All about the shale

Gas-drilling boom has had huge impact on White County

By Amy Widner

LITTLE ROCK — By all accounts, White County is the Fayetteville Shale hot spot in the Three Rivers coverage area.

Much of that boom is visible in Searcy, where traffic is heavy, construction is everywhere and business is brisk. The upswing in economic activity has come with some side effects, County Judge Michael Lincoln said, but is welcome all the same.

"With any type of growth - to go back to that old term, 'growing pains' - we're experiencing some of those growing pains," Lincoln said. "One thing I stress and remind citizens who are having those pains is of what a state of need our country is in at this time and what a unique role Arkansas and White County have in helping to solve the energy crisis in our country."

County-level retail sales taxes would normally be a good way to look at what economic effect the natural gas industry is having on Three Rivers counties, said John Shelnutt, administrator for economic analysis and tax research at the Arkansas Department of Finance and Administration. But before-and-after comparisons are difficult because the way they are reported was streamlined recently, giving somecounties a deceptive boost in numbers.

"It's mostly anecdotal at this point," Shelnutt said.

Johnny Wheetley - president of an informational support group for landowners and concerned residents, the Fayetteville Shale Citizens Association - has gathered a pretty good anecdotal picture of the Fayetteville Shale action in the Three Rivers area through his regular conversions with landowners and research on the topic as he works to address their concerns.

Wheetley said most of the activity in White County is in the Ozark foothills to the northwest. The leasing phase is mostly finished there, and natural gas companies have moved on to drilling and operating wells.

Oklahoma-based Chesapeake Energy, the most active natural gas company in White County, has 211 producing wells and 18 drilling rigs in the whole Fayetteville Shale area, Chesapeake Media Relations Director Mark Raines said. It is also working in Cleburne, Van Buren (another hot spot) and northern Faulkner counties, although about 90 percent of their work is in White County.

Lincoln said the White County presenceof Fayetteville-based SEECO, a branch of Houston-based Southwestern Energy Company, is not as great as it once was, but newcomer XTO Energy of Fort Worth, Texas, is showing more of a presence than last year.

Someone who is trying to put together a more complete county-by-county picture of the Fayetteville Shale's economic impact is Kathy Deck, University of Arkansas at Fayetteville Center for Business and Economic Research director. The center released an updated portrait in March 2008 (from an original 2006 study) of the projected total economic impact of the Fayetteville Shale, $17.9 billion through 2012, a figure based on surveys conducted among gas industry companies about their future plans. The study is available on the center's Web site, http://cber.uark.edu.

Now the center is looking at the economic impact on individual counties, and Deck said White County is one they paid particular attention to. She said Fayetteville Shale jobs have had an offsetting effect to overall job numbers, absorbing job losses in other industries like manufacturing. Since 2002, White County has lost 1,300 manufacturing jobs. Overall employment was 28,370 in January 2002 and 31,621 in June 2008 - an increase of about 3,500 jobs. So really 4,800 jobs or more were added, and Deck said most of those jobs can be attributed to the shale boom.

Other indicators of the county's economic health are that its unemployment rate hasn't increased, while the average rate of personal income has. The per-capita personal income rate has stayed steady. Construction employment has increased significantly since 2004, 200 jobs have been added in the financial activity sector and almost 2,000 leisure industry jobs have been added since 2002, Deck said - indications of the shale play's trickledown effect on the economy.

Deck said sales-tax revenue is strong, as confirmed by Lincoln, who said revenue intake continues to grow and is especially good compared with neighboring counties, which aren't seeing similar increases.

"White County is a leader," Deck said. "Their advantage is that they have a lot of gas and an existing metro area in Searcy. Pre-existing towns like Conway and Searcy are a natural place for companies to gravitate, where they have the benefit of pre-existing retail and hospitality services."

Wheetley said there is a little drilling in Jackson, Independence and Cleburne counties, and some leasing in Stone County. There is also some activity in Woodruff and Monroe counties, and Wheetley has heard of leasing as far east as Palestine in St. Francis County.

"They were like we were five years ago," said Wheetley, who lives in Judsonia. "People here didn't know anything about it. They didn't think there was anything here underneath the ground."

As Wheetley suggested, parts of the Fayetteville Shale area have come a long way since Southwestern Energy first started the rush in Franklin County in 2001 - long before the previously obscure geological formation became a household name and everyday landowners started researching their mineral rights.

According to a 2006 Arkansas Democrat-Gazette article, Southwestern was drilling for natural gas in a sandstone formation in 2001 when they noticed they were getting more gas than expected. The source turned out to be the nearby shale - finegrained rocks that split easily but had previously been considered impractical for gas extraction.

A combination of factors made the Fayetteville Shale formation attractive.

Technology advanced; horizontal (as opposed to vertical) drilling techniques were developed that can drill downward and then across underground, increasing the amount of natural gas that can be collected and making the surface location of the drill more flexible and convenient for landowners.

Companies started fracturing the shale with fracking materials (short for hydraulic fracturing) that are injected into the well at high pressure to break the rocks apart and release the natural gas.

Increased gas prices made natural gas more attractive. Companies started drilling for natural gas in places they previously wouldn't because the costly extraction methods weren't justified by the price natural gas fetchedon the market, according to the 2006 article.

By 2003, Southwestern started leasing mineral rights in the western part of the shale formation, and the boom spread from there. Lincoln said it arrived in White County by 2005 and intensified in 2007/2008.

During summer 2008, construction began on a 167-mile, $500 million pipeline to transport natural gas from Arkansas to market. A peak of about 1,300 people will be employed in Arkansas during the project, which has an estimated completion date of early 2009, according to an Arkansas Democrat-Gazette article from July.

As the action continues and moves eastward, groups like the Fayetteville Shale Citizens Association and the Arkansas chapter of the National Association of Royalty Owners, whose chairman is Jonathan Dismang of Beebe, are trying to equip a new wave of landowners with the information they need and look forward to what the next phase of needs may be for the landowners already deeply involved.

Dismang said he gets calls from people who need help and usually knows who to call to address their problems. His group also wants to start doing seminars, and they supply information and have a Web site, www.naro-us.org, with an active message board. The Arkansas chapter has 243 members, but Dismang said four or five times that number use the message board.

So much is already in the history books on the Fayetteville Shale story, and Dismang is looking to the future.

"Just like the gas companies, we believe that we have a product here that can really make a difference," Dismang said.

- awidner@ arkansasonline.com

Three Rivers, Pages 52, 53 on 10/02/2008