it to other parts of the country. It’s located on a recently completed six-acre site, where up to 20 million cubic feet of natural gas per day will be gathered and transported from three wells.

The system got the name Football GGS because of its shape. “In surveying the area from aerial shots, it resembles the shape of a football – thus the name,” said Katie McCullin, media relations and corporate development manager.

In addition to building the Football GGS, Chesapeake also made improvements to a quarter-mile of Coffee Crossing Road off state Highway 153 that leads to the site.

The village of Ashland is not reaping any financial benefit from the facility, but Mayor Gahagan Lee welcomes it just the same.

The village owns some property but none where the site is located. And the village does not have a tax.

“But we’re proud to have it here. I just haven’t figured out a way for the town to get any money off of it,” Lee joked.

He added: “Maybe one day we can turn it into some employment for our local people. … It all takes a while. But at least there’s activity here; that’s a plus. We’re proud to have it here. Chesapeake has been a good neighbor.”

“Without question, the Haynesville Shale bodes well for the village of Ashland, Natchitoches Parish and the state,” Paul Pratt, Chesapeake’s director of corporate development, said in a news release. “We are very excited to make this investment in this area. The Football GGS clearly demonstrates our commitment to a long-term presence in the Haynesville Shale.”

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BHP Billiton is accelerating the recovery of 1.5 billion barrels of liquid hydrocarbons from the Eagle Ford and Permian fields in the US as it attempts to avoid a multibillion-dollar write-down of its US shale assets.

BHP petroleum chief Mike Yeager yesterday said the recovery target had been increased by half a billion barrels in the past six to eight months and he extolled the company’s $US20 billion acquisitions of Fayetteville and Petrohawk, which had given it a premium position on the ”unique” Haynesville shale play, the largest gasfield in the US.

Mr Yeager said liquids at Eagle Ford would make up half of production volume – and more than 80 per cent of revenue – with BHP targeting 300,000 barrels of oil equivalent a day within five or six years.

”We’re going to bring it forward in a big way,” he said.

Another 100,000 barrels of oil equivalent a day would flow from the Permian field, which was 80 per cent liquids. Combined, the two fields would produce 250,000 barrels of liquids a day and ”$US100 barrels are going to flow through to our company”.

The forecast revenue would more than offset the slump in US gas prices after the fourth-warmest winter in US history, and would feed into a valuation of the business when BHP ruled off its accounts on June 30.

Analysts at investment banks including Citi and Credit Suisse have said there may be a US shale write-down of $US2 billion or more, but yesterday Mr Yeager said BHP would factor in its proprietary view on future gas and oil prices and ”let the accounting fall where it may”.

Mr Yeager said US gas prices had already risen by more than 30 per cent from their bottom. Gas prices had previously fallen below the cash cost of production and operators were pulling out of shale extraction. But he said that longer term, gas was the ”premium, preferred fuel of the future and it will rebound and it will be strong”.

While the Haynesville shale was an unconventional resource, he said it was ”big, fat, juicy unconventional”.

The advent of unconventional gas was a ”revolution” that would last 50 years and was bigger than the shift from 2D to 3D seismic surveys, or from shallow to deepwater drilling. ”It’s the biggest thing in my 33 years in this industry,” he said.

Mr Yeager was confident that the US would allow exports of LNG to Asia, potentially competing with Australian projects including BHP’s Scarborough field.

Mr Yeager said Western Australia was ”very, very expensive” and a floating LNG facility was an option at a smaller field such as Scarborough as it would save on the cost of pipelines, storage tanks and a jetty.

Mr Yeager said BHP had brought in some of its best shale experts from Petrohawk to study the potential for shale gas development in Australia.

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Two Bossier Parish Police Jury lawsuits that seek unleased mineral interest on parish property with producing well units could pave the way for a new parish revenue source.

The Police Jury sued KCS Resources and WSF in March for unleased mineral interests on two 7-acre areas along Highway 157 and Highway 154, respectively.

KCS Resources’ attorney Jamie Rhymes said his client did not wish to comment on the case. Attempts to reach counsel for WSF were not successful. The suits are test cases to determine whether a district court judge will agree that 1926 conveyance records gave the parish full ownership of the properties, entitling it to mineral interests from the well unit, said Patrick Jackson, parish attorney.

Every conveyance record is unique, he said. But if the court finds the instrument is successful in affirming parish land ownership, other suits could be filed. Jackson estimates the parish has unleased mineral interests on 70 parish-owned roads.

KCS and WSF are cited in the lawsuits as stating Bossier Parish does not own the land but was granted right of way. As a result, the two companies have not attempted to lease the property or compensate the parish for minerals extracted, the suit said.

A well unit is an area, set by the state conservation department, where a well can be drilled, said Gayle Hamilton, a retired Caddo Parish district court judge with expertise in oil and gas law. Well units for Haynesville Shale are typically 640 acres or one square mile, which means production from the unit’s well is shared between mineral owners inside the unit, according to the Louisiana Department of Natural Resources website.

In terms of the Bossier Parish properties, this means the parish would collect revenue from well production on its 7 acres minus production and well expenses if the court ruled in favor of the parish’s ownership interest, Jackson said.

Louisiana Oil and Gas Association spokesman Ragan Dickens said his organization has not experienced issues with other parishes suing for unleased mineral interests on property.

The situation boils down to a mineral right title dispute between a public body and private mineral owners, he said.

Steve Brown, administrator and engineer for DeSoto Parish, said his parish recently identified a few roads with unleased mineral interests.

The parish approached respective gas companies with their research on land ownership, he said, and they worked with them to begin getting revenue.

Caddo Parish, likewise, is evaluating its parish roads with unleased mineral interests, Caddo Parish Public Works Director Robert Glass said.

“This is a huge undertaking for us,” said Glass, who worked as a landman in the oil and gas industry for many years.

The parish does not have a specific plan for the money, he said; however, as stewards of taxpayer money, parish officials felt they had a responsibility to protect taxpayer mineral interests. He estimates there are 130 parish-owned roads with unleased mineral interests.

Bossier Parish plans to use any interest it receives — an unknown figure at this point — to repair roads being destroyed as minerals are being harvested, Jackson said.

He estimated it will take six months to a year to obtain a court ruling on the two suits.

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Robert Glass has been through his share of oil and gas booms and busts, and the historic slide in natural gas pricing to near-$2 and a 10-year low, which has brought gas drilling to a halt in Louisiana, doesn’t faze him.

Before becoming director of public works for Louisiana’s Caddo Parish, which includes the city of Shreveport, Glass clocked 18 years in the oil and gas business. In fact, the former oil and gas executive became a municipal official just as the Haynesville shale gas boom was flooding Louisiana with cash.

“It’s somewhat normal down here. It’s always been that way with gas. No matter how good it gets, two or three years down the road, it will turn,” Glass said.

In fact, Louisiana’s familiarity with this harsh cycle goes back to 1910, when the Pine Island oil and gas field was discovered in Caddo Parish. “Pine Island was one of the biggest oil fields in Louisiana. Back during that time there were good-sized boom cities and now they are little bitty towns lucky if they have a few thousand people,” Glass said.

Headline attraction to the energy boom is perennial. A headline from the New York Times three years ago about the Haynesville shale boom can today be replaced by tales of the North Dakota Bakken, where unemployment is a thing of the past, or stories about the Eagle Ford and Permian shale, where sports car dealerships spring up and real estate values rocket in formerly forgotten locales.

The press is less obsessed with the bust than the boom in the current narrative about the United States becoming the “new Middle East” thanks to the revolution in shale drilling technology. Yet the same Louisiana boom area that the New York Times profiled three years ago is weathering the natural gas bust rather well, even if Glass is no longer fielding calls from the national press.

In fact, Caddo Parish is proving to be an example of fiscal discipline that the E&P companies might be well advised to heed, led by the biggest driller in the Haynesville shale, Chesapeake Energy(CHK).

Chesapeake Energy is the poster-child for the shale land grab and the excessive leverage racked up by the company has made it a market laggard. Cash flow is a major concern and the company this year said it will sell as much as $10 billion to$12 billion in assets to cover its expenses. Caddo Parish, on the other hand, doesn’t have to sell a thing, including any of its remaining oil and gas acreage.

The aggressive mentality that led Chesapeake Energy to amass the second-largest collection of shale assets in the U.S. — second only to Exxon Mobil(XOM) — is on display once again, even as the boom has gone bust. Chesapeake has twice the level of debt of a company 27 times its size in Exxon Mobil.

This week, Chesapeake Energy officials were back in Caddo Parish to make a bid on Haynesville acreage. The price per acre being offered by Chesapeake says all that needs to be said about the cycling from boom to bust.

In July 2008, just as the press was chasing the Haynesville boom story, the high bid for shale drilling acreage in Caddo Parish was $30,212 per acre and a 30% royalty. By April to July 2010, Caddo Parish was accepting bids at $6,867 and $7,537, both with a 25% royalty.

Chesapeake Energy’s latest offer? Not to exceed $1,500 per acre and a 25% royalty. Glass said that twice in the recent past Chesapeake Energy came to Caddo Parish with declining bids of $5,000 and $3,000 per acre before the latest drop to $1,500.

It’s not just Chesapeake’s insatiable need for acreage that is on display in the Haynesville negotiations (though the company can make the case that it is now a deep value buyer, opportunistically acquiring for a better day). It’s also a sign of the parish’s fiscal discipline that it doesn’t have to say yes to Chesapeake at natural gas bust prices.

“The last two times the parish elected not to do it, because the price was not high enough and unless they pay a premium the parish will just sit on the acreage, ” Glass said. Glass expected that the parish would likely reject Chesapeake’s latest offer, too. “We don’t need the money. The parish can hold out because it is financially strong.”

Over the three-year boom that hit its high point in 2008, Caddo Parish was able to amass a $50 million reserve fund. The fund stood at “a few thousand dollars” before the boom. Royalty checks during the boom had averaged as high as $1 million per month for the parish. Last year, royalty checks averaged around $350,000 a month, and in the past few months, the royalty checks have come down to $150,000 to $200,000, Glass said.

Yet Caddo parish still has about $48 million in the reserve trust. Unlike Chesapeake Energy, where critics contend the board is beholden to CEO Aubrey McClendon, in the parish 8 of 12 commissioners must agree to release any money from the trust.

The parish viewed the days of the record $30,000 bid per acre as a one-time bonanza. “We knew it wouldn’t happen again and we’ve been fortunate in trying to protect it,” Glass said.

It’s a conservative approach to managing the gas boom windfall that has led to a local bond rating higher than the state’s rating, and an unemployment rate that remains lower than the national average at 6%. It helps Shreveport that its workforce is diversified, with a burgeoning “medical mile” and an Air Force base.

The situation for Caddo Parish has changed, nonetheless. While the head of sales at the local European sports car dealership said he hasn’t seen any impact of the gas bust yet, and real estate values are stable, Glass’s own son is now working in Pennsylvania’s Marcellus shale — where economics still support gas drilling. He has seen friends move to southwestern Texas for jobs in the Eagle Ford shale boom, also.

In fact, while the lease deals have stopped in Caddo Parish, Glass still finds himself busy in advising parish officials located in new speculative shale plays like the Tuscaloosa Marine, on how to deal with oil and gas companies.

“Some of the parishes are not used to the boom and bust and interest from oil and gas companies. I’ve talked to several in the Tuscaloosa Marine shale. Lots of them don’t know some of the things they need to know to protect themselves,” Glass said.

Back in Caddo Parish, Glass said there are still convoys going out to the well sites, and in the grander scheme of local development, more drilling now than before the boom, even if the most recent craziness has died down. Wells still have to be serviced even if, year-over-year, rig count in the Haynesville is down by 55%. Chesapeake Energy, specifically, has been good about offering relocation to workers if they don’t have a job in the local drilling operation anymore, though no workers are forced to move.

What is known to all who lived through, and benefited from, the 2008 boom in Caddo Parish, is that it’s done. “Everyone knows the drilling boom is over but everybody isn’t depressed from what I can gather. We haven’t squandered the money,” Glass said.

There’s not only a lesson in that for the other parishes, but for Chesapeake Energy.

original article