Landowners get windfalls from natural gas drilling

Here's the good news: The rising prices have enticed companies to unearth new supplies, moderating price hikes. Analyst Robert Ineson of Cambridge Energy Research Associates expects natural gas prices to fall to $8 per 1,000 cubic feet later this year and hover at about $7 through 2012.

Several years ago, with recoverable natural gas reserves being depleted in traditional fields such as the Gulf, the industry started scrambling. Companies such as Sempra Energy began planning terminals to accept LNG from overseas.

At the same time, as natural gas prices crept past $6 per 1,000 cubic feet, it became economical for companies to develop new drilling methods to extract gas deeply embedded in formations of shale rock. Rigs drill down about 7,000 feet, then make a right angle and bore horizontally up to 5,000 feet, exposing about 10 times as much rock. Workers free trapped gas by pumping in water to form cracks in the shale and sand to hold the fissures open, letting gas flow up.

"It's made millions of acres productive," says Chesapeake Energy spokesman Jim Gipson.

In Fort Worth, horizontal drilling has allowed rigs to be placed up to a mile from neighborhoods where gas will be tapped. Nearly 1,000 wells have been drilled in the city, the heart of a 5,000-square-mile basin, known as the Barnett Shale, that skirts Dallas. Like mini-Eiffel Towers, the 130-foot-tall latticework rigs can occasionally be spotted around town, emitting an airplane-engine hum punctuated by screeches and periodic clouds of smoke. More common are the 6-foot-high wellheads that remain after drilling is done in about 30 days. Billboards exhort commuters to "Explore the Barnett Shale."

"I've never seen a development of this magnitude in an urban area," says Larry Dale, CEO of Dale Resources, a production company that leases property in Fort Worth for Chesapeake.

Dallas/Fort Worth International Airport sports five rigs after leasing the right to drill on its 18,000 acres for $186 million plus royalties. The city of Fort Worth expects to rake in about $1 billion in the next 20 years for leasing its property. Property owners these days typically get a signing bonus of at least $17,000 per acre and 25% of monthly revenue.

"It has, indeed, floated everyone's boat higher," says Fort Worth Mayor Mike Moncrief.

Across town, the Barnett Shale — which surrenders 3 billion cubic feet of gas a day, 5% of U.S. consumption — inevitably seeps into conversations. As Pastor Bowman concludes a visit with Maureen and R.V. Castle, who live across the street in a small clapboard house, Maureen exclaims, "I want to see that hole in the ground so I can see that (new) church going up!"

Denise and Lloyd Stephens, who leased the mineral rights under their southwest Fort Worth house, plan to invest the $4,200 signing bonus into their direct-sales nutrition business. The $150 or so they expect to earn in monthly royalties will help pay their property taxes. "We were thrilled," Denise says. "This was pennies from heaven. God put shale below us."

Not everyone's happy

The drilling has also rankled some. Two wells were drilled about 600 feet from the backyard of Brenda and Gary Hogan. "Twenty-four hours a day you've got noise and bright lights," as well as a parade of trucks that deliver and pick up water, Brenda says.

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