By Jodee Bruyninckx
Feb 2009
Ft Worth Basin Reporter

When residents of the other 49 United States think of Louisiana, it is generally in terms of Bayous, Gators, Cajun food, Cajun French, New Orleans, and the Mardi Gras. While this an important part of our state, there also exists the rolling green hills of North Louisiana, which more resembles the typical southern countryside than the Cajun Boggy Bottoms of Deep South Louisiana. It is in those hills of Northwest Louisiana that becomes our focus today. Shreveport, Louisiana’s third largest city, experienced the oil boom in the 1970’s, complete with oil revenue flowing in and corporations employing thousands. Venues like Petroleum Tower and the Petroleum Club cropped up in downtown Shreveport and, like many areas, times were good and the oil business was even better, until the oil bust hit the region in the mid-1970’s. Many lost their jobs, their businesses, and their homes. Many left, finding employment elsewhere, while other oil and gas companies were able to stay afloat and ride out the storm. Fortunately, many of those companies are still here, still operating, still employing and contributing.

The oil and gas industry has a rich history in employing Louisiana’s citizens and serving as a main economic driver for this great state. According to a study by Dr. Loren Scott in July 2007, Louisiana is the number one producer of crude oil and the number two producer of natural gas in the United States. The extraction, refining, and pipeline industries supported $70.2 billion in sales to Louisiana Firms, generated over $12.7 billion in household earnings for Louisianans, and supported 320,280 jobs in the state in 2005(1).

Considering all this, most were not prepared for the “Shale Shock,” as it has been termed that has descended upon this region in the past year.

On March 24, 2008, Chesapeake Energy Corporation, the largest independent and third-largest overall producer of natural gas in the U.S. announced their Haynesville shale discovery in Louisiana: “Based on its geoscientific, petrophysical and engineering research during the past two years and the results of three horizontal and four vertical wells it has drilled, Chesapeake believes the Haynesville Shale play could potentially have a larger impact on the company than any other play in which it has participated to date(2).” For the past two years Chesapeake had quietly leased 200,000 acres in North Louisiana and, at the time, a leasehold acquisition effort underway with the goal of owning up to 500,000 net acres. They have since met that goal and more.

Since then, North Louisiana has become a hotbed of activity, as well as state and national focus due to the press surrounding the Haynesville Shale natural gas play. At the time of this publication, almost two dozen Operators are drilling the Haynesville Shale.

Technically speaking, the Haynesville Shale is a black, organic-rich shale of Upper Jurassic age that underlies much of the Gulf Coast area of the United States. “Haynesville Shale” is a drillers’ term for shale rock units within the Haynesville Formation. The Haynesville Formation is underlain by the Smackover Formation and overlain by rocks of the Cotton Valley Group.

Although experts have known for almost sixty years about the Haynesville Formation, due to its low permeability the Haynesville was originally considered to be a gas source rock rather than a gas reservoir. Like the Barnett, the Haynesville was once considered too costly to explore, but newer technology and processes have changed that, leading to a rush of activity as energy exploration companies began leasing property in north Louisiana in preparation for natural gas drilling and production. In light of that, local landowners’ bonus payments for selling leases have risen sharply.

Today, natural gas production from the Haynesville is taking place beneath northwestern Louisiana, southwestern Arkansas and eastern Texas. The most productive parishes have been Caddo, Bienville, Bossier, DeSoto, Red River and Webster Parishes of Louisiana, along with adjacent areas in southwest Arkansas and east Texas.

In recent months, due to the drop of natural gas prices, economic slowdown, and general saturation of drilling capacity per acreage already leased, the area has experienced a slow down in frantic leasing. However, while the frantic pace of leasing may have slowed down, the drilling activity certainly has not. Companies are moving ahead with their drilling operations and, as you can see from the Haynesville Well Map, courtesy of the Office of Conservation, there now are 235 permitted and 35 producing Haynesville Shale wells in the region(3). The results from these producing wells have been impressive. For instance, a December press release from Petrohawk Energy Corporation (NYSE: HK) stated: “(Petrohawk) has placed three additional Haynesville Shale wells on production at a combined rate of 73 Mmcfe/d, one with the highest reported initial production rate of any well in Petrohawk’s history(4).” This is exciting news for Petrohawk, for all Operators drilling the Haynesville Shale, and for the State of Louisiana.

This interest in tapping more of the natural resources in Northwest Louisiana has meant much to the state and local parishes in economic terms. In June 2008, Marjorie McKeithen, Secretary of the State Mineral Board, noted: “This is an extraordinary time for Louisiana, particularly in north Louisiana, where we are experiencing something akin to a modern day gold rush due to excitement about the Haynesville Shale discovery….(June 2008’s mineral) lease sale surpassed by more than double the bonus collections for the previous 11 months of FY 2007-08 combined, almost entirely because of activity in north Louisiana… 25 of the 38 leases awarded were from Caddo, Red River and Bienville parishes, totaling approximately $34 million in cash payments, and the average bonus per acre for these leases was over $13,400 per acre, while more typical prices in the past for north Louisiana have been around $400 per acre5.”
Currently, the state Department of Natural Resources has contracted with a local group to conduct an Economic Impact Study for the Haynesville Shale and I expect those numbers to be quite high. When Dr. Perryman conducted a similar study for the Barnett Shale and the Fort Worth area, he revealed a multi-billion dollar direct impact on the economy(6).

In September 2008, our organization, the Louisiana Oil & Gas Association (LOGA) opened a Shreveport office to help address the needs of our members in the Northern region of Louisiana. LOGA, known before 2006 as LIOGA, was organized in 1992 to represent the Independent and service sectors of the oil and gas industry in Louisiana, including exploration, production and oilfield services.
Due to the size of the play and increased focus from the media and local and state officials, it has been imperative to organize a coordinated, united Industry response. To promote this integrated approach, LOGA has coordinated the members drilling in the Shale to form the Haynesville Shale Exploration & Production Development Committee. This E&P Committee meets monthly to discuss best practices for this Play and solutions to the challenges before us. As an Industry group, we have been focusing on careful study of the best structure for training the needed workforce and for identifying the best alternatives to industry aquifer use. The water issue is critical in this region and we do not take that lightly. We are in the process of formulating an Industry Plan for Water Resources in lieu of using the Carrizo-Wilcox Acquifer, which many have concerns may be adversely affected by industry use for fracturing and production of the number of rigs in the area. Thoughtful and measured solutions on these issues will benefit both the region and the industry by providing lasting infrastructure and solutions.

Particularly for the Haynesville, as the drilling operations increase, so do questions from the public. LOGA is working to address those questions and work with our member companies to supplement their community outreach. In November, our area took a page from the Barnett Shale play and a Haynesville Shale EXPO was held in Shreveport with a huge turnout.

LOGA has established a web-based Haynesville Shale Education Center, which can be accessed at www.hsec.la. As the premiere source for Haynesville Shale information and education, the HSEC is monitored and updated by LOGA staff. Offering an interactive forum, submission of anonymous suggestions, tips, and concerns, the website is constantly updated with Shale news. LOGA will be hosting the Shale Classic at Southern Trace Country Club in Shreveport on Monday, April 13th. For more information, please visit our website.

Our region has been blessed with an abundance of natural resources, not the least of which is the Haynesville Shale. By working together, community and industry, we can ensure good stewardship of those resources and provide meaningful, lasting community partnership for Northwest Louisiana.

Citations:
1. Scott, Loren C, Ph.D. The “Energy” Sector: Still a Giant Economic Engine for the Louisiana Economy. July 2007. www.lmoga.com/ers.pdf
2. Chesapeake Announces Haynesville Shale Discovery and Seven Other New Unconventional Discoveries and Projects; Increases Capital Expenditures to Accelerate Development. Home page. 24 March 2008. http://www.chk.com/News/Articles/Pages/1121277.aspx
3. Louisiana Office of Conservation. Home page. 17 February 2009. http://dnr.louisiana.gov/haynesvilleshale/haynesville.pdf
4. Petrohawk Energy Corporation. Home page. 9 December 2009. http://www.petrohawk.com/news/?id=1233915
5. McKeithen, Majorie. Louisiana State Mineral Board Secretary. June 2008.
6. Perryman, M. Ray. Ph.D. Drilling for Dollars: An Assessment of the Ongoing
and Expanding Economic Impact of Activity in the Barnett Shale o Fort Worth and the Surrounding Area. March 2008. http://www.barnettshaleexpo.com/impactstudy.php

Don Briggs

LOGA President

In Marine News March 2009

http://dwp.marinelink.com/pubs/nwm/MN/200902/

Feb. 02, 2009 | KPEL

Don and Senator Michot discuss energy policy for the Louisiana and the US.

http://www.kpel1051.com/portals/laf/kpelfm/podcasts/Acadiana%20Live%20020209.mp3