Drilling for Natural Gas
Faces Hurdle: Fort Worth

The Barnett Shale formation is a wedge of blackboard-colored rock measuring 400 feet thick in places. It's packed with 27 trillion cubic feet of natural gas made from organic material that decomposed several million years ago, according to government scientists. That's enough to supply all gas-heated homes in the U.S. for more than five years.

It's also directly underneath Fort Worth, a booming metropolitan area home to 1.6 million people.

Extracting this gas -- once thought to be permanently trapped in the rock -- is creating a peculiar set of challenges for energy companies and for the consumers whose properties lie above it. Laverne Stanley, who lives near downtown Fort Worth, stands to reap monthly checks because she owns rights to the gas under her house. In nearby Haslet, Bob Lane, who doesn't own mineral rights, had to listen to the whine of a 175-foot-tall drilling rig at the end of his street all night. He won't be paid a penny.

Energy companies, for their part, are spending time wooing suburban communities and planning drilling routes that avoid golf courses and baseball diamonds.

Urban drilling has never been undertaken on such a giant scale. Oil and gas wells still dot neighborhoods in Oklahoma City and Los Angeles but those fields were discovered in the 1920s and developed when local opposition was minimal. Drillers also left many oil-free neighborhoods untouched. By contrast, Fort Worth's gassy rocks lie under the entire city and stretch underneath 16 counties. Any open field in the area is a potential well site.

There are now 90 natural-gas drilling rigs poking holes in and around Fort Worth, more than one can find in either Africa or Europe. The Barnett Shale, all by itself, is having a significant impact on the U.S. energy sector. It's arresting steep declines in domestic gas production and tempering near-record prices for a fuel critical for generating electricity and home heating.

At first, energy companies concentrated on a small section of the Barnett Shale about 30 miles north of downtown. But the pace of drilling accelerated after word got out about good wells on the other side of the city. That has created some new challenges.

It took 18 months of negotiations to hammer out plans to drill wells on the site of a proposed 8,900-home community named Sendera Ranch. The property's developer, Centurion American Development Group, originally wanted to build baseball diamonds on the four-acre well sites.

Devon Energy Corp. of Oklahoma City, which leased rights to drill on the property, objected. Devon knew it would need to bring heavy equipment into the site every few years and officials worried that homeowners would be furious when their baseball diamonds got trashed and backstops and dugouts removed. Instead, Centurion plans to build soccer fields, which can more easily be disassembled and reconstructed. It will also plant cedar trees with metal baskets around the roots that can be easily pulled up and put back in place.

For its part, Devon agreed to accelerate drilling so that rigs would be gone before home shoppers arrived. The company also rerouted existing pipelines. "We didn't want someone digging in their backyard to build a fence and hitting a pipeline," says David Keener, Centurion's chief financial officer.

The Woodhaven Country Club, an exclusive 18-hole golf course in Fort Worth, leased the right to drill under its 150 acres. But the deal was structured to ensure the driller had no access to the club grounds. Duffers would never know when a drill bit was chewing its way 7,000 feet underneath their feet.

With individual homeowners, the situation is more complicated. Property rights in Texas are split between surface owners, who can build a house on the land, and mineral owners, who have rights to oil or gas discovered underneath. Because few people thought there was much oil and gas near Fort Worth, mineral and surface rights used to be neatly transferred from owner to owner. In the past couple of years, as word spread, property owners have grown unwilling to part with their mineral rights, even if they sell their house. Without mineral rights, land owners sitting on millions of dollars in natural gas aren't entitled to a dime.

"The word is out," says Dan Proctor, a Fort Worth developer. "There is no property you can buy, from here to I-don't-know-where, that you can still buy the mineral rights."

One or two holdouts in a neighborhood won't prevent a well from being sunk. Under Texas regulations, a Barnett Shale well -- and its associated drills and pipes -- must run at least 330 feet away from any unleased property. Opposition from a larger number of people, however, can render a project unviable if a pipe had to snake awkwardly through a neighborhood in order to remain on approved land.

A drilling rig behind a suburban Fort Worth house digs deep for natural gas.

Prospective drillers typically promise homeowners that they'll use a horizontal technique to hide unsightly above-ground equipment. Horizontal wells go straight down before gradually bending and running parallel to the surface.

Until a couple years ago, the idea of drilling in Fort Worth was farfetched. The first breakthrough came when Mitchell Energy & Development Corp. figured out how to break open the Barnett Shale without breaking the bank. The shale is incredibly dense and hard, tough enough that federal scientists working on a similar formation in Colorado once tried, with mixed success, to see if they could break it open with a nuclear explosion.

Shale is honeycombed with tiny pores that aren't well-connected. The natural gas is trapped in those pores and has also been absorbed into the rock. The wells aim to drain the gas trapped in the pores and shake loose the gas merged into the shale.

For years, Mitchell tried pumping an expensive and gooey chemical cocktail into the shale. Under extraordinary pressure, the mixture would create tiny cracks in rock. But the chemical also gummed up the pathways that allowed gas to flow.

In 1997, Mitchell's engineers tested a new "fracturing" technique using a mixture of water and sand. Fed by several pumps on flatbed trucks, water is pumped in until it fills the confined space. Workers slowly increase the pressure -- which can reach 3,500 pounds per square inch, roughly 100 times the pressure of a car tire -- until the rock cracks. The break can be half an inch wide and a few feet in length. The water and sand fill the crack and build more pressure, until the crack elongates. The sand then prevents the rock from sliding back into place after the water is drained, allowing gas to flow into the well.

It turned out the lighter "frac jobs" worked better than chemicals and were also cheaper. These days, specialty oilfield service companies pump as much as seven million gallons of water per well -- enough to fill the reflecting pool in front of Washington's Lincoln Memorial.

After its discovery, Mitchell Energy used the new technique and drilled hundreds of wells. In 2002, Devon bought Mitchell for $3.2 billion, largely because of its gas prospects in the Barnett Shale area.

Because some homeowners living above the Barnett Shale retain mineral rights to their property, while others don't, the gas-drilling boom has created a split between the haves and the have-nots.

"There are two kinds of surface owners: happy ones that own the mineral rights and unhappy ones that don't," says Dick Lowe, a partner in Fort Worth's Four Sevens Oil Co. Four Sevens has drilled about 20 wells in Fort Worth and has an additional 50 planned.

Ms. Stanley is one of the happy homeowners. She bought her $300,000 home east of downtown Fort Worth a decade ago because she liked the towering oak trees and lakes. She had no idea that her home would end up in the middle of one of the biggest natural-gas plays in North America. Four Sevens wooed her and her neighbors. It held community meetings.

"We don't want to drill in your subdivision," said Four Sevens Chief Geologist Larry Brogdon, addressing Ms. Stanley's community, Riverbend Estates. "We want to drill underneath your subdivision." At the end of the meeting, half the residents lined up to sign notarized leases. Since then, almost all the 210 other homeowners in the gated community have consented to drilling.

The closest well will be nearly a mile away in a flood plain, next to a lumberyard. Using horizontal drilling, the well will drop straight down for two miles, then take a gradual turn and travel sideways until it reaches the rock underneath the subdivision. If it strikes gas, all she and her neighbors will see are royalty checks. "No one is going to get to be a millionaire, but the checks could be $100 to $200 a month and they will last longer than anyone here will live," she says. The company says Ms. Stanley's expectations are accurate.

A couple of homeowners have yet to put their signatures on a lease. "If they don't sign, that's fine," says Ms. Stanley. "It's just so much more for the rest of us."

Twenty miles to the north in the rapidly growing suburb of Haslet, Mr. Lane isn't so happy. When he bought his home two years ago, he also didn't realize that his quiet patch of suburbia was about to be invaded by drilling. Then one morning last month, a red and white drilling rig was erected at the end of his street by XTO Energy Inc. of Fort Worth. The steel structure is so well lit at night that Mr. Lane's neighbors have started calling it the Eiffel Tower. A droning metallic whine -- the sound of the machinery chewing through rock -- could be heard at all hours. "They can drill wherever they want. That really unnerves me," he says.

The company didn't need to ask permission and will never pay Mr. Lane royalties because he doesn't own the mineral rights, which were retained by the property's previous owner. By local ordinance, the energy company needed only to stay 400 feet away from the nearest home. The neighbors didn't even get a letter advising them what was about to happen.

Municipal officials have a big incentive to allow drilling. Their coffers are being boosted by taxes on the value of the underground gas, large signing bonuses and royalty checks for city-owned land. The Fort Worth city council recently awarded rights to drill underneath city parks after a round of bidding. In early April, the city's mayor was handed a check for $1.4 million from Dallas-based Dale Resources LLC, the signing bonus from the first contract.

In Haslet, Mayor Francis Leong created a co-operative in the 800-acre Hugh White Estates subdivision where he lives so that smaller landowners could also benefit. All the residents pooled their mineral rights, a move that attracted Four Sevens, which was able to sign paperwork with a single entity instead of 200 homeowners. The royalties are divided up among the co-op members based on how many acres they own. Mr. Leong owns a five-acre lot in the subdivision and was entitled to a 1/160th share.

Royalty checks are running about $250 per acre per month, Mr. Leong says. He's using his windfall to build a weekend home on a nearby reservoir.

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