Drilling rush in North Louisiana creates new millionaires
by Robert Travis Scott, The Times-Picayune
Tuesday September 16, 2008, 9:33 PM

Ted Jackson / The Times-Picayune
Rev. Ronnie Morris praises God in front of the sign celebrating a million dollar offering at Higher Ground Ministries, an African American church near Mansfield.
KEITHVILLE -- Each day, the Trinidad-108 drilling rig on the Walton family farm grinds a few hundred feet closer to its targeted natural gas field 2 miles underground.

And each day, Dale Walton, 49, keeps an eye on the constantly buzzing derrick as he roams the hilly pastures and forests nearby on his all-terrain vehicle.

Very soon, if the industry experts are right about a gigantic gas discovery called the Haynesville Shale, and if the drillers strike that sweet spot they call the "pay zone, " Walton could become a millionaire, drawing fat royalty checks monthly from the wells.

"I should be excited, " said Walton, who walks a thin line between hope and skepticism. "What should you say? Yeah, I'm excited for my family. It's awakening. We'll see what happens."

Feelings of anticipation are in great supply nowadays in the northwest corner of Louisiana. In search of what might be the nation's greatest-ever natural gas find, energy companies are rapidly buying mineral rights from property owners across a six-parish region, affecting tens of thousands of people.

A layer of gas-rich sedimentary rock as thick as 300 feet lies about 11,000 feet beneath the surface. Named after the Louisiana town where it was discovered, it stretches from northeast Texas to a broad region around Shreveport-Bossier City.

Geologists have long known about the shale, but its reputation as a blockbuster gas source is a recent phenomenon. Chesapeake Energy Corp. launched the gold-rush mentality with its March announcement of the shale's potential bounty. The Oklahoma company is running a dozen rigs in the region, including two on the Walton land in south Caddo Parish, and expects to have 60 drilling by the end of 2010. It has 11 wells producing gas so far on the Haynesville play and plans for 600 wells in the next three years.

Chesapeake has acquired drilling rights on more than half a million acres in Louisiana's Haynesville field and is still leasing. Petrohawk Energy is not far behind, and several other companies are aggressively in the game.

Farms, homes, shopping centers and parks -- anywhere there's land, rural or urban -- are all up for grabs. For example, the St. Elizabeth Baptist Church of Grand Cane leased two acres and, just down Highway 171, the Mansfield Golf and Country Club leased 51 acres.

Overnight riches

The windfalls, both real and potential, are raising expectations of early retirements, fine cars and independent wealth.

Cadillac sales in Shreveport were 70 percent above average in July, said Tim Robinson, general manager of Gregg Orr Automotive Group, mainly because of newly enriched landowners. Even the dealer's gas-hungry Hummers are selling briskly, opposite the national trend.

"The car business all around the country is suffering, but our business has been great, " Robinson said.

It's an unnatural and sometimes unsettling reality sinking in on the generally modest, conservative citizens of this area. Gas plays in the region date from 1870, but no one has seen anything like this.

Signing bonuses are turning large property owners into millionaires overnight. Mineral leases were going for as little as $100 an acre a year ago. Reports are now coming in of bonuses from $10,000 to $30,000 an acre. At those rates, a family with 100 acres would immediately get a check for as much as $3 million, plus 20 percent to 30 percent of future royalties.

Mike Smith, 60, an appraiser in Bossier City with 343 acres of timber farm, first heard about the lucrative lease deals in the late spring. A quick deal gave him lottery-like shock, and now he's retiring early.

"I got a check for over a million, in less than two weeks, " Smith said. "I just didn't get used to it. Gosh, it was like, damn. Somebody hands you a million dollars, and you have to think about it for a while."

After leasing more than 1,000 acres of its public land at an auction this summer, DeSoto Parish received a bonus check of $28.7 million, which was 60 percent more than the annual tax revenue for the mostly rural jurisdiction.

"Everybody's mouth was wide open, " Parish President Bryant Yopp said.

In Mansfield, the parish clerk of court's office is crammed with land men, people paid as much as $450 a day to flip through property records for proof of mineral rights.

"Crazy time, " Clerk O.L. "Sonny" Stone Jr. said

Stone bemoans a pre-rush lease he made for his own 40 acres at a paltry $100 an acre. But then, there's always the possibility of future royalty payments, he said.

'Massive amounts of money'

Of course, the scenario for royalties is full of "ifs, " such as, if the land is drilled, if they find gas and if market prices hold up.

The evidence will be clear in about a year, said Roger Averitt, Chesapeake's drilling superintendent at the Waltons' site. Averitt supervised drilling in the famous Barnett Shale field, which has caused a frenzy in recent years in the Fort Worth, Texas, area. Judging from well results so far, Haynesville will be even better, he said.

"This will blow Barnett away, " Averitt said.

Advances in horizontal drilling have made the Haynesville phenomenon possible. Drillers bore 2 miles down to the shale layer, bend the line and then bore another mile horizontally, blowing cracks in the shale to release the gas.

But it's expensive. Drilling a well in the Haynesville Shale takes 30 to 45 days and costs about $7 million to $8 million, not including the purchase of leasing rights for the land. That's more than twice the time and cost of drilling a traditional well.

In this corner of the state, "The Shale, " as locals call it, is consistently the No. 1 topic of conversation, the top news story and the biggest worry on everyone's mind. Questions abound. Will water-thirsty rigs deplete the public's drinking supply from aquifers? Should landowners sue if suckered into low-ball bonuses?

Numerous educational seminars have drawn large crowds, including a recent meeting in Shreveport set up by the Louisiana Oil and Gas Association with 1,500 in attendance. Accountants, lawyers and retirement planners are in demand.

Neighborhood associations are unifying households to make joint lease sales. In Shreveport, a coalition of 35 neighborhoods covering several square miles is preparing for negotiations on multiple subdivisions involving thousands of homeowners.

"There's massive amounts of money to be made, and technically it's our gas down there, " said Larry Farley, president of the Captain Shreve Neighborhood Association.

Churches are joining forces to make land deals and offer financial and spiritual guidance to parishioners. Cash flow from donations and from church lease deals is helping them focus on their core mission.

"Shale has made more ministry possible, " said Doug Cain, superintendent for the six-parish Shreveport District of the United Methodist Church, which is conducting Haynesville Shale financial seminars.

On a sign at High Ground Ministries Church in Mansfield, Pastor Ronnie Morris has posted a thank you to God "for our $1,000,000 offering, " which he says is the amount of pledged contributions from shale beneficiaries. The money will go to the church's community center for meals and services to the needy. The church also offers counseling programs on financial planning and tax-free donations.

"When you're dealing with finances, you need information more than inspiration, " Morris said.

'Ain't got nothing . . . yet'

The Waltons have 360 acres, populated mainly by cows grazing an acre or two away from the 170-foot tall rigs. Called a super pad, the dual rigs can install eight wells.

The family has a taste of what's to come because it has been receiving three-sixteenths of the royalties on an older well producing from the shallower sandstone Cotton Valley field. Dale Walton gets a fraction of the family share, and his monthly checks are about $900.

Based on the potential production of a Haynesville well and the multiple wells under a new contract, it would not be surprising if the Waltons' royalties grew into the millions of dollars a year.

That's what the family is hoping, because it sold its drilling rights before the rush for only $175 per acre.

"Somebody asked us the other day, 'And how's it feel to be a millionaire?' " said Dale's mother, Rita Walton. "And I said, 'We're no millionaires. We ain't got nothing . . . yet.' "

Even if the millions come in, Rita and her husband, Ed, now in their 80s, don't think it will change their outlook or the way they live.

"The way things are, I think it'll help the kids, the grandkids and all with their education and all, " Rita Walton said.

Indeed, landowners in the region generally aren't the sort of folks to load up the truck and move to Beverly Hills at the first sign of good fortune.

Teri White, 43, a department manager at the Mansfield Wal-Mart who owns a dozen inherited acres in DeSoto Parish, signed a minerals lease in July with a nearly $100,000 bonus. She put a portion aside to cover her tax liability and paid off debts, including medical bills from a serious illness, now cured. Then she bought a new car for the first time in her life, trading in a compact 1998 Chevy Prizm for another economy model, a 2009 Toyota Corolla.

"I put it to good use; it wasn't just blowed, " White said of her bonus. "It just made it so I'm not struggling so much."

The majority of people who have mineral rights for a sizable amount of land already have some financial means, a number of locals observed.

"You have a lot of people who were already wealthy, and now they're going to be more wealthy, " said state Rep. Richard Burford, R-Stonewall. "People aren't giddy and acting silly about this. It isn't going to change them drastically."

'Simple people'

Linda Whatley, 64, a banking consultant in Mansfield, inherited mineral rights from a family friend. She bargained with Chesapeake for $6,700 per acre on a 400-acre piece, netting a $2.7 million bonus plus 25 percent of future royalties.

"It's unreal, " she said. "It's just overwhelming what's going on in this community. It's like we're in a dream. I keep thinking we're going to wake up."

Still, Whatley's new financial status is a barely visible contrast to the comfortable middle-class lifestyle and nicely furnished home she and her husband, Wayne, already enjoyed. They paid off the house note, kept the same cars and plan to retire sooner than planned.

Her big splurge was to step up from drinking Gallo Twin Valley jug wine to the slightly higher-priced Woodbridge economy brand.

"We're just the same old people, " Whatley said. "We haven't really changed our lifestyle."

Wade Britt of Marthaville said the lease of his family's 69 acres had a big impact on their finances, allowing him to pay off their house note 15 years early.

"You weren't expecting to hit the lottery, " he said. Still, day-to-day life isn't affected. "We're simple people to begin with, " Britt said.

Further evidence that wealth hasn't changed people in Mansfield can be found at the Anderson Bros. Feed and Hardware, which looks like it hasn't had a facelift in decades.

Larry Anderson, the proprietor, hosts a regular klatch of patrons who gather in the mornings for free coffee and idle gossip. Though some of the members have encountered extraordinary fortunes, they show up all the same, clinging to a treasured custom. "People here are set in their ways, " Anderson said.



Robert Travis Scott can be reached at rscott@timespicayune.com or 225.342.4197.