Louisiana will profit from shale

State officials say a north Louisiana natural gas cache is continuing to generate income for state government.

State Natural Resources Secretary Scott Angelle said the Haynesville Shale field is helping flatten out the rate of decline in revenues from oil and gas production.

But the state is maybe five years away from the tax income that would help prop up state revenues, Angelle said.

New drilling techniques unearthed in north Louisiana possibly one of the largest natural gas fields in history.

State government receives taxes from natural gas extraction plus royalties from production.

Mineral revenues directly contribute more than $1 billion — down from nearly $2 billion in 2008 — to the $8 billion raised from Louisiana sources in the state’s nearly $30 billion annual spending plan, according to the Division of Administration appropriated budget analysis.

The state coffers also benefit from taxes on sales of equipment and goods as well as on income from individuals and companies working the fields. Plus, the state receives revenues from leasing state-owned lands to prospectors.

The days of oil prices creating huge budget surpluses for the state appear to be over for now based on economists’ projections. In the state budget year that starts July 1, a nearly $1 billion shortfall is projected in the revenue that the state uses to pay for expenses.

Angelle said Louisiana accounted for 15.2 percent of the nation’s natural gas drilling activity in late October. Just two years ago, before the Haynesville Shale cranked up, Louisiana only accounted for 7.8 percent of the nation’s drilling activity, he said.

“We have shale fever and I think it’s here … America hopefully will embrace natural gas use,” he said.

But Haynesville Shale isn’t pumping $100 million into state coffers like it did a year ago following a lease sale for state land, according to state mineral board reports.

The revenue still is flowing despite the recession and a dip earlier this year in natural gas prices, according to mineral leases and state officials.

At the moment, the return for the state is modest with bigger payouts a few years away, which officials say is not soon enough to help with a staggering state budget shortfall.

However, state officials like Angelle said they are encouraged by the continued interest in Haynesville Shale.

A state mineral lease sale last month produced $12.1 million in bonuses on 29 leases — 23 of them in north Louisiana, according to state mineral board reports.

A second natural gas cache in north Louisiana — the mid-Bossier Shale — also is generating excitement. The mid-Bossier Shale is located above the Haynesville Shale.

Haynesville is a huge natural gas cache that is mostly in the parishes of Caddo, Bienville, Bossier, DeSoto, Red River and Webster.

The shale began as muddy water that led to plant formation and then methane gas over millions of years.

The find turned farmers into millionaires as companies leased land for drilling.

The state also is benefiting, mainly from leasing land. State government eventually will collect severance taxes on the gas extracted from the ground as well as royalties on production.

State Sen. Robert Adley, R-Benton, said activity slowed when natural gas prices dipped earlier this year.

Prices have doubled since September, spurring more drilling, he said.

“They’re still drilling up here … The activity is very prominent here. They’re still robust,” Adley said, referring to companies’ activity.

Angelle said 159 rigs were drilling last month in Louisiana. Of the rigs, 109 were in north Louisiana, he said.

“Clearly, a great percentage of the rigs working in Louisiana are working in north Louisiana,” Angelle said.

Getting to the natural gas in the Haynesville Shale is a cumbersome process.

Wells are drilled down about two miles and then are bored horizontally about 4,000 feet. A single well requires 3 million gallons of water to release — or fracture — the natural gas from the rock.

Economist Loren Scott studied the economic impact of Haynesville Shale for a report  he published in April.

He concluded that, in 2008, the discovery generated:

• $2.4 billion in new business sales.
• $3.9 billion in new household earnings.
• $153 million in state and local tax collections.

Scott noted that the number of rig counts in north Louisiana dropped in March because of the recession and falling natural gas prices.

Adley said each rig produces about 180 jobs, which in turn increase sales and income tax revenue.

He said Haynesville won’t resolve the state’s financial problems, but will push up revenue.

Because the companies have to drill vertically and then horizontally to tap the natural gas, the wells are called horizontal and they get a two-year state severance tax exemption.

Angelle said the state is three to five years away from substantial severance tax income on the activity.

He said major companies such as Shell and ConocoPhillips are buying shares in Haynesville and no dry holes have been drilled to date.

“That tells me it is the real deal,” Angelle said.

http://www.2theadvocate.com/news/69499402.html?index=27&c=y

ENCANA DONATES $95,000 TO DESOTO PARISH NON-PROFITS

Eight Organizations Benefit From EnCana’s Community Investments in October

MANSFIELD – EnCana Oil & Gas (USA) has given grants to eight DeSoto Parish non-profits during the month of October totaling more than $95,000.  Presenting donations ranging from $6000 to $20,000, EnCana’s grants will serve to improve equipment and services throughout the Parish that impact community wellness, emergency services and educational needs.

During the October 26^th City Council meeting, EnCana’s Ron Stark, Operations Lead, and Shawn Helm, Community Relations, presented the Mansfield Police and Fire Departments each with $10,000.  “EnCana’s gift has helped us purchase a much-needed off-road utility vehicle and storage shed,” said Captain Gary Hobbs.  “This vehicle will be used for search and rescue as well as community events.  We can’t thank EnCana enough for their contribution.”

Mansfield Fire Chief Lee Shaver added, “EnCana’s generous donation has allowed us to replace air packs that have outlived their service life of 15 years.  They’ve helped make our community a safer place to live and we welcome EnCana to the area in their efforts to explore our Haynesville Shale.”

The DeSoto Parish School Board and North DeSoto Elementary each received grants from EnCana.  The School Board will use its $8,000 grant to purchase the new stadium scoreboard at Logansport High School.  North DeSoto Elementary School – in celebration of their $18,000 grant for a new playground —  had a special assembly planned for EnCana when they arrived to present the check.  In addition to many cheers and a special sign that read “Thank you EnCana”, students presented EnCana Vice President Don McClure with a stack of “thank you letters” written by every student in the building. “We were touched,” said McClure.  “Those letters will be on display at our Coushatta office for years to come.”  McClure was visiting DeSoto Parish from EnCana’s U.S. headquarters in Denver.  “We understand our impact in this community and we just want to be good neighbors.”

DeSoto 911 services will be able to complete their building renovation and equipment upgrades in part due to EnCana’s $20,000 check received by Administrator Bruce Vanderhoeven.  “EnCana has answered a huge need in our community,” said Vanderhoeven.  “Their contribution has helped us expedite getting

ENCANA DONATES $95,000

ADD ONE

the new equipment online — something we plan to complete by the end of November .  We really appreciate EnCana’s involvement.”

Surgical patients at DeSoto Regional Hospital can be thankful for the $15,000 grant from EnCana to purchase a Ligasure Triad System.  “We appreciate EnCana’s commitment to Desoto Regional and to furthering our mission of personal, compassionate healthcare,” said John Yeary, CEO of DeSoto Regional Health System.  “Through the use of the Ligasure Triad system, our patients will experience decreased surgical and anesthesia time, leading to better patient outcomes.”

“Members of the DeSoto Chamber of Commerce will soon enjoy an outdoor courtyard thanks to EnCana’s $8,700 grant.  Chamber President Jim May said, “EnCana is helping our membership base by completing an outdoor courtyard attached to our facility.  We ran out of money last year when completing the building and were unable to finish the project.  Thanks to EnCana, we’ll now be able to finish it and have it ready for member functions as soon as possible.  We sincerely appreciate EnCana’s support.”

October ended with a $6,000 grant to HGM Community Development to purchase audio visual equipment.  Community Development offers free seminars and workshops to the region focusing on healthcare, education and personal finances.

About EnCana Oil & Gas (USA)

EnCana Corporation, one of North America’s leading independent natural gas companies, operates in the United States (U.S.) under its subsidiary, EnCana Oil & Gas (USA) Inc. and coordinates its operations from its U.S. headquarters in Denver, CO.  EnCana has operations in Colorado, Louisiana, Texas and Wyoming.

# # #

Presidential Honors
Shreveport Green recognizes Chesapeake Energy Corporation for support of environmental projects

On November 3, Shreveport Green presented Chesapeake Energy with its 2009 President’s Award for support of environmental projects in the Shreveport area.  Shreveport Green is a non-profit organization dedicated to improving the city’s environment and enhancing its economy through public education and community beautification, litter abatement, and recycling projects.

The prestigious award is given each year to companies displaying extensive involvement in community betterment projects and a strong commitment to the Shreveport area.

Chesapeake formed the Chesapeake Green Team to work closely with members of ShreveCorps to landscape public areas, stencil storm drains, assist with Shreveport’s recycling program, implement litter abatement programs in public spaces and perform home assistance projects for elderly residents on limited incomes.  The Chesapeake Green Team consisted of 12 high school and college students who earned valuable life skills and higher education scholarship funding during the summer.

During one of ShreveCorp’s Enrichment Days, Chesapeake exposed the students to our company and business and the critical role natural gas plays in America’s energy future.  Sarie Joubert, Chesapeake’s Manager of Public Affairs, spoke to the students on the benefits of using compressed natural gas for transportation and the positive impact CNG has on our environment.

As a Chesapeake employee, we know we’re more than a partner, we’re also a neighbor. We live in the towns where we operate and take pride in improving the places we call home. It is this knowledge which drove Chesapeake to give financial assistance to more than 375 college students across the country in 2008 and volunteer over 26,000 hours of service this past summer. These actions and this way of thinking set us apart and are the reason for any recognition received. At the core of Chesapeake’s values is a desire to be an involved corporate citizen and help to build community partnerships while working to improve and strengthen our communities.

Business briefs: Devon Energy announces large gas

well in Haynesville Shale

Posted Tuesday, Nov. 03, 2009

By DANIEL YERGIN AND ROBERT INESON

The biggest energy innovation of the decade is natural gas—more specifically what is called “unconventional” natural gas. Some call it a revolution.

Yet the natural gas revolution has unfolded with no great fanfare, no grand opening ceremony, no ribbon cutting. It just crept up. In 1990, unconventional gas—from shales, coal-bed methane and so-called “tight” formations—was about 10% of total U.S. production. Today it is around 40%, and growing fast, with shale gas by far the biggest part.

The potential of this “shale gale” only really became clear around 2007. In Washington, D.C., the discovery has come later—only in the last few months. Yet it is already changing the national energy dialogue and overall energy outlook in the U.S.—and could change the global natural gas balance.

From the time of the California energy crisis at the beginning of this decade, it appeared that the U.S. was headed for an extended period of tight supplies, even shortages, of natural gas.

While gas has many favorable attributes—as a clean, relatively low-carbon fuel—abundance did not appear to be one of them. Prices had gone up, but increased drilling failed to bring forth additional supplies. The U.S., it seemed, was destined to become much more integrated into the global gas market, with increasing imports of liquefied natural gas (LNG).

But a few companies were trying to solve a perennial problem: how to liberate shale gas—the plentiful natural gas supplies locked away in the impermeable shale. The experimental lab was a sprawling area called the Barnett Shale in the environs of Fort Worth, Texas.

The companies were experimenting with two technologies. One was horizontal drilling. Instead of merely drilling straight down into the resource, horizontal wells go sideways after a certain depth, opening up a much larger area of the resource-bearing formation.

The other technology is known as hydraulic fracturing, or “fraccing.” Here, the producer injects a mixture of water and sand at high pressure to create multiple fractures throughout the rock, liberating the trapped gas to flow into the well.

The critical but little-recognized breakthrough was early in this decade—finding a way to meld together these two increasingly complex technologies to finally crack the shale rock, and thus crack the code for a major new resource. It was not a single eureka moment, but rather the result of incremental experimentation and technical skill. The success freed the gas to flow in greater volumes and at a much lower unit cost than previously thought possible.

In the last few years, the revolution has spread into other shale plays, from Louisiana and Arkansas to Pennsylvania and New York State, and British Columbia as well.

The supply impact has been dramatic. In the lower 48, states thought to be in decline as a natural gas source, production surged an astonishing 15% from the beginning of 2007 to mid-2008. This increase is more than most other countries produce in total.

Equally dramatic is the effect on U.S. reserves. Proven reserves have risen to 245 trillion cubic feet (Tcf) in 2008 from 177 Tcf in 2000, despite having produced nearly 165 Tcf during those years. The recent increase in estimated U.S. gas reserves by the Potential Gas Committee, representing both academic and industry experts, is in itself equivalent to more than half of the total proved reserves of Qatar, the new LNG powerhouse. With more drilling experience, U.S. estimates are likely to rise dramatically in the next few years. At current levels of demand, the U.S. has about 90 years of proven and potential supply—a number that is bound to go up as more and more shale gas is found.

To have the resource base suddenly expand by this much is a game changer. But what is getting changed?

It transforms the debate over generating electricity. The U.S. electric power industry faces very big questions about fuel choice and what kind of new generating capacity to build. In the face of new climate regulations, the increased availability of gas will likely lead to more natural gas consumption in electric power because of gas’s relatively lower CO2 emissions. Natural gas power plants can also be built more quickly than coal-fired plants.

Some areas like Pennsylvania and New York, traditionally importers of the bulk of their energy from elsewhere, will instead become energy producers. It could also mean that more buses and truck fleets will be converted to natural gas. Energy-intensive manufacturing companies, which have been moving overseas in search of cheaper energy in order to remain globally competitive, may now stay home.

But these industrial users and the utilities with their long investment horizons—both of which have been whipsawed by recurrent cycles of shortage and surplus in natural gas over several decades—are inherently skeptical and will require further confirmation of a sustained shale gale before committing.

More abundant gas will have another, not so well recognized effect—facilitating renewable development. Sources like wind and solar are “intermittent.” When the wind doesn’t blow and the sun doesn’t shine, something has to pick up the slack, and that something is likely to be natural-gas fired electric generation. This need will become more acute as the mandates for renewable electric power grow.

So far only one serious obstacle to development of shale resources across the U.S. has appeared—water. The most visible concern is the fear in some quarters that hydrocarbons or chemicals used in fraccing might flow into aquifers that supply drinking water. However, in most instances, the gas-bearing and water-bearing layers are widely separated by thousands of vertical feet, as well as by rock, with the gas being much deeper.

Therefore, the hydraulic fracturing of gas shales is unlikely to contaminate drinking water. The risks of contamination from surface handling of wastes, common to all industrial processes, requires continued care. While fraccing uses a good deal of water, it is actually less water-intensive than many other types of energy production.

Unconventional natural gas has already had a global impact. With the U.S. market now oversupplied, and storage filled to the brim, there’s been much less room for LNG. As a result more LNG is going into Europe, leading to lower spot prices and talk of modifying long-term contracts.

But is unconventional natural gas going to go global? Preliminary estimates suggest that shale gas resources around the world could be equivalent to or even greater than current proven natural gas reserves. Perhaps much greater. But here in the U.S., our independent oil and gas sector, open markets and private ownership of mineral rights facilitated development. Elsewhere development will require negotiations with governments, and potentially complex regulatory processes. Existing long-term contracts, common in much of the natural gas industry outside the U.S., could be another obstacle. Extensive new networks of pipelines and infrastructure will have to be built. And many parts of the world still have ample conventional gas to develop first.

Yet interest and activity are picking up smartly outside North America. A shale gas revolution in Europe and Asia would change the competitive dynamics of the globalized gas market, altering economic calculations and international politics.

This new innovation will take time to establish its global credentials. The U.S. is really only beginning to grapple with the significance. It may be half a decade before the strength of the unconventional gas revolution outside North America can be properly assessed. But what has begun as the shale gale in the U.S. could end up being an increasingly powerful wind that blows through the world economy.

Mr. Yergin, author of the Pulitzer Prize-winning “The Prize: The Epic Quest for Oil, Money, & Power” (Free Press, new edition, 2009) is chairman of IHS CERA. Mr. Ineson is senior director of global gas for IHS CERA.

http://online.wsj.com/article/SB10001424052748703399204574507440795971268.html?mod=googlenews_wsj