Barnett Shale related stories in Explorer's October 2007 issue
Locals Reaping Benefits
Hot Barnett Play Creating Wealth
The Barnett Shale natural gas play has become so prolific it appears to have taken on a life of its own.
Indeed, there’s speculation aplenty it may become even bigger than the generations-old, giant Hugoton gas field in Kansas.
What’s especially unique about the Barnett play is that a major piece of the action is in a highly urbanized area. In fact, there are close to 500 wells within the Fort Worth city limits, and predictions are this number will double by 2010, according to noted economist M. Ray Perryman, CEO of The Perryman Group (TPG), a Waco, Texas-based economic and research analysis company.
If this prompts you to envision a drilling rig stationed at each street corner in downtown Fort Worth as well as smack-dab in the middle of a homeowner’s flowerbeds, forget it.
Thanks to horizontal drilling technology, wells can be drilled at a considerable distance from the target reservoir with the unseen horizontal leg traversing the subsurface to the pinpointed location to tap into the natural gas.
An added plus: Multiple wellbores can be drilled from a single pad, further reducing the footprint.
About 177 companies have operations in the Barnett Shale, and operators continue to expand the play to the south and west, with varying results, meaning the real action remains in the general Fort Worth Basin region – in fact, 14 counties in north and central Texas hosted 99 percent of the drilling in 2006.
Overall, Perryman noted, thousands of wells are producing hundreds of billions of cubic feet of natural gas annually from the Barnett.
Drill Here! Drill Here!
Given the urban nature of the bulk of the activity, it is noteworthy that an array of area chambers of commerce joined with a sizeable number of industry participants to host a recent Barnett Shale Expo in Fort Worth. The objective of the free event was to involve and educate the public concerning the numerous aspects of the play.
Both the citizenry and the local government bodies are reaping humongous benefits from the Barnett, according to a recently completed study conducted by TPG and commissioned by the Fort Worth Chamber of Commerce.
Perryman presented the results at the Expo.
The numbers are eye-popping enough that even a hard-core NIMBY (not in my backyard) might be convinced to rethink before voicing the usual emphatic “No!” to oil and gas drilling in certain other domestic areas, despite their potential to yield badly needed “homegrown” hydrocarbon supplies.
When summing all major categories of stimulus associated with the Barnett Shale, the result is a whopping $5.164 billion in annual output and about 55,385 permanent jobs, according to Perryman.
Not surprisingly, the bulk of the impacts stemming from the Barnett activity are spawned by exploration and drilling. Perryman noted the typical annual impact of activity over the next 10 years is expected to include more than $7 billion in output and 64,375 jobs in the Barnett Shale region.
The projected average annual impact of Barnett activity overall may well be more than 108,000 jobs and $10.4 billion in output per year through 2015, according to Perryman. Given that many industry observers predict activity in the play will continue for another 20 to 30 years, or even much longer, the math tends to become mind-boggling.
A Populist Play
It is noteworthy that this play is not a scenario where the rich get richer, and all others must continue making do as always. In fact, the fallout in terms of financial impact and improved quality of life reaches citizens across the socioeconomic spectrum .
Myriad factors make this possible:
- Property taxes paid on oil and gas properties and enhanced retail sales and real estate development are the two primary sources of income impacting local taxing entities.
- Cities, school districts and others receive royalties and bonus payments.
- Severance taxes collected by the state of Texas in 2006 tallied $165.4 million.
- Permitting and other fees are paid to local governing bodies.
- Other kinds of levies include hotel/motel occupancy taxes.
- Companies involved in exploration and development in the Barnett are donating millions of dollars to local charities.
Varying organizations have benefited outright from the play, including:
- The American Cancer Society – sold mineral rights to donated land for about $5 million.
- Area Girl Scouts – leased mineral rights to drill beneath a summer camp.
- A local church – received a signing bonus of $21,000 to allow drilling under its property.
Perryman noted TPG estimated the overall direct and indirect fiscal contribution (excluding royalty and lease payments to public entities) of Barnett Shale activity totaled about $718.6 million in 2006. This included $490.9 million in state revenues and $227.7 million to local governments.
The aggregate amount is expected to exceed $1 billion per annum in the future.
Not surprisingly, this financial bonanza comes with some trade offs – after all, drilling activity is accompanied by its own considerable baggage, so to speak.
Increased truck traffic, noise and water usage go hand-in-hand with oil and gas drilling, and the Barnett is no exception – and these issues can pose particular challenges when the action occurs in urban areas.
Perryman reported, however, these downside elements are, in most instances, being dealt with to minimize any lasting effects.