Hillbillies making millions out of American gas rush

Southern landowners cash in as technology opens up vast new fields, reports James Doran
The Observer,
Sunday August 17 2008

Judy was, until very recently, a normal 61-year-old great grandmother from rural Arkansas who taught English at the local middle school and spent her spare time taking care of five troublesome terriers.
Now, in a story reminiscent of the 1960s sitcom The Beverly Hillbillies, she has joined a rapidly growing group of millionaires cashing in on a natural gas gold rush that is sweeping the American south.
The Haynesville Shale is a massive geological formation 12,000 feet below the soil of rural north-west Louisiana that is said to contain enough natural gas to supply much of America's needs for the next decade and beyond. It has been known about for years, but only recently has the technology been available to exploit it to the full.
The world's biggest natural gas exploration companies, including Shell, Conoco, Chesapeake, Petrohawk and EnCana, have descended on the vast area between the Arkansas border and Shreveport, Louisiana, to tap what most experts agree is a reservoir of about 240 trillion cubic feet of gas.
Local farmers own the land above these massive gas pockets, as do a large number of householders and some speculators, and there are large tracts owned by the State of Louisiana. And if the gas giants want to get their equipment drilling working in time to cash in they are having to pay up - big time.
'The reality is there is a lot of people making some pretty damn serious money down here thanks to this natural gas,' said Don Briggs, president of the Louisiana Oil and Gas Association.
And Judy - who wants to withhold her last name for fear of attracting too much attention to her newfound wealth - is one of them.
Judy's parents were farmers on the outskirts of Bossier City, Louisiana until her father passed away when she was seven. 'I inherited half the farm that day, I was an only child,' Judy said. 'I inherited the rest in 1991.'
She vowed never to sell the land, even though half of it was virtually worthless swampland. But then, in March this year, her telephone at home in Arkansas started ringing non stop with gas company reps and land brokers offering to buy or lease her land.
"First they were offering me $200 an acre, then $500, but I am not stupid," Judy said, 'I told them that if their gas was so precious they would have to come up with something better.'
After a couple of months of stiff negotiating she walked away with a cheque for about $4.5m, and she didn't even have to sell her land. 'I leased the land to Chesapeake for five years, after which they have to put it back exactly as they found it,' Judy said.
Much of the land that sits above the Haynesville Shale had a lease value of about $300 an acre until this spring, when a ferocious bidding war broke out. Now the same tracts of land are commanding prices as high as $25,000 and $30,000 an acre, so locals say.
And by the time the big gas companies have finished, there will be plenty more hillbilly millionaires like Judy. 'It is possibly the fourth largest gas discovery in the world and the largest in the United States,' said Briggs. 'It's big.'
But drilling the shale is an expensive business. 'The shale lies like blankets - flat blankets of geologic formations on top of each other,' Briggs said. 'You drill down 12,000 feet, on average, make a right angle and go up to another 4,000 feet. It's incredible technology.'
With the record amounts being paid for leases, bonuses and up to 25 per cent royalties, 'a lot of millionaires are being made every day,' Briggs added.
Given that most of the rest of the country is grappling with the credit crunch and impending recession, the country folk of Louisiana and Arkansas are rightly celebrating their newfound prosperity. Those not fortunate enough to own land above the shale are benefiting from the jobs and investment flooding into the area.
'I would say 74 wells are working in the area now, 50 more than are normally working in all of north Louisiana,' Briggs said. 'Probably by the end of the year there will be 100, and by the end of next year, 200. That's an incredible amount of activity.'
As for Judy, she is not letting her millions go to her head. 'I think I will get my bathroom renovated, finally,' she said, 'and then I will give some money to my three sons, my eight grandchildren and my great grandchild.'
And then of course there are the dogs, all five of whom are yapping at her feet. 'I might get them some new toys, it depends if they are good or not.'