Rural Louisiana And Mississippi Brace For Accelerated Tuscaloosa Drilling

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This text was published in “The Louisiana Weekly” in the Dec. 9, 2013 version.)

Short-Term Energy Outlook - U.S. Energy Information Administration ...North of new Orleans, formidable drilling plans within the Tuscaloosa Marine Shale or TMS deposit–estimated to carry 7 billion barrels of recoverable oil–may very well be a windfall for some residents. But the seek for crude has already harmed rural roads and left landowners fearful about mineral rights and future drinking water. What’s extra, jobs are anticipated to go to oil employees from exterior the shale play.

Extending east through central Louisiana and encompassing 17 parishes, the TMS includes the Florida Parishes in the state’s “foot of the boot” and three close by Mississippi counties. Drilling has gotten as close to New Orleans as Tangipahoa Parish, and St. Tammany–whereas untapped thus far–is inside the deposit.

“Roads are already torn up in the northern part of our parish, the place the drilling is,” St. Helena Parish administrator Virginia Bell said final week. “Trucks are bringing water in for fracking and other trucks are taking oil away. Our police jury asked an oil company to assist pay for blacktopping nevertheless it did not get a agency dedication from them yet.”

Drillers fracture the Tuscaloosa formation by forcing in water, combined with sand or ceramic material and chemicals to crack the shale. The cracks release oil when they open.

Final week, Baton Rouge-based minerals marketing consultant Dan Collins said too many trucks on rural roads are the top environmental concern for the time being. “The Florida Parishes have little industry and are not suitable for crops or grazing livestock,” he said. “It is largely pine trees and roads without visitors lights.” Groundwater is not a serious concern for now, Collins said. “Oil deposits in the TMS are deep and well beneath the water table, making groundwater less inclined to contamination than in shallower plays,” he mentioned.

But retired Lt. Normal Russel Honore in Baton Rouge said wastewater from fracking is commonly injected underground in nearby wells and may contaminate drinking water and the meals chain. “It might sound safely stored away but could have an effect on water supplies of future generations,” he warned. Leaching and seismic activity are among the many potential threats to saved wastewater. Honore is the leader of the Inexperienced Army, a gaggle of nonprofits and others formed in Louisiana in September to boost environmental awareness.

Within the early levels of the Tuscaloosa play, roads will likely be significantly in danger till infrastructure is constructed to distribute oil, presumably by way of pipelines, David Dismukes, professor and associate govt director of the middle for Energy Studies at Louisiana State University, stated last week. Planning between authorities and corporations is needed. “You want to keep the golden goose however you don’t want it tearing up the barnyard,” he said.

Bell said St. Helena Parish officials have visited the Haynesville shale deposit in northwestern Louisiana to find out about drilling-related points there.

Activity in the TMS is gathering steam. “In Louisiana, 22 wells have been drilled thus far, 20 have been brought onto production, with one at the moment being drilled and one other lately permitted,” Patrick Courreges, spokesman for the Louisiana Dept. of Pure Assets, mentioned final week. “These final two are Goodrich tasks.” Houston-primarily based Goodrich Petroleum controls the largest share of acreage in the TMS.

Out-of-state corporations acknowledged their intentions this summer and fall. “If we’re to believe what we have heard and browse from the varied companies, $500 million to $800 million in drilling expenditures are planned for the TMS in 2014,” Collins mentioned. “That is huge cash.”

Denver-based Encana Oil & Gasoline USA, Inc. operates 15 wells in the TMS now, together with four in St. Helena Parish, one is in East Feliciana Parish and ten in nearby counties in Mississippi. “Our 2014 plans name for $200 million to $300 million in expenditures in the TMS, and we’ll run one to 3 drilling rigs there,” Encana spokesman Doug Hock said last week. Drilling by parish and county will depend upon rig availability and other factors, he said.

Goodrich Petroleum plans to spend $300 million within the TMS subsequent yr, versus $50 million this year, and could run 5 rigs by late 2014. This year, Goodrich purchased Devon Vitality Corp.’s two-thirds share of 277,000 leased acreage and seven wells in the TMS.

EOG Sources in Tyler, Texas operates Tuscaloosa wells. “And the entry of two new gamers, Halcon and Comstock, is an interesting growth,” Collins mentioned. Houston-based Halcon Sources Corp. has leased seventy five,000 acres in Louisiana, and Comstock Sources Inc. in Frisco, Texas controls fifty three,000 acres in Mississippi and Louisiana. Final summer season, Sanchez Power Corp. in Houston acquired rights to 40,000 acres in Mississippi and plans to start out drilling in 2014.

The depth of TMS oil, which is 10,000 to 15,000 ft down, makes it costly to extract. Encana needs to scale back the worth tag for its wells there. “The fee to drill and complete our final three TMS wells and convey them onto production was roughly $sixteen million every,” Hock stated. “But as soon as we start drilling multiple wells per pad, we expect significant value financial savings.” A pad is a site of several acres, containing plenty of wells. “Long run, the objective is for our TMS effectively costs to are available in at $12.Eight million,” Hock said. “As compared, our Haynesville wells run in the $14 million vary.” In Haynesville, Encana operates about 275 wells.

Curiosity in Tuscaloosa shale is pushed by crude oil costs, which have hovered on both sides of $one hundred a barrel for over two years. In the meantime, values for natural gas, the product of Haynesville wells, have languished due to intensive shale drilling for that product. The pure gas market may have some upward potential this winter due to heating wants, Dismukes said.

To what extent are residents benefiting from the TMS? Bell said a quantity of people in northern St. Helena Parish have been disillusioned by the money they’ve been offered. “Principally, they’re dealing with middlemen fairly than the oil corporations, and they feel the provides are low,” she said. However those who need the money are taking it. Meanwhile, attorneys have been contacting residents about their rights. “We don’t have quite a bit of knowledge at our disposal and aren’t that web proficient right here,” Bell said. “We have to have extra neighborhood meetings in regards to the impacts of drilling.”

It’s difficult to know what mineral rights ought to be. “Present provides range from $175 to $250 per acre, along with one fifth of the royalty when the lease becomes productive and as long as the properly produces and the lease stays in effect,” Collins mentioned. In the final three years, an estimated 1.7 million acres have been leased in the TMS at a mean $200 per acre, he mentioned. Some landowners receive sizable, monthly checks from Tuscaloosa oil operators now.

Collins noted that Comstock paid over $1,000 an acre for rights in its November agreement to lease 53,000 internet acres for $54.5 million in St. Helena and East Feliciana Parishes and Wilkinson and Amite Counties in Mississippi. Probably the most ever paid in Haynesville was $30,000 an acre, together with royalties, in 2008.

As for jobs, Bell stated a number of residents of northern St. Helena have been hired as security guards for wells, and Northshore Technical Neighborhood School in Greensburg is providing programs for shale-trade training.

Louisiana oil-and-gasoline employees, who’re principally clustered in the southern a part of the state, will profit from the TMS deposit to their north, Dismukes said. “It is higher for them than traveling to Pennsylvania for 2 weeks a month to work on shale sites,” he said. “I have been flying to the East Coast recently and that i meet these workers on planes. I hear about their disturbing schedules.”

Wilkinson and Amite Counties in Mississippi have been the play’s core so far. Mississippi’s climate for frackers is healthier than Louisiana’s. Mississippi diminished its severance tax on hydrocarbons from horizontal wells to 1.3 percent in July from 6 p.c. That’s for the first 30 months of production or until the effectively pays out. A severance tax is a levy on the removal of nonrenewable sources, together with oil and natural fuel. Louisiana has no severance tax on sales of oil produced in the primary two years of drilling however the state’s tax jumps to 12 % after two years.

Mississippi has “compelled pooling” if a landowner would not want to signal a lease. A Tuscaloosa operator leasing a third of the mineral rights in a Mississippi space can “power-integrate” holdouts, after which must give them the identical phrases as the perfect lease that was signed with the primary third of landholders.

Also in Mississippi, the State Oil and Gas Board permits very massive drilling models, exceeding Louisiana’s models of 640 to 1,520 acres. With bigger units, firms can hold onto their leases but drill fewer wells.

Landowners aren’t notably fond of Mississippi’s rules. “Landowners don’t love forced pooling or the larger models of 1,900 plus acres seen there,” Collins stated. “Within the bigger items, the pie is divided between extra mineral homeowners.” Items in Louisiana average 900 to1,000 acres. “However since Mississippi has moved to greater models, Louisiana may observe ultimately,” he said.

Louisiana’s severance tax could also be greater than Mississippi’s nevertheless it isn’t totally collected, Honore stated. “Companies assess their production, and a few of them are paying fewer taxes than they owe,” he said. “Key departments within state authorities are stored understaffed so that the oil-and-gasoline companies are ready to do this. Louisiana’s received the most effective government that oil and gasoline can purchase.”

The state could also be dropping out on millions of dollars of in revenue from oil and fuel severance taxes underneath its current assortment program, in keeping with Louisiana Legislative Auditor Daryl Purpera’s office in early December.

Honore stated policies in Louisiana and Mississippi are extra favorable for frackers than in Texas, North Dakota, Pennsylvania and other states. And he stated diligent planning by Louisiana parishes, in matters equivalent to disposal of wastewater from fracking, may be overridden by the state.

One space the place parishes do have some management is roads. Courreges stated the Dept. of Pure Assets’ regulatory authority doesn’t extend to infrastructure upkeep beyond effectively sites. “However parishes can work with firms to mitigate increased wear and tear by means of agreements or via parish ordinances,” he said.

Oil from the eastern swathe of the TMS is expected to maneuver to the St. James crude terminal, situated on the Mississippi River between Baton Rouge and New Orleans, and to refineries along that stretch.

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