Searcy, Arkansas: Online News

LITTLE ROCK- Now that drilling in the Fayetteville Shale play has been under way for more than two years, a larger percentage of Chesapeake Energy Corp.’s jobs on drilling rig crews are filled by Arkansans, a company official said Tuesday.

When Chesapeake, the second-largest operator in the play, and Southwestern Energy Co., the play’s largest operator, began drilling in 2005, Arkansas didn’t have a large pool of job candidates seeking employment in the field.

“So initially the rig crews were brought in from other states where there had traditionally been that sort of backbone of a work force,” Danny Games, Chesapeake’s corporate development director, said Tuesday during a speech at an economic forecast conference hosted by the University of Arkansas at Little Rock.

This time last year, roughly 10 percent of Chesapeake’s jobs on drilling rigs in the Fayetteville Shale were filled by Arkansas, Games said. The jobs pay $55,000 a year and up.

“Now that number is about 40 percent and incrementally grows as we can train and expand,” Games said.

Chesapeake currently employs 354 people in Arkansas, and 299 of those employees work on rig crews. Currently, Chesapeake operates 14 rigs in the play, but the company plans to increase that number to 25 rigs by early 2009.

Since beginning operations in the promising Fayetteville Shale play, where company officials plan to drill for years, Chesapeake and other companies are collaborating with local colleges to offer a simulated drill rig class to Arkansans.

The first class of nine students was held last week at Arkansas State University in Searcy, Games said. Classes are booked for the next six to seven weeks, he said. Enrollment limits are set at 10 students per class.

White County is ‘dead center’ of activity, expert says

By Warren Watkins

The Daily Citizen

The natural gas boom in White County keeps getting bigger, despite shocking projections from last year, or even last month.

Kathy Deck, director of the Center for Business and Economic Research, a part of the Sam M. Walton College of Business at the University of Arkansas at Fayetteville, spoke to the Searcy Economic Club Tuesday, giving a report of natural gas development in the Fayetteville Shale Play.

“When you look at the places that have been developed by some of the gas companies, you see White County is at dead center,” Deck said. “I think that White County is at the very beginning of a long, lucrative period, economically speaking.”

In 2007, the county saw more jobs and the construction of the regional headquarters of Chesapeake Energy, allowing the local economy to diversify so as to not overly depend on manufacturing.

“We’re the fastest growing part of the state,” said Brooks Davis, president of Simmons First Bank in Searcy.

Decker said she had findings from the Bureau of Labor Statistics that supported Davis’ statement, showing how jobs are being created in White County.

Chesapeake has said they are increasing their drilling rig count in the county from 14 to 25 by the end of the year.

Workforce training has already begun to allow local citizens to join the gas development job hunt.

“We have full classes lined up for a couple of months,” said Dr. Eugene McKay, Chancellor of Arkansas State University at Beebe, which has a branch in Searcy where 10 students a week are graduating from the school’s Floor Hand Training program, a 40-hour course of intensive training preparing students for jobs as floor hands on the gas rigs. “It’s very intensive, with a lot of one-on-one work. They tell me these people can make $50,000 a year. If you can produce 10 graduates a week, think what that will do in just six months.”

Letain DeVore, chairman of board for the Searcy Regional Chamber of Commerce and an associate broker at Re-Max Advantage Realtors, said the economic impact of gas development has been felt in her business.

“People are starting to buy houses as they move in here,” DeVore said. “At first it was more temporary.”

Local bankers have verified Deck’s assessments.

“You’re starting to see a lot of money coming in now, the royalty payments,” said Donnie Miller, president of Regions Bank of Searcy. “What everybody was guessing at, we’re getting the checks.”

Miller said multiple wells are now being developed in locations where only one well existed before.

When Deck’s first study was published in 2007, some had skeptical reactions to the projection of a $5.5 billion economic impact.

“People said, ‘You’re out of your mind. You can’t be serious about this,’” Deck said.

Those predictions turned out to be understated, with new figures showing the boom is 62 percent larger than thought a year ago and will create a $22 billion impact by 2012, bringing 11,000 new jobs and producing $2.1 billion in tax revenues for the state, counties and cities.

Deck said the gas boom was “an economic kick in the pants” for the eight core counties most impacted by the Fayetteville Shale Play: White, Cleburne, Conway, Faulkner, Franklin, Johnson, Pope and Van Buren. Those counties have been historically economically depressed and are now seeing a boom that is bringing a 50 percent increase in sales tax revenues, Deck said.

“White County is where we see the most explosive growth,” Deck said.

Of the over 200 local leaders who attended Deck’s lecture, held in the Heritage Building at Harding University and hosted by Chesapeake, several commented on concerns related to the gas development.

Davis said he had concerns about what the gas boom is doing to the county’s infrastructure.

“Everyone’s working together well but I still don’t know we have a complete solution to those larger issues surrounding our roads,” Davis said.

White County Judge Michael Lincoln, who said he has forged a relationship with the major gas companies for reimbursement for repairs to county roads caused by gas companies, said the continued investment in the county showed their commitment.

“I’m very pleased with the agreements we have,” Lincoln said. “They continue to honor what they say they will do.”

LITTLE ROCK - Chesapeake Energy Corporation (NYSE:CHK) dedicated its new Fayetteville Shale Corporate Development Office today in Little Rock.

“The opening of our Fayetteville Shale Corporate Office is further proof that Arkansas and the Fayetteville Shale remain an important focus for Chesapeake's natural gas exploration efforts and a vital region for increasing the clean burning natural gas supply in the United States,” said Aubrey McClendon, Chesapeake's Chairman and Chief Executive Officer.

Chesapeake began its natural gas drilling operations in Arkansas in 2005. Today, the company has 12 rigs in operation, has drilled more than 180 wells and has 138 producing wells with an average daily production of approximately 135 million cubic feet.

Last month, the Center for Business and Economic research at the University of Arkansas released the findings of a study that indicates the natural gas industry will have an $18 billion impact on Arkansas' economy over the next five years and will create more than 11,000 new jobs.

“The University of Arkansas' study confirms our belief that the natural gas industry is driving the state's economy,” said McClendon. “The opening of our newest office, along with our continued investments in Arkansas, is proof that we plan to be here for a very long time.”

In dedicating the new office in Little Rock, Chesapeake announced a $50,000 donation to Arkansas Rice Depot and a $25,000 donation to THEA Foundation.

“We are honored to help support these worthy organizations,” said Martha Burger, Chesapeake's Senior Vice president of Human and Corporate Resources. “Chesapeake believes in adding value to the communities where we operate by providing financial support to community efforts that enhance the quality of life.”

The Arkansas Rice Depot is a respected leader in domestic hunger relief. In 2007, the organization distributed more than six million pounds of food. While Arkansas Rice Depot is best known for its statewide food bank, it also operates the Food For Kids program in over 500 schools in Arkansas, including White County. Food For Kids provides schools with ready-to-eat food that is given to children who have problems in schools because of hunger at home.

THEA Foundation was started in 2001 by Paul and Linda Leopoulos in honor of their 17-year-old daughter, Thea, who died in a car accident earlier that year. Thea's love of art inspired the couple to help provide educational opportunities for students interested in the arts. Chesapeake's donation will go to the foundation's Art Across Arkansas program, which will distribute art supplies to elementary schools in White, Van Buren, Faulkner, Cleburne and Conway Counties.

Chesapeake is the nation's most active driller for natural gas with 142 rigs currently in the United States. Additionally, Chesapeake is the largest independent producer of natural gas in the nation and the second largest producer of natural gas in the Fayetteville Shale with approximately 600,000 net acres of leasehold.

BY LAURA STEVENS ARKANSAS DEMOCRAT-GAZETTE

    Natural-gas companies’ future spending will make “completely irrelevant” a recent study on the economic impact of drilling in the Fayetteville Shale formation in north-central Arkansas.

    That was the observation made Tuesday by Aubrey Mc-Clendon, Chesapeake Energy Corp. chief executive.

    The companies will spend between $75 billion and $100 billion in the next decade in development of the formation, McClendon said at the Arkansas Economic Development Foundation’s luncheon at the Statehouse Convention Center in Little Rock. “It really can be transformative,” McClendon said.

    The study, partially funded by Chesapeake, projected a five-year total of $12.5 billion invested by companies, from 2008 through 2012. As a result, the Fayetteville Shale, where most of the production is in a fivecounty area in the north-central part of the state, is expected to have an almost $18 billion impact on the Arkansas economy during that same time frame, creating about 11,000 jobs, according to the study.

    “The danger of doing a study where you ask companies to project their future activities is that they constantly revise those projections,” Kathy Deck, director for the Center for Business and Economic Research, which conducted the study, said in an e-mail. “If market conditions are favorable, then it is unsurprising that companies accelerate their investment plans.”

    Natural-gas futures for May closed at $10.21 per 1,000 cubic feet Tuesday on the New York Mercantile Exchange. The first week of January saw futures prices in the $7.80 range, up about a dollar from prices in October, according to the U.S. Energy Information Administration. McClendon said that gas has to stay between $6 and $7 to maintain the economic viability of the expensive type of drilling used to extract natural gas from the shale.

    In October, a Chesapeake spokesman said the company might decrease its 2008 investments in the shale if naturalgas prices dipped too low, and in a January interview with the Arkansas Democrat-Gazette, McClendon said the company planned to increase drilling in the Fayetteville Shale with 20 rigs by the end of 2009, but an increase in the state’s severance tax “could mess it up,” he said.

    But Chesapeake’s opinion changed as the state approved a new severance tax and natural gas futures skyrocketed.

    McClendon’s projection of as much as $100 billion directly invested by companies is “staggeringly large,” Deck said. “The state obviously experiences accelerated job growth and tax revenues under that scenario. The state only benefits when companies make bigger investments sooner.”

    If the new projected numbers happen, Jeff Collins, of Streetsmart Data Service in Springdale, said “I think you’d have to look at it as a huge windfall for the state, particularly during an economic period when manufacturing has been struggling.”

    However, he said the numbers are highly reliant on market conditions.

    “It’s one thing to have that kind of potential, it’s another thing to realize it,” Collins said. “Clearly relatively high naturalgas prices and, I think, success with the initial efforts exceeding expectations are the two reasons why you see those kinds of estimates of future investments.”

    McClendon said, “We’re going to continue to put capital where we think it can have the best impact, and right now Arkansas is a good place to be spending money.”

    The energy company has the second-biggest presence in the producing area of the shale after Southwestern Energy Co. Mc-Clendon said the company will probably spend about $15 billion to drill wells on the company’s approximately 600, 000-acre leasehold.

    A Southwestern spokesman did not immediately return voice mail and e-mail messages Tuesday evening.

    Late last month, Chesapeake announced it would be increasing rigs drilling in the shale from 12 to 25 by early 2009 “in response to the company’s recent 10 percent increase in expected estimated ultimate per well recoveries,” according to a news release. During his speech, McClendon said the company will “spend $1 billion a year for as long as we can project.”

    The state Legislature recently approved an increase to the state’s severance tax, one of the lowest in the nation, from threetenths of 1 cent per 1,000 cubic feet to 5 percent of the market value, with some exemptions for lower-producing wells. The new tax will go into effect in 2009.

    “I’m not going to say I was OK with it,” McClendon said about the new severance tax. Chesapeake worked with the governor to make sure incentives were included, but he added that other states have lower rates. “We’re satisfied with it, we’ve moved on and we’re ready to start increasing our investments in the state.”

    McClendon said natural-gas prices were another factor in the company’s increased presence, as well as the wells’ production numbers.

Chesapeake: Shale could turn state into powerhouse

The chief executive of Chesapeake Energy Corp. said Tuesday the Fayetteville Shale natural gas formation will transform Arkansas' economy, but said any additional tax burdens or regulations could drive business away from the state.

"You all are in a unique situation to see an event that will potentially transform this state into an economic powerhouse of the mid-South," Chesapeake Chief Executive Officer Aubrey McClendon said at a luncheon for the Arkansas Economic Development Foundation in downtown Little Rock.

McClendon said his company won't lobby for any changes in the increase on Arkansas' severance tax on natural gas recently enacted in a special session this month. Chesapeake, the largest leaseholder in the Fayetteville Shale, agreed to support the tax hike along with other natural gas firms after negotiations with Gov. Mike Beebe's office.

The tax increase, which takes effect Jan. 1, will eventually raise $100 million annually for state highways. It replaces a rate that brings in about $660,000 a year.

The tax hike includes temporarily lowered rates for some wells, but McClendon warned against the Legislature considering any other increases or regulations. He said the company's recent natural gas discovery in the Haynesville Shale in Louisiana is an example of why the state should avoid any further tax hikes.

"It certainly can draw away. That's why Arkansas has to be careful with the regulatory environment and tax environment," McClendon told reporters before his speech. "There are other competing plays in nearby states that are every bit as good as the Fayetteville, if not better, so you have to stay competitive."

Chesapeake announced last month that it would more than double its number of rigs from 12 to 25 and will drill about 300 wells a year in the state. McClendon predicted the company would spend more than $1 billion in the state annually in the coming years.

"We're going to continue to put capital where we think it can have the best impact, and right now Arkansas is a good place to be spending money," he said.

McClendon predicted that the shale's economic impact would be much higher than the nearly $18 billion that a recent University of Arkansas study said would come to the state over the coming five years.

"We're about to make that completely irrelevant, I think, with what we and others in the industry are going to do," McClendon said. "The way I see it, we're going to spend somewhere between $75 and $100 billion in your state for the next decade or so."

The company is satisfied with the tax hike, said McClendon, who indicated he accepted the compromise grudgingly.

"I'm not going to say I was OK with it. ... In a compromise nobody is completely happy with it, but it's something we can live with," he said.

McClendon suggested that Arkansas consider setting aside some of the severance tax revenue in an endowment fund that could be used in the future if natural gas prices go down and money from the tax hike drops. Under the tax plan signed into law, 95 percent of the severance tax money will go toward highways and roads and 5 percent toward general revenue.

"It would give Arkansas some advantages that really no other state in this part of the country has," McClendon said.

Beebe said after the luncheon that setting aside the money for any kind of endowment was unlikely.

"We'll have to see how it happens, but right now the people of Arkansas need highways and we need highways for economic development," Beebe told reporters. "Unless the numbers significantly change, it's an option that may be more of a want-to than realistic."

During his speech, McClendon said his company is also opposed to the introduction of any new coal plants in Arkansas.

"It makes no sense, to me, for the people of Arkansas to subject to pollution levels from higher consumption of coal when you have this gas bonanza," he said.

BJ Services brings jobs

Company breaks ground for $82 million regional headquarters

By Warren Watkins

The Daily Citizen

BJ Services Company broke ground for their new regional headquarters in Searcy Tuesday.

The regional headquarters will allow BJ Services to provide pressure pumping and other oil field services to the natural gas industry in the counties involved in the Fayetteville Shale play. The company is investing about $82 million in the regional headquarters, which will employ approximately 150 people by late 2008.

The headquarters will be in a new 64,000-square-foot facility to be constructed on a 40-acre site at 3750 South Main Street. The property, which is near the Morning Sun community, is bordered on the west by Highway 67 and on the east by South Main Street.

“This is the big one,” said Danny Games, director of corporate development for Chesapeake Energy, which contracts work to BJ Services. “This is the bread and butter.”

White County is now “ground zero” for the Fayetteville Shale play, Games indicated.

“White County is seeing the bulk of the economic investment and the resulting economic activity, compared to the other Fayetteville Shale play counties. They're getting the lion's share of the current investment right now.”

Wayne Hartsfield, president of the Searcy Regional Economic Development Corporation and chairman of Regions Bank of Searcy, said recruitment efforts to get BJ Services to locate in Searcy began in June, 2006.

“BJ Services looked at different communities around Arkansas,” Hartsfield said. “Buck Layne and his staff at the Searcy Regional Chamber of Commerce have spent many hours working with BJ Services and the community.”

Hartsfield said Searcy Mayor Belinda LaForce, the city council and city workers also contributed to the effort to lure the gas services company to Searcy.

“This is amazing,” LaForce said. “To think of $82 million brought into the community. What an investment! About a year and a half ago, we lost 750 manufacturing jobs in Searcy, and this will help with the employment situation.”

White County Judge Michael Lincoln used the announcement to remind gas industry officials of their part in preserving the county's roads. Since the beginning of the gas development boom in the county, controversy has surrounded the use of roads by the heavy trucks used in the industry.

“New, high-quality jobs will help expand our economic base throughout Arkansas,” Gov. Mike Beebe said in a press release.

Beebe did not attend the announcement, held at the Searcy Regional Chamber of Commerce one mile north of the construction site, but a number of state officials were in attendance.

“BJ Services Company exemplifies the contributions being made to this growing industry through repeated investments in Searcy and White County,” Beebe said.

On Jan. 2, BJ Services opened a temporary headquarters in Doniphan Industrial Park in Searcy.

The new headquarters is planned to open in the spring of 2009.

“BJ Services is very excited about our move to Searcy, Arkansas,” said Ronney Coleman, vice president North America pressure pumping services for BJ Services Company. “This is a great opportunity for us and the local community.”

BJ Services provides pumping, process and pipeline, chemical, tubular and completion services to oil and natural gas companies worldwide.

“The City of Searcy is pleased to welcome BJ Services to our community and to have worked with the Arkansas Economic Development Commission to make possible industrial and commercial growth for Searcy and White County,” said LaForce. “Searcy is excited about the prospect of partnering with BJ Services in utilizing our workforce and providing stable economic growth to our area.”

Additional information can be found at www.bjservices.com.

Weatherford celebrates operations

Fracturing company to create 200 new jobs in Searcy location

Weatherford Fracturing Technologies, a product line of Weatherford International LTD. (NYSE: WFT), recently held an open house at its new Searcy facility. The Searcy location will allow Weatherford to provide pressure pumping and other oil field services to the natural gas industry in the region. The company is investing several million dollars in the facility that will employ more than 200 people by late 2009. The 12.5-acre site, located at 111 West Booth Road, formerly housed the Atlas Carrier Trucking Company.

Jim Cottom, district manager, Searcy operation, said Weatherford's management chose to locate a new facility in Searcy to target the rapid expansion of the Fayetteville Shale Play.

“We made a conscious effort to hire and train local people rather than bringing in trained people from outside the community,” Cottom said. “We feel that in the long term, hiring local people with ties to the community will provide us with the best workforce - one that will help the Searcy operation to be successful.”

The company provides pumping, process and pipeline, chemical, tubular and completion services to oil and natural gas companies worldwide.

For more information on the company, visit www.weatherford.com.

BJ Services to build $15 million headquarters in southeast Searcy

By Warren Watkins

The Daily Citizen

The Searcy City Council approved a tax incentive Tuesday night for a natural gas development company, enticing the corporation to build its headquarters in Searcy and bring hundreds of jobs to the community.

BJ Services will be refunded sales tax paid on building materials for the $15 million facility, built on 40 acres inside the city limits directly west of Chesapeake's Nomac facility near Morning Sun. The site is on the southeast side of Hwy. 67, opposite from most of the city, and will receive water and sewer service from Higginson.

The deal for the Tax Back/Advantage Arkansas incentive was brokered by Buck Layne, president of the Searcy Industrial Development Corporation and the Regional Chamber of Commerce, who spoke to the council at its agenda meeting Thursday and its Tuesday meeting.

“Good job, Buck,” said Alderman Carl Nutter after the unanimous vote.

Mike Gillespie is construction manager for BJ Services and will be overseeing the project.

“We have not completed all the drawings yet,” Gillespie said. “We'll have a groundbreaking ceremony but that's not been announced yet.”

The headquarters will include areas for truck maintenance, storage of materials and equipment and administrative offices.

“It will be a support facility which will be the heartbeat of the company for us,” Gillespie said. “About 150-200 employees will work out of the building.”

Design engineering will take four to six months and completion of the project will take 18 months.

“When you've got as many trucks as we're going to be running and the equipment, it takes a lot of support staff, and with the environmental issues we have to take care of each and every day,” Gillespie said.

Gillespie said now that the city has signed on to the tax incentive program, county and state officials will also be asked to approve it.

“The success of our continued economic development efforts is largely due to the partnership of the city with the Searcy Industrial Development Corporation, Metro Little Rock Association and Teamwork Entergy Arkansas,” said Mayor Belinda LaForce. “BJ Services is going to be a major player in our future economy here in Searcy considering their millions of dollars of investments here locally, both capital and in workforce development. We welcome BJ Services and hope they find Searcy and White County to be as profitable for them as we believe they will be for us.”

In other business, the council passed a budget ordinance waiving bidding and approving fuel purchases from AC Oil for $42,443.93, and authorizing payment of a $12,730 balance for Relativity software purchased in 2007 and $25,000 for a maintenance agreement on the Relativity software for the police and court departments.

The Daily Citizen

ALBION - The gas boom in White County became even larger as the leading development company dedicated its regional headquarters here Thursday.

Chesapeake Energy has drilled 146 wells in the Fayetteville Shale in Arkansas, with 135 in White County, 97 of which are producing. The new field office will support 35 workers organizing subcontractors who employ hundreds of roustabouts, well hands and others.

“It's going to put a bunch of money in a lot of people's pockets that didn't have any money,” said Dickie Rambo, who owns 200 acres between Albion and the Little Red River. “It's like a gold rush.”

Rambo has four wells on his property, all developed by Chesapeake, and one in the same section. Another is on the way on his land, Rambo said, and he began to receive royalty checks on two of the wells five months ago.

“It's exciting to have their headquarters in Searcy,” said Searcy Mayor Belinda LaForce. “We have close communication with them and are able to have them close by if we need to talk to them about the issues. It's going to be a long-term presence.”

About 500 people attended the event, hearing remarks by Aubrey McClendon, chief executive officer of Chesapeake and owner of the National Basketball Association's Seattle Supersonics.

“My feeling is that this will be an office that will be expanded three or four times down the road,” McClendon said. “Some of our field offices in Oklahoma supply up to 400 people.”

McClendon said Chesapeake, Southwestern Energy and others have just scratched the surface of the gas boom in White County, although he discounted ideas the Moorefield Shale, which lies underneath the Fayetteville Shale, will be a major gas producing strata. Gas leases signed to give permission for drillers into the Fayetteville Shale also allow drilling deeper into the Moorefield Shale.

Chesapeake plans on drilling 5,000 wells in the Fayettevile Shale play, with two-thirds of them in White County.

“We want to be the best neighbors they've ever had,” McClendon said of the company's interaction with local residents. “The challenge is that for every Chesapeake employee that we have, there will be 10-15 other employees not employed by Chesapeake but working on Chesapeake wells. We continue to hire a lot of young people.”

McClendon presented Dr. David Burks, president of Harding University, with a $100,000 check for scholarships.

“This will be for students who are going into science and engineering,” Burks said.

The graduates will take leadership positions in the gas industry, according to Chesapeake and Harding officials.

A training facility for vocational workers in the gas industry is being built with Chesapeake's support at Arkansas State University-Searcy, including an on-campus gas well simulator. That training facility is expected to open this spring and will see students come in for 40 hours of instruction during one week.

“It's probably the biggest economic shot in the arm we've experienced,” White County Judge Michael Lincoln said of the gas boom. “The benefits will far outweigh the problems as far as the exploration process.”

McClendon thanked local residents who attended the event for “embracing people you've never met before.”

“The people of this area are about to see an economic boom the likes of which they've never seen before,” McClendon said.

Fire in the sky

The Daily Citizen

Dub Gentry had a set of Christmas lights that were much brighter than others in his neighborhood - in fact, the two dramatic flames shooting 50 feet in the air could be seen for miles up and down Highway 16 on Christmas Eve.

Three wells are on Gentry's property, just 200 yards from his carport, and gas from two of them was being burned off while his family celebrated the holiday. Gentry reports no safety problems with the well operations, which are being completed by Chesapeake Energy.

“We've had three or four incidents where people have called in, and it turned out that's what it was,” said Tamara Jenkins, coordinator for the White County office of emergency management and 911 system. “We've since had conversations with officials of different companies, and now they call us before they do it.”

Jenkins said the events, called flares in the gas industry, are basically controlled burns.

The fires produce flickering orange and yellow light that is diffused on nights with high humidity or fog.

“We have received an occasional report of the glow in the sky, but no known complaints about them,” said Jeremy Clark, chief deputy for the White County Sheriff's Department.

Mark Raines, spokesman for Chesapeake, said the burn-offs were part of a highly-controlled process.

“We safely burn, or flare, the gas so that we do not put methane into the air,” Raines said. “It also stops the fumes from being in the flow-back tanks. This practice also helps to determine the types of fluids in the well, the pressure and flow rates and other characteristics of the underground reservoir.”

The amount of gas burned varies from well to well depending on the strength of the well, how long it takes to clean the well or to see water recovery down to a level that can be controlled during production, Raines said. Burned gas is not metered to the extent of sellable gas but goes through a test separator with estimated volumes.

No royalties are lost by property owners because of flares because the wells are still in the flow back and clean-up stage so the company can prepare to sell the gas, Raines said.

“The burn is actually conducted for safety reasons,” Raines said. “It is safer to burn, or flare, the gas than it is to flow to a tank and have the fumes on location.”

The question that has occurred to some involves how the fire is started. A gas worker does not have to hold a match to the escaping gas.

“An electronic-spark pilot light ignites the fire,” Raines said.

The length of a typical burn varies depending on how long it takes to clean the well, but on average it is about five days, Raines said.

Don Harlan, Vice Chancellor of ASU-Searcy, received a $75,000 donation from Sam McCaskill, Nomac President and Dr. Eugene McKay, Chancellor of ASU-Beebe, is presented with a $75,000 donation from David Fisher, Vice President of Drilling Services for Chesapeake. Chesapeake and Nomac donated money to construct a drilling rig simulator that will be located on the ASU-Searcy campus and will provide students with hands-on instruction. The rig will stand approximately 60-feet tall and have 20-feet by 20-feet platform, which is about half the size of a fully operational drilling gas rig. Construction for the rig is set to begin immediately. Enrollment will begin on January 2 for classes, which are tentatively scheduled to commence in March. Call 501-207-4075 or log on to www.asub.edu for more information.

The Daily Citizen

When officials at Arkansas State University-Searcy heard about natural gas drilling in White County a few years ago, they felt a need to help this new industry in the state, said Don Harlan, Vice-Chancellor of ASU-Searcy

“We asked what we could do to prepare the populace to drill natural gas,” Harlan said. “In regard with our dealing with the natural gas industry, we believe our major role is to listen to the gas industry folks about what their needs are and find a way to meet those needs.”

ASU-Searcy announced Wednesday that, in cooperation with Chesapeake Energy, Nomac, Union Drilling and High Plains Technology Center, it will create a program training people for careers in drilling. The program will involve hands-on training on a simulated drilling rig that will stand approximately 60-feet tall with a 20-foot by 20-foot platform, which is about half the size of an operational gas rig. Classroom training developed by the High Plains Technology Center will also be included in the program.

“We intend by this to create personal wealth, increase the income of local families and increase the profitability of these companies,” said Les Wyatt, president of the ASU system. “ASU absolutely believes in a relationship between higher education and economic development.”

To pay for the program, Cheasapeake Energy and Nomac, a wholly owned subsidiary of Chesapeake Energy, will donate $75,000, said Eugene McKay, Chancellor of ASU-Beebe. Union Drilling will donate $50,000, McKay said. High Plains drilling will provide the instructor and pay the instructor's salary, he said. The drilling simulator will take three months to build and the training program will simulate a 40-hour week on a drilling rig, McKay said.

High Plains will only provide the instructor until June 30, by which time ASU-Searcy's program must be able to stand on its own legs, said Bill Jackson, Assistant Superintendent of High Plains Technology Center. High Plains has trained over 5,000 people for careers in the natural gas industry in the last five years, Jackson said.

“When the industry moved, we moved with it. Now it's moved here, so we are moving with it,” Jackson said. “We are here to serve in whatever capacity we have to make sure the program lasts after June 30.”

The demand for drill workers has grown rapidly lately, said Chris Strong, President and CEO of Union Drilling. With the price of oil raising, the demand for natural gas has increased, Strong said. The number of drilling rigs has gone up to meet demand, but this brings up training issues, Strong said.

“We don't want people coming in who don't have that training,” Strong said. “They are more likely to be injured, and we don't want that for the community.”

Chesapeake Energy leases more land than any other company in White County, and with the number of rigs going up, it needs a locally trained labor force, said Dave Fisher, Vice-President of Drilling Services for Chesapeake. Currently, 45 percent of employees working for Nomac in the Fayetteville Shale Play are Arkansans, and they hope to see that number increase, Fisher said.

“We want to hire more Arkansans to work with us and drill natural gas,” Fisher said.

Not only will the jobs be available, they pay well, Strong said. The entry level positions pay $50,000 a year on average, while shift supervisors are paid between $75,000 and $80,000 a year, Strong said. Top positions in drilling rigs often pay six figures, Strong said. The natural gas industry “provides opportunity for high rewards, but it's hard work,” Fisher said.

“We believe natural gas can reduce the nation's dependence on foreign oil, and the Fayetteville Shale can be a big part of that,” Fisher said.

The Daily Citizen

The City of Searcy will receive $489,775 from Chesapeake Energy as up-front money on mineral rights leases for city property.

Attorney Don Raney reported to the council in a called meeting Tuesday that the latest figures after title searches have been done by Chesapeake show the city owns 877 acres. The council voted five to three to accept Raney's recommendation, formulated after negotiations with Chesapeake, which split the city into three sections with differing up-front amounts and royalties.

Voting to accept the bid were Aldermen Mary Ann Arnett, Jim Dixon, Dale English, Jackie Liles and Mike Chalenburg. Opposing the deal were Aldermen Kyle Reeves, Carl Nutter and Mark Derrick.

A controversy that has disrupted gas development in White County is on its way to resolution, according to Gov. Mike Beebe.

Beebe told The Daily Citizen earlier this week that a compromise has been reached in principle concerning issuing truck permits.

Gas development companies working in north White County have had difficulties using heavy trucks in recent months because of weight limits on state highways and an inability to obtain proper permits from the state.

“We have reached an agreement, in principle, with the Arkansas Highway and Transportation Department that would allow us to use those weight-restricted state highways in question — Highways 305, 310 and 124,” said Mark Raines, spokesman for Chesapeake Energy. “We are still working through the details of the agreement and hope to have it finalized soon.”

Raines said drilling sites in north White County had been impaired because of the controversy.

“We have not worked at locations that have required use of those restricted highways,” Raines said. “Instead we have moved some planned operations elsewhere in White County until this issue is resolved, which is about to happen.”

Beebe said the agreement would be re-evaluated after a year.

John Thaeler, senior vice president of SEECO, Inc., parent company for Southwestern, confirmed an agreement in principle has been reached.

Sen. John Paul Capps of Searcy said he felt the severance tax issue would also be worked out without the question being referred to voters in a public election. Capps said there would probably be a resolution within months and that he would support a bill in the next legislative session which would raise the severance tax.

“The governor’s preferred scenario is to pass a severance tax increase in the 2009 legislative session,” said Matt DeCample, a spokesman for the governor. “He feels that is the first avenue you should pursue for new public policy, with the possibility of an initiated act.”

Beebe is guiding the issue toward a solution in the legislature, DeCample said.

“Going into the ‘09 session, his attitude will be, ‘Here’s our proposal,’ and if it doesn’t pass the legislature is prepared to lead the effort to put it on the ballot,” DeCample said.

Talks to work out an acceptable raise in the severance tax are ongoing, along with research, DeCample said.

“The Department of Finance and Administration is studying very thoroughly how this industry and this product is taxed around the region, in other states,” DeCample said.

The relationship between the state and gas companies is not broken down, DeCample indicated.

“The governor has not ordered restrictions on gas industry trucks,” DeCample said. “The highway department controls that. The governor does feel strongly about sustaining that balance between insuring those who use the roads and who potentially damage the roads pay their fair share to maintain the roads, but at the same time preserving the economic development for that region, and the Fayetteville Shale has been a big source of economic development for that region.”

The Daily Citizen

It's really just a matter of numbers. Geologists estimate the Fayetteville Shale natural gas formation in Arkansas to be 300 million years old. Economists believe natural gas drilling activity will have a $350 million impact on Arkansas' economy by the end of next year.

Meanwhile, the 72,000 White County citizens remain mostly uninformed and unsure about the entire thing.

The natural gas industry is progressing so rapidly in White County that it will boggle the mind to try and keep pace. In addition the three most active companies here - Chesapeake, Southwestern Energy and Hallwood - several smaller businesses attempting to capitalize on the Fayetteville Shale activity have also arrived in the area. New jobs - filled mostly by folks foreign to White County - are being added daily. And natural gas rigs are plummeting through the county's soil this very second.

The Daily Citizen

As Chairman of the Arkansas legislature's Joint Performance Review Committee, Rep. David Evans of Searcy attended as committee member Betty Pickett, representative from Conway, conducted hearings Wednesday at the State Capitol.

Pickett's focus was the state's water resources, and the hearings were a fact-finding effort to be sure that proper procedures were being followed to protect aquifers and surface water.

“The Fayetteville Shale is new to us all, and the regulatory agencies are learning all they possibly can,” Evans said. “I thought the meeting was very positive. The various witnesses that appeared before the committee were informative and everyone that was in the committee room learned a lot about the Fayetteville Shale and what was going on in the shale.”

Chesapeake Energy was only gas company to have a representative that testified, Evans said, while other witnesses include representatives from state agencies, the Arkansas Oil and Gas Commission (AOGC) and the

. Wildlife Commission.

Another meeting of the committee will be at 10 a.m. Nov. 27, featuring testimony from representatives of environmental groups.

Some county residents have questioned the environmental impact of natural gas drilling in White County and throughout the state.

In an October interview with The Daily Citizen, Lloyd Schrieber, a retired worker from Illinois now living in White County, said he is looking to the future. He defines the future as a time when the gas boom may be over in central Arkansas but its environmental effects remain, especially in the water supply, both above ground and underground. Water is used in fracturing or “fracing” wells to make them produce more gas and is sometimes contaminated with chemicals after use. The disposal of frac water is highly regulated by the Arkansas Department of Environmental Quality.

“They put it in ponds,” Schrieber said in October. “Well, 20 or 30 years from now we'll still have the ponds sitting around here.”

Schrieber said he lived in Clay County, Ill., and saw the environmental impact on oil drilling there.

“I saw them drilling for oil and they would get into the water table,” Schrieber said. “The sulfur content got into it.”

Pumping water from the Little Red River, which is now ongoing, may have an impact, Schrieber said.

SEECO perspective

John Thaeler, senior vice president of SEECO, Inc., reacted to public concern over water issues related to gas development. Southwestern Energy is the parent company of SEECO.

Water is a key element in gas development, Thaeler said.

“We do use water in our drilling operations and in our fracture stimulation operations,” Thaeler said. “We've got a strategy in place that we think is environmentally friendly.”

Some lessons learned in observation of the Barnett Shale Play in Texas, where water is not as abundant as in Arkansas, can be applied to the Fayetteville Shale Play, Thaeler said.

“Southwestern Energy is proactive,” Thaeler, a geologist, said, “and 80 percent of our water supply comes from private ponds and lakes.”

In the disbursed system used by Southwestern, many existing impoundments are used while others are constructed, cutting down on water transportation costs.

“We've had some very minor withdrawals from the Little Red River, all of them permitted,” Thaeler said.

The handling of byproducts from drilling operations is a concern for Southwestern.

“We have our own health, safety and environment department that is tasked with developing and maintaining a comprehensive management system that guides our activities in key areas,” Thaeler said. “In many ways we have a much more stringent set of rules than of the regulatory bodies.”

The company works closely with regulatory bodies, he said.

“Our health, safety and environment department uses extensive training with employees,” Thaeler said. “We have 22 core programs offer training, with classes conducted over 500 times this year alone. It's a very strong program within Southwestern Energy.”

Southwestern has even been asked by their service and supply providers to offer suggestions on how to improve their practices, Thaeler said.

“An environmental safety program has to be part of your operations on a day-to-day basis or it doesn't mean anything,” Thaeler said.

Southwestern does not generate hazardous wastes, Thaeler said.

“We have two kinds of wastes: Typical household waste, which is taken to a domestic landfill, and the second type, non-hazardous oilfield waste, which is defined by federal law.”

Examples of non-hazardous oilfield waste would be drilling muds, mud additives and produced water, all of which Thaeler claims Southwestern disposes of properly.

“All of it goes to licensed and permitted disposal sites,” Thaeler said. “Our health, safety and environment department reviews each of the disposal facilities before I get approval to use them.”

Spudder rigs are drilled with air, and the only fluid is what is encountered underground. Steel casing is cemented in place in the wells so the underground water can't come into the well. Cuttings and fresh water out of the well are put into a reserve pit 25 to 30 feet across in both directions and five to six feet deep, which has a waterproof liner. Historically, fresh water has been taken to a disposal site, but Southwestern is now working with the Arkansas Department of Environmental Quality (ADEQ) to dispose of it.

In order to apply the cuttings and fresh water to local land, the landowner must agree. Southwestern builds a series of ponds to catch the water to reuse in operations.

Big rigs, different than spudder rigs, used oil-based muds.

“For oil-based muds we used a closed loop system,” Thaeler said. “Mud is expensive. We put special chemicals in there, none of which are classified as hazardous. We keep the mud in the tank, and it continually cycles and gets cleaned up, then goes back down the hole. It's taken by steel container to a new location.”

In fracturing the wells, water is also used, Thaeler said.

“We use fresh water with a few chemicals, which we call slick water,” Thaeler said. “We have to catch that water in steel frac tanks. That water has to be cleaned up or sent to disposal site.”

Thaeler said the state was working well with Southwestern.

“I want to be complimentary of the state's environmental agencies, the AOGC and ADEQ,” Thaeler said. “They have been very proactive in understanding the new scale of operations and developing programs that permit the development and maintaining of high Arkansas standards.”

Southwestern has made a $250,000 donation to the Damascus Bobwhite Quail Habitat Project, which covers 9,700 acres in Conway, Faulkner and Van Buren counties.

Chesapeake perspective

Chesapeake Energy expresses a commitment to environmental stewardship.

“It is evident in what we do everyday, which is produce the most environmentally-friendly hydrocarbon energy source - natural gas,” said Mark Raines, Chesapeake spokesman. “Natural gas burns more cleanly than any other hydrocarbon. Its impact on the environment when extracted and consumed is minimal when compared to coal and imported oil.”

Raines said Chesapeake's operations are built around a commitment to safeguard the environment and to operate in a manner that is consistent with recognized American industry standards as they relate to the environment.

“We strive to make efficient use of resources to minimize our environmental footprint and to protect the habitat and plant and animal populations in our areas of operation,” Raines said.

Paul Hagemeier, vice president of regulatory compliance for Chesapeake, took members of the legislature's Joint Performance Review Committee through a step-by-step process of the life cycle of a typical well in the Fayetteville Shale, from how a drill site is selected to the completion of a well.

How Chesapeake addresses the environmental considerations that are present in each phase of the drilling and completion process was part of Hagemeier's remarks.

“In developing our operations in Arkansas, we have worked with many state agencies to refine our environmental management practices,” Raines said. “Those agencies include the AOGC, the ADEQ, the Arkansas Game and Fish Commission, the Arkansas Natural Resources Commission, the U.S. Fish and Wildlife Service and others. Their guidance and assistance have been valuable.”

Raines said Chesapeake is very pleased with the responsiveness of each of the partner agencies and their willingness to help Chesapeake work through issues that may arise during the course of a typical drilling and completion project.

Hallwood officials expect big things in Fayetteville Shale play

By Jay Strasner

The Daily Citizen

Officials with one of the most active companies in the Fayetteville Shale play are still trying to figure the best ways to drill and complete natural gas wells but think the economic impact of the industry can continue for the next 50 years.

Bill LaFleur and Tad Morrow, representing Hallwood Energy, provided a two-pronged presentation to the Searcy Rotary Club Tuesday regarding their company’s natural gas drilling activity in White County.

“Someone asked me the other day to gauge how far along we are in the Fayetteville Shale play,” Morrow said. “One a scale of 1 to 100, I’d say probably around 10. We’re really in the early stages right now. I’ll say this: It’s not like we’re planning to be here one day and then gone.”

Morrow, a land man for Hallwood, said innovative technology is allowing geologists to determine “new areas of depth” within the Fayetteville Shale, which could lead to discoveries of additional reserves of natural gas or possibly other fossil fuels.

“It looks promising,” Morrow said.

LeFleur, a land manager for Hallwood, said new fracturing and horizontal drilling techniques have provided access to natural gas that in years past was trapped within the layers of shale and near impossible to remove.

“We’ve had to try various fluids to see which ones hold the gas best and other factors,” LaFleur said. “We’ve also seen inconsistencies in different wells. Once we figure it all out, we should see just about every well producing large amounts of gas per day. Then we can always go back and refrac wells that didn’t produce initially and try those new techniques in those areas.”

Hallwood is the third-largest lease holder within the Fayetteville Shale play, behind Chesapeake Energy and Soutwestern Energy Company.

“We don’t want to be the biggest, but we want to be the best, just like any company” Morrow said. “The goal is to be as profitable as possible.”

Morrow said in his travels around the county he’s encountered landowners who are very eager to learn more about the natural gas reserves within the area.

“The biggest concerns are leases, bonuses, royalty payments, etc.,” Morrow said. “We want to share our knowledge, be involved in the community and become a working partner for people here. We hope for a long, productive partnership.”

During the question and answer session, a Rotarian voiced concerns about Arkansas’ severance tax structure in comparison to other states in the region. Morrow said Arkansas’ taxes are lower.

“At the current gas prices, it would be hard to be profitable in Arkansas if taxes were higher,” Morrow said. “Oklahoma has higher taxes, but more reserves right now. Texas doesn’t have state income taxes, so that kind of balances out. It’s an issue that will probably be debated quite a bit over the next few years.”

LaFleur said “a lot of money” has been invested in the Fayetteville Shale and future activity and subsequent success in the area hinges on a knowledgeable workforce.

“There’s a large gap in the age of our workforce in this industry,” LaFleur said. “About 25-30 years ago, the industry almost collapsed. Those with the most knowledge are at or past retirement age. A lot of companies are investing in workforce education to help train workers.”

He added that Chesapeake and SEECO have invested nearly $1 billion in the area’s gas exploration and said Hallwood has spent nearly $500 million. The second determining factor regarding the future of natural gas activity in Arkansas will depend on the market price of the fossil fuel.

“We’ve invested a lot, but at some point you’ve got to show a profit,” LaFleur said. “Everybody’s trying to figure out the best way to do that. If gas drops below $5 [per million British thermal units] or so, some people will say ‘we’re outta here.’ Then again, if the reserves prove to be anything like the Barnett play in Texas — and we think it is — then this will be a source of gas for many years to come.”

The Daily Citizen

Chesapeake Energy is downplaying a report of the company’s planned cutbacks in the Fayetteville Shale Play.

Cutbacks in the Fayetteville Shale and White County will be “minuscule,” according to Mark Raines, manager of public relations for Chesapeake, despite a report published Wednesday in a statewide newspaper. There is no cause for concern, Raines said, adding that the key word in interpreting the company’s plans is “projections.”

“We were projecting at one time this year to have up to 16 rigs in the Fayetteville Shale this year,” Raines said. “We are now going to have 11.”