Barnett Shale

Devon chief says drilling slowdown will continue

Devon Energy Corp. CEO Larry Nichols said Wednesday the company is reducing its natural gas drilling in the short-term until gas prices start to rebound. “We see absolutely no reason to continue to drill at this time and bring natural gas production on at this time, any more than we need to,” Nichols said at the company’s annual shareholders meeting. “It’s better to leave that gas in the ground and sell it next year, or in future years, when we can generate a greater profit for our shareholders.”

Devon has reduced its exploration and development capital budget to between $3.5 billion and $4.1 billion this year from $8.5 billion in 2008. Nichols said that 2009 continues to be a challenging year for the industry but that the largest U.S. independent oil and natural gas producer is well-placed to weather the economic downturn.
“While last year was a great year, this year is a tough year,” Nichols said, citing a steep decline in oil and natural gas prices during the second half of 2008.

Oil prices have doubled since March with some signs that the worst of the recession may be over and were hovering around $66 a barrel Wednesday afternoon on the New York Mercantile Exchange. Natural gas for June delivery tumbled 36.2 cents to $3.758 per 1,000 cubic feet after peaking last summer at $13.69 per 1,000 cubic feet.
Nichols said that natural gas prices will take longer to recover than will oil prices because of the current oversupply of natural gas.

 

-- Associated Press

 

 

McClendon expects Haynesville to be No. 1 by 2015

The Haynesville Shale formation in the U.S. South will become the country’s largest source of natural-gas production by 2014 or 2015, Chesapeake Energy Corp. Chief Executive Officer Aubrey McClendon said.

The formation in East Texas and northwestern Louisiana will, in turn, be eclipsed by the Marcellus Shale in West Virginia, Pennsylvania and New York by 2020, McClendon said today at an investor conference in Miami sponsored by Deutsche Bank AG and broadcast on the Internet. Chesapeake is the second- largest U.S. independent gas producer behind Devon Energy Corp.

The Barnett Shale in north-central Texas is the largest non-conventional source of gas in the U.S., Chesapeake said in its first-quarter earnings statement on May 4. It yielded about 1.4 trillion cubic feet of gas last year, 5.3 percent of U.S. production of the heating and power-plant fuel, according to the Perryman Group, a financial-analysis firm based in Waco, Texas.

Haynesville Shale gas production may peak at 4 billion cubic feet a day in 2014, or about 1.46 trillion cubic feet a year, consulting firm Wood Mackenzie said in a July 2008 report.

The Marcellus Shale may contain as much as 50 trillion cubic feet of recoverable gas, equivalent to more than two years of U.S. consumption, Terry Engelder, a geosciences professor at Pennsylvania State University, estimated last year.

-- Bloomberg News

Chesapeake has bidders for Barnett Shale stake

Chesapeake Energy is in talks with four bidders for a $500 million stake in its Barnett Shale properties in North Texas, the company said Wednesday. Oklahoma City-based Chesapeake also has letters of intent to put about $1 billion of gas-processing assets into a joint venture, Chief Financial Officer Marc Rowland said at an investors conference in Austin. Rowland didn’t identify potential partners or bidders. The deals would continue a string of transactions that the company has done, all generally aimed at providing it with additional cash or reducing future expenses at a time when Chesapeake and other producers are struggling to manage low energy prices and tight credit.

Deals "imminently about to close" include a so-called volumetric production payment of $500 million on Barnett Shale properties. Volumetric production payments call for a buyer to pay a fixed price upfront for a certain amount, or volume, of production from a particular property. Last year, Chesapeake did three similar deals for a total of $1.6 billion. In addition to the volumetric production deals, Chesapeake is also about to sell $300 million of other unidentified assets, Rowland said.

For more, see Thursday's Star-Telegram.

-- Jack Z. Smith

Quicksilver sells Barnett Shale properties for $280 million

Fort Worth-based Quicksilver Resources is selling 27.5 percent of its leasehold interests in the Alliance area in Tarrant and Denton Counties to the Italian oil company Eni for $280 million in cash. Quicksilver plans to use the proceeds to pay down debt. Quicksilver announced today that it is forming a “strategic alliance” with Eni to acquire and develop Barnett Shale natural gas properties “in an area covering approximately 270,000 acres surrounding Quicksilver’s Alliance properties.” Quicksilver will be the operator for the properties. Quicksilver last year paid $1.3 billion for 13,000 acres around Alliance, using $307 million in stock and $1 billion in cash, most of it borrowed.

For a complete report, see Tuesday's Star-Telegram.

-- Jack Z. Smith

Denbury Resources selling Barnett Shale properties

Denbury Resources has agreed to sell 60 percent of its natural gas assets in the Barnett Shale in North Texas to Dallas-based Talon Oil & Gas LLC for $270 million. Plano-based Denbury said production from the properties in Tarrant, Parker and Wise counties averaged the equivalent of 45.7 million cubic feet of natural gas per day in 2008, or 16 percent of the company's 2008 production and 18 percent of its proven reserves as of Dec. 31. Denbury said selling the properties will allow it to focus on its crude oil operations, which it said are more profitable and carry less risk. It said it plans to use proceeds from the sale to pay down bank debt.
—Jack Z. Smith

Industry pressures congress over hydraulic fracturing

The oil and gas industry launched a lobbying campaign to protect hydraulic fracturing from more federal oversight.

Here's the latest, courtesy of the New York Times.

http://www.nytimes.com/gwire/2009/05/07/07greenwire-industry-campaign-targets-hydraulic-fracturing-10572.html

And here's a story from late last year about the potential downsides of hydraulic fracturing.

Gas-removal method may be subject to more rules

-- Mike Lee

Devon sees Barnett peak

Devon Energy Corp., the largest U.S. oil and natural-gas producer, said it expects output in the Barnett Shale gas formation in North Texas to “crest” in the current quarter. David Hager, executive vice president for exploration and production at Oklahoma City-based Devon, commented on Barnett Shale expectations Wednesday on a conference call with investors and analysts. Devon’s output in the formation reached an all-time high of 1.2 billion cubic feet of gas equivalent a day in the first quarter.

Devon is only the latest in a number of observers who believe that the sharp drilling slump will produce an earlier peak in the field's production than earlier predicted. XTO Energy, for example, made its forecast back in February, as we reported here.

-- Bloomberg News

Barnett rig count inches up second week

The number of rigs working in the Barnett Shale increased, just barely, for the second consecutive week, while the U.S. rig count continued to slide. In North Texas, 83 rigs were active, up one from a week earlier and up six from two weeks ago. Tarrant County increased its standing as the busiest county, with 33 rigs compared with Johnson County’s 17. Nationally, the rig count fell by 20 in the past week to 955, barely half of the year-ago total. Of those, 742 were exploring for natural gas and 202 for oil, with another 11 unclassified, Houston-based Baker Hughes said Friday. The U.S. count is down 53 percent since the end of August as weak energy demand has hampered oil-field activity. Texas, with 378 rigs, was down six.

-- Jim Fuquay

Schnurman: McClendon's deal a gusher

Star-Telegram columnist Mitch Schnurman wrote Sunday on Chesapeake Energy Chairman Aubrey McClendon's 2008 pay package. Here's his introduction:

Chesapeake’s Aubrey McClendon messed up big time. The consequences? A huge bonus.  Heads, he wins. Tails, shareholders lose. Either way, the chief executive of Chesapeake Energy makes a killing.

Aubrey McClendon, who built Chesapeake into the nation’s largest independent natural gas producer, had a terrible year in 2008. He lost 95 percent of his stake in Chesapeake, once valued at almost $2 billion, on a reckless gamble with a margin account and company stock.

Rather than reprimand the CEO for playing speculator and damaging the company’s reputation, the board gave McClendon a $77 million bonus in 2008 -- on top of $23 million in shares, salary and other perks. This after Chesapeake’s net profit fell by half and its stock price dropped 59 percent as natural gas prices collapsed. In the proxy released last week, directors defended the payout as a reward for superior performance, but it’s actually a path for rebuilding McClendon’s personal wealth. Call it a CEO bailout, with shareholders footing the bill.

Click here to read Mitch's full column.

Sell your royalties? Better think twice

First, property owners in the Barnett Shale had to decide when to lease their mineral rights and for how much. Now, with the recession pushing back drilling projects, some are being asked to sell their royalty payments. The offer: Wait for royalty checks to come in month by month -- or just to start in the first place -- or accept a one-time, lump-sum payment in exchange for the right to all those future payments. It’s not necessarily a simple decision at a time when natural gas prices have plunged, depressing royalties and putting their future value in doubt. "Now’s the time to buy," said Jerry Simmons, executive director of the National Association of Royalty Owners in Tulsa. Compared with the peaks paid last year, he said, investors face a much more favorable market to accumulate properties.

But is it time to sell? "I would be very cautious," said Bob West, a Fort Worth oil and gas attorney who has advised a number of neighborhood organizations. "This is a business we haven’t heard a lot of in Tarrant County, but I imagine we’ll be hearing more of," West said.

For the complete story in Sunday's Star-Telegram, click here.

Questions about big bonus for Chesapeake CEO

The New York times reports that a shareholder lawsuit is seeking information about a $75 million bonus paid to Chesapeake CEO Aubrey McClendon -- despite a big drop in the company's stock price.

http://www.nytimes.com/2009/03/29/business/29gret.html?_r=1&emc=eta1

Dueling air quality studies

There's been a war of words for the past six months over how much natural gas production contributes to the air pollution in the Dallas Fort Worth region.

Al Armendariz, an engineering professor at SMU, and Ramon Alvarez, a researcher with the Environmental Defense Fund, issued a study in February that said gas drilling produces more of some pollutants than all the cars and trucks in the Metroplex. Study: Drilling fouls the air

(Read the full report here: Barnett_Shale_Report )

The Barnett Shale Energy Education Council, a trade group, released a study last week questioning some of Armendariz and Alvarez' conclusions:

http://www.bseec.org/index.php/content/news_detail/air_quality_and_the_barnett_shale/storiesimportant

The debate has been going on since the fall, when Armendariz released a draft of the report:  Drilling’s role in pollution examined

The question of air pollution has come up during discussions about Fort Worth's drilling ordinance: Expert: Existing technology can reduce pollution from drilling

 and in the Legislature: New rules for gas drilling proposed

-- Mike Lee

The dish on pipeline battle in DISH

We've got the latest from Mayor Calvin Tillman, who's been fighting a running battle of letters and words with pipeline companies in the Denton County town of DISH.

Loyal readers will remember that DISH, just north of Justin, is at the crossroads of several major pipelines. Tillman says the pipeline companies have too much authority to run pipelines through towns and has been urging other towns to pass resolutions calling on the Legislature to fix the problem. 

Read  Tillman's e-mail here

Click here for the Backstory about DISH's situation  

Most major pipelines for Barnett Shale in place. Crosstex chief says

The sharp slowdown in drilling in the Barnett Shale not only means that the big natural gas field will peak earlier than previously expected, but also that most of the major pipelines aimed at moving gas out of the field are already in place. Barry Davis, president of Dallas-based pipeline operator Crosstex Energy, told a Fort Worth audience Thursday that producers will still need to build smaller pipeline networks, called gathering systems, to carry gas from their wells to processing plants. But “probably 80 or 90 percent of the capital spending” on the big transmission lines that carry gas from the field to distant trading hubs has been done, said Davis, who made his remarks at an energy investment conference sponsored by the Texas Christian University Energy Institute.

Davis estimated that the Barnett Shale’s takeaway capacity – the amount of natural gas that pipelines can carry – stands at between 5.5 and 6 billion cubic feet a day, or Bcf. That compares to producers’ and analysts’ estimates of 4.6 to 5 Bcf a day at year’s end, of which Crosstex handles about 1.2 Bcf, he said. Today’s expected peak is far short of early predictions that the field could grow to 8 or 9 Bcf a day, Davis said, a level that would have required the industry to plow millions more into pipeline infrastructure. In retrospect, he said, the flattening of the Barnett’s production rate will probably result in a more effective use of those pipelines. “So now the Barnett gets to 4.5 or 5 billion Bcf,” he said, and as drilling stabilizes, “it just stays there forever.” That’s in line with comments from some producers in the field, who note that even if the field’s daily production doesn’t peak as high as it might have had the drilling frenzy continued, the field will still produce at a high level for decades.

-- Jim Fuquay

Greenwood cemetery site going back to City Council

UPDATE: The Greenwood Cemetery site was approved unanimously after more than two hours of debate Tuesday night. Read the whole story here: http://www.star-telegram.com/metro_news/story/1237184.html

Chesapeake's request for a high-impact pad site inside Greenwood Cemetery  next to Crestwood Park goes back to the City Council Tuesday night.

Three petitions are reportedly circulating -- one by neighborhood residents in favor of the site, one by neighborhood residents against the site and one by trail users against the site. 

Opponents have two big issues -- truck traffic on Rockwood Park Drive and the impact on the Trinity River Hike and Bike Trail. The "pro" side wants to see their minerals developed. Click here to see the petition.

The council has kicked this can down the road at least twice. The showdown is Tuesday at 7 p.m. at City Hall, 1000 Throckmorton St.

Chesapeake's plans for the site are at www.askchesapeake.com. (Click on the "neighborhoods" drop down menu). The company's map of the site is below.

-- Mike Lee

Chesapeake moves 215 jobs out of West Virginia

Chesapeake Energy said Thursday that a reorganization of its Eastern Division headquarters in Charleston, W.V., would either eliminate or relocate to Oklahoma City 215 of 255 jobs there. Charleston will become a regional field office. The move is expected to be complete by June 30. The Charleston office is part of Chesapeake's Marcellus Shale operation in the Appalachians. The company said it will still have more than 400 employees in the state.

Julie Wilson, Chesapeake's top officer in the Barnett Shale, said the company plans to slightly expand local employment here as it completes additional wells in 2009.

Chairman Aubrey McClendon said the cuts "became inevitable when we decided last year not to build our $40 million regional headquarters office complex in Charleston" after the state Supreme Court refused to hear Chesapeake's appeal of a $405 million jury verdict. That award was based on a lawsuit that charged that gas producers, which Chesapeake later acquired, had cheated landowners out of royalties. McClendon said that while the court decision "was not the primary reason for the reorganization, it did play a significant role in our decision."

-- Jim Fuquay

Barnett Shale Rig Reports !

For the complete Barnett Shale junkie, here's an archive of the Star-Telegram's weekly Barnett Shale Rig Reports dating to when we started publishing them in mid-2007. We'll update this archive every week with the new Rig Report.

Click on the links below to see the full reports:

Rig Reports -- 2009

Rig Reports -- 2008

Rig Reports -- 2007

-- Scott Nishimura

Chesapeake should temporarily plug part of east Fort Worth well, examiners say

Chesapeake Energy should temporarily plug part of an East Fort Worth well that comes too close to unleased property, Texas Railroad Commission examiners say. Click here to read staff writer Jim Fuquay's story.

-- Scott Nishimura 

State reps. Charlie Geren, Marc Veasey, want to regulate landmen

Geren and Veasey jointly authored the bill. Click here to read the full story from staff writer Jim Fuquay at star-telegram.com.

-- Scott Nishimura 

Burnam pushes Barnett Shale reform

Democratic State Rep. Lon Burnam held a press conference this morning with local citizen activists to announce the filing of six bills aimed at reforming how natural gas drilling is conducted in Tarrant County.

A write up of the press conference is at our Politex blog.

The six bills were filed last night and are now online:

--HB 1533 requires the Texas Railroad Commission to notify certain elected officials upon receipt of gas drilling permit applications in Tarrant County

--HB 1534 requires natural gas production and pipeline companies to disclose property appraisal, damage estimate, and other relevant appraisals in condemnation procedures.

--HB 1535 lays out a new process for pipeline companies to apply for and receive a permit from the Texas Railroad Commission before condemning property for pipeline construction.

--HB 1536 repeals eminent domain authority for subsidiary pipeline companies in the construction of gathering and transmission lines in Tarrant County

--HB 1537creates a new series of rules including setback requirements for gathering and transmission lines in Tarrant County

-HB 1538 authorizes Tarrant County and municipalities in the county to regulate pipeline safety.

-Aman Batheja

Barnett Shale could peak in 2009, XTO says

XTO executives on Thursday voiced what seems to be a growing consensus that production in the Barnett Shale could peak this year or next if the rig count in the big North Texas gas field continues to decline. Barnett Shale production should continue to grow this year as wells drilled in late 2008 continue to come online, but might top out at about 5 billion cubic feet a day, XTO President Keith Hutton said during a conference call with investment analysts. “You would need to get back to 150 or 160 rigs” very quickly to offset existing wells' natural decline rate and resume growth in production, Hutton said. And since that doesn’t look likely, the field could peak in 2009, he said.

Active drilling rigs in the Barnett stood at 120 as of Feb. 13, down 44 percent from the peak of 214 in October, according to RigData. Producers have pared budgets sharply in response to continued low natural gas prices. Gene Powell, publisher of the Barnett Shale Newsletter, which closely tracks production statistics, said he estimates the field finished 2008 right at 5 billion cubic feet a day. Citing the decline in drilling and the rapid falloff in production from new wells, Powell said it’s possible the field has already peaked at about 5.1 billion cubic feet a day. Hutton told analysts that U.S. natural gas production, which grew strongly the past two years, could plateau by midyear and be down about 10 percent by the end of 2009 if prices and drilling activity remain low.

Hutton made his comments as part of the company's fourth-quarter earnings report. XTO Energy earned $351 million on record revenue of nearly $2 billion, as the Fort Worth-based producer largely avoided the big asset write-downs that have hit several of its peers. Still, profits were down 24 percent from the same period a year ago as prices fell, and the company’s 68 cents a share in earnings after extraordinary items fell short of Wall Street’s average estimate of 78 cents. As a result, XTO’s shares (ticker: XTO) slipped nearly 7 percent to close at $32.02 in active trading. For all of 2008, XTO earned a record $1.9 billion on revenue of nearly $7.7 billion.

-- Jim Fuquay

All big U.S. shale gas fields found, Chesapeake's McClendon says

Chesapeake Energy Chairman Aubrey McClendon said Wednesday that "we think the major shale plays have all been found. We don't believe we're going to see other shale plays like the big four in years to come," referring to the Barnett, Haynesville, Fayetteville and Marcellus shales that have led a resurgence in U.S. natural gas production. McClendon made his comments to financial analysts during the company's conference call to discuss fourth-quarter financial results. McClendon added little to the company's previous statement that it was in talks with several international energy companies to create a joint venture to develop its Barnett Shale properties.

"There's a high degree of international energy company interest in gas shales in the U.S," McClendon said, and he expects Chesapeake to offer an attractive way to get into the market. "We have multiple, ongoing coconversations. We are very excited about the possibilities of what might come out of these discussions," he said. He said he expects any deal reached to mirror earlier joint ventures in the other three shale plays, inwhich Chesapeake has given up a minority stake in its huge leaseholds in exchange for its partner contributing most of the capital to drill and develop the properties. He also said he doesn't expect Chesapeake's efforts to find a partner to be hurt even if other properties come on the market in distress sales forced by continued low gas prices.

-- Jim Fuquay

A half dozen bills and counting

State Sen Wendy Davis has filed her third Barnett Shale bill.

 The latest would require operators to use "green completions" to reduce the amount of air pollution -- mostly methane -- that is released before wells are hooked up to a pipeline. http://www.legis.state.tx.us/tlodocs/81R/billtext/html/SB00902I.htm 

Davis has also filed SB 752, which requires injection well operators who dispose of oil and gas waste to use deep formations.  SB 752 -  Bill Text

And SB 686, which requires the Texas Department to allow gas gathering lines in state highway rights-of-way. SB 686 - Bill Text

Meanwhile, State Rep. Lon Burnam said he plans to introduce three bills dealing with pipeline routes, pipeline safety and the use of eminent domain by pipeline companies.

Read the news release here. Barnett Shale Bills Press Conf Media Advisory

-- Mike Lee

Chesapeake in Barnett joint venture talks

Chesapeake Energy said Tuesday it is in talks with "several large international oil companies" about a joint venture in the Barnett Shale, where the Oklahoma City-based independent is one of the largest producers. Chesapeake has done similar deals in its other big U.S. shale gas fields, in which the company gives up a share of its holdings in exchange for its partner shouldering a large share of the future capital spending. The biggest such venture is a $3.4 billion agreement with StatoilHydro in Appalachia’s Marcellus Shale, and it also has agreements with BP in the Fayetteville Shale in Arkansas and Plains Exploration and Production Co. in the Haynesville Shale in Louisiana.

Chesapeake disclosed the talks as part of its latest earnings announcement, which it issued after the close of trading on U.S. stock markets Tuesday. The company said it lost $866 million in the fourth quarter after taking a $1.7 billion after-tax write-down, or impairment, on the value of its reserves and other assets to reflect lower natural gas prices as of Dec. 31. Not counting the write-down, Chesapeake said it earned $427 million in the quarter, or 73 cents a share, a penny short of Wall Street’s consensus estimate. The company’s shares fell 8 percent Tuesday as petroleum prices continued to weaken, and was down an additional 3 percent in after-hours trading.

-- Jim Fuquay

Chesapeake gets farm-out from partner Parallel Petroleum

Parallel Petroleum, a Midland-based producer with a 35 percent stake in about 34,400 acres in the east Fort Worth area with Chesapeake Energy, has struck a deal that calls for Chesapeake to pick up all Parallel's drilling and development commitments through 2016. Parallel is slashing its spending in 2009 and faced severe penalties if it failed to fund its required share of drilling on the leases, President Larry Oldham said Friday. The deal, called a farm-out, calls for Chesapeake to pay all costs of development each year and to keep all revenues until it gets back 150 percent of its costs. After that, Parallel will receive 17.5 percent of revenues and pay the same share of costs, the company said. See Saturday's Star-Telegram for a complete report.

-- Jim Fuquay

Out -- for now

Troy Tuomey, the president of the Overton West Neighborhood Association, withdrew Thursday as a candidate for Place 3 on the City Council.

Tuomey never officially filed for the office, but said in interviews that he was considering running. He said Thursday he has too many family commitments.

"With a wife, a first grader, and an 11-month old baby, there is always something to do. I feel I would not be able to devote the time necessary to represent the citizens of District 3 properly," he said in an e-mail.

He said he wants to stay involved -- including working with the neighborhood association and serving on city boards and commissions, if appointed.

"Don't count me completely out. If the opportunity arises again when my kids are older, I will definitely be a candidate," he wrote.

 

Place 3 is probably the most closely-watched city race right now. Chuck Silcox died in October after holding the seat for 17 years. Two candidates have already declared -- W.B. "Zim" Zimmerman and Eric Fox -- and two others have said they're interested. 

 

-- Mike Lee

 

A week's worth of high-impact drill sites

The Fort Worth school board will discuss a waiver for a drill site near North Side High school on Tuesday: http://www.boardbook.org/apps/bbv2/temp/48F6B1DB-F60C-E246-66372B9BEF32C8CA.pdf

 

Meanwhile, the Fort Worth City Council discusses two sites, also on Tuesday:

Near the Henderson Bazaar: http://www.fortworthgov.org/council_packet/mc_review.asp?ID=11159&councildate=2/10/2009

And on White Settlement Road near the Rivercrest neighborhood:

http://www.fortworthgov.org/council_packet/mc_review.asp?ID=10878&councildate=2/10/2009

 

-- Mike Lee

 

 

 

Pipeline bill would allow pipelines in freeway right of way

Sen. Wendy Davis, late of the Fort Worth City Council, has filed a bill  that would require the Texas Department of Transportation to allow gas gathering lines in freeway rights-of-way.

This became an issue during the debate over the pipeline on Carter Avenue  in East Fort Worth, where Chesapeake Energy's pipeline division condemned people's front yards for a gathering line.

Councilwoman Kathleen Hicks, who represents the area, tried to convince TxDOT to allow the line to run along Interstate 30, which is nearby. But TxDOT  officials said they don't allow gathering lines.

"This is terribly important not only for the issues we face along Carter Avenue but in many urban areas where we seek to avoid pipeline placement in neighborhoods," Hicks said via e-mail.

-- Mike Lee

East side compressor station out.

The city Board of Adjustments closed the loop Wednesday on a proposal to allow a four- to six-unit natural gas compressor station at the corner of Cook's Lane and Interstate 30, turning down the request unanimously.

A Chesapeake Energy spokeswoman said last week that the company's pipeline was going to withdraw the request. No one from the company attended the hearing. (Read the story here)

About 20 nearby residents turned out for the hearing anyway, just to make sure. Sally Neasbitt, who lives nearby, wanted to make sure the board understood the depth of neighborhood opposition.

"They wanted to set a precedent," she said of Chesapeake, "And we wanted to set a precedent, too."

The land is zoned for commercial uses, and the new city gas drilling ordinance board requires compressor stations to be in industrial zones, unless they get a special exception from the board of adjustments. The board voted unanimously against the exception for the compressor station, and they did it "with prejudice," meaning the company can't re-apply for two years unless there's a significant change in the plan. 

Meanwhile, the city staff is writing guidelines for when and how the board of adjustments can grant this type of exception. Those rules will go before the city Zoning Commission next month.

 -- Mike Lee

Chesapeake puts the brakes on plans for a compressor station

This just in from Chesapeake Energy, whose pipeline division was asking for a zoning variance to put a compressor station at Cooks Lane and Interstate 30:

"The application for the Cooks Lane compressor station will be withdrawn prior to the Board of Adjustments meeting on Wednesday, February 4. Texas Midstream Gas Services (TMGS) is still completing negotiations with those located closest to the side and will decide at a later date if this application will be resubmitted to the City of Fort Worth. In the near future, TMGS will still need an additional compressor site in this area of the Barnett Shale to maximize production for royalty owners in east Fort Worth and the surrounding suburbs. Regarding future development at this property, Chesapeake is focused on long-term value at any property that it owns. It is in Chesapeake's interest to find the best and highest use for these 24 acres."

Residents are still skeptical. Watch the Star-Telegram for details.

COOKS LANE MAP

-- Mike Lee

EPA sued over lack of oil and gas regulations

A Colorado environmental group sued the U.S. Environmental Protection Agency earlier this month, asking a judge to force the EPA to tighten regulations on the oil and gas industry.

(Read the suit here)

Ed Ireland, with the Barnett Shale Energy Education Council, thinks there will be a trend toward more environmental regulation under the Obama administration. The suit comes a few months after a bill that would impose rules on hydraulic fracturing. He's worried about driving up the cost of production.

Loyal readers will recall that, at a City Council hearing in October, there was a lot of discussion about low-cost ways reduce pollution from drilling.

What do y'all think? 

-- Mike Lee

East Texas residents win case against compressor station

A group of residents in Lamar County, outside Paris, won a long-running lawsuit against a natural gas compressor station, according to The Paris News. The residents complained about noise and odors from the compressor station, and the case included testimony about lax enforcement by the Texas Railroad Commission.

Paris News pipeline story

 -- Mike Lee

UTA wells paying off

The University of Texas at Arlington is the beneficiary of unusually strong production from six natural gas wells on its campus. The school said Monday it received a check for $528,495 from Carrizo Oil & Gas, its first royalty payment from production that started Nov. 4. The school said about 40 percent of the money will go toward undergraduate scholarships and graduate fellowships, with the rest to endowed faculty positions and campus improvements. Other property owners receiving royalty payments from the wells’ production include the city of Arlington, First Baptist Church of Arlington and the state of Texas. Carrizo said it issued a total of more than $675,000 in royalty checks just for November production.

For a complete report, see Tuesday's Star-Telegram.

--Jim Fuquay

Biding their time

The City Council is likely to toss out the bids for natural gas leases on three tracts of city property because the bonuses that the city was offered were too low.

The bids were for a water pump station on Alta Mesa Boulevard, a police station on Nashville and Rosedale Plaza park. The city only got an offer from one company -- Chesapeake Energy -- on each tract. Chesapeake offered a bonus of 2,500 an acre for the park and the pump station, which total about 35 acres, and $10,000 an acre for the 2.4-acre police station. Chesapeake offered 25 percent royalties on all three tracts.

"We will selectively lease property when it makes sense and we believe we can get a fair offer," Planning and Development Director Susan Alanis said via e-mail. "In some cases we will wait to lease when the market recovers."

This is going to be an important issue to watch. Fort Worth has about 12,000 acres of parks, airports, water plants and other city buildings. The city expects to earn a little more than $1 billion over 20 years from bonuses and royalties. But a lot of observers say the city will have to be disciplined and avoid leasing during downturns in the oil and gas business.

-- Mike Lee

Thanks God it doesn't snow here . . .

A new study by the National Oceanic and Atmospheric Administration shows that high levels of ozone can form in natural gas fields in the dead of winter.

Now, anyone who's found themselves wheezing on a hot day knows that ozone typically forms when the sun starts to work on our air pollution and creates a chemical reaction. The Dallas-Fort Worth area has been under orders from the EPA to clean up its air for almost a decade. In the last year or so, researchers have started exploring the effects of natural gas production on our air pollution and disussing ways to reduce the impact.

But researchers found high levels of ozone in Wyoming when the gas and chemical fumes  released around wells can got caught in a temperature inversion. The sun reflecting off the snow created enough heat to turn the pollution into ozone.

Here's the NOAA news release NOAA news release and a story from the Rocky Mountain News:

http://www.rockymountainnews.com/news/2009/jan/19/winter-ozone-levels-a-concern/

 

 -- Mike Lee

A look at the master plan

Click here for a rough Google map of the master drilling plan Chesapeake Energy has proposed for near-south Fort Worth.

Chesapeake VP Julie Wilson said the whole thing is contingent on getting city approval for the new well sites. The Santa Fe site, at Seminary and Lubbock, will be within 600 feet of about 15 houses. And the plan requires a pipeline that will cut through residential areas from the Santa Fe site to the new Seminary well.

http://maps.google.com/maps/ms?ie=UTF8&hl=en&msa=0&msid=110921857299426390137.000460a02dc1110b1613a&ll=32.706278,-97.355518&spn=0.061967,0.109863&z=13

The big rectangle that lies between Hemphill and Forest Park represents the neighborhoods that signed a deal with XTO -- Berkeley Place, Mistletoe Heights, Ryan Place and Fairmount. Note how the Chesapeake plan puts it in a strategic position to drill beneath those neighborhoods.

 

-- Mike

TCU well site is off the table, as well as pipeline through Westcliff

 Councilman Joel Burns announced Friday that the well site at TCU would not be drilled, which means in turn that the pipeline through the nearby Westcliff neighborhood is no longer necessary.

Here's Burns' news release:

In recent months Chesapeake Energy and Texas Christian University
considered a gas drilling plan that would put a well on the TCU
campus. Because such a site would be considered high impact to more
than 40 homes, I asked the two parties to come back with an alternate
proposal that would include a more comprehensive strategic approach to
accessing the natural gas under TCU and the surrounding communities.

I am pleased to report that Chesapeake has developed a plan, the
result of which would be no gas well site on the university's campus.
Instead the TCU minerals would be accessed by two alternate wells
south of Granbury Road in industrial areas. One of these sites is an
existing well pad at Thornton Steel.

Additionally, Chesapeake's proposal includes a comprehensive plan for
their operations in near southwest Fort Worth (generally inside Loop
820) that uses three existing pad sites along with four additional
proposed well locations that council would most likely consider in the
spring. There will no longer be a need for a gathering pipeline
through Westcliff and adjoining neighborhoods.

I applaud both Chesapeake and TCU for heeding our request and removing
the TCU site from their plans. This is a great example for how a
comprehensive approach to gas drilling can work throughout our city.

By the way, if that idea of a master plan sounds familiar, you read it here first:

The other side of the Barnett Shale: It’s time to care Neighborhoods

You might have also noticed a response, saying that a master plan was unworkable:

One size doesn’t fit all in the world of drilling

-- Mike Lee

Another delay for the TCU pipeline

The City Council will delay a vote on a pipeline through the neighborhood south of Texas Christian University until March, City Manager Dale Fisseler announced.

Chesapeake Energy's pipeline subsidiary has been buying right-of-way for the line along Alton Road, South Hills Avenue and other streets. Two houses in the neighborhood have been demolished to make way for the line. The company still needs permission to cross city streets before it can build the line.

The pipeline would serve a well on the TCU campus, but Chesapeake hasn't gotten a permit from the city for the drill site.

-- Mike Lee

Battle over pipeline bills begins in the Leg.

Check out tomorrow's paper for a story on the different bills aimed at fixing state eminent domain laws, particularly when it comes to pipelines in the Barnett Shale.

Here's a copy of the main bill, by Rep. Bill Orr of Burleson:

Download Eminent domain 81(R) HB 4 - Introduced version - Bill Text

And a counter-proposal, which hasn't been filed yet, from the Texas Pipeline Association:

TPA Proposal

-- Mike Lee

State officials tackling drilling waste in Pennsylvania

The Pittsburgh Post-Gazette reports that Pennsylvania is trying to get a handle on what's in the frac water used for natural gas wells -- and what comes out of the ground once those wells are finished. It's been one of the toughest issues in the Barnett Shale. 

Read the Post-Gazette story here

http://www.post-gazette.com/pg/08356/936646-113.stm

-- Mike