Fort Worth May Allow City Drilling

Abstract: The realities of untrammeled urban growth and fast-shrinking municipal revenues have "Cowtown" mulling over whether to allow Barnett Shale gas drilling within city limits. But elsewhere--even in California--are governments overlooking a handy income source?

Analysis: Here's a subject that ought to attract nationwide attention, but apparently, it hasn't--at least, not just yet.

The City of Fort Worth, TX, is seriously considering taking bids for natural gas drilling on city property inside the city limits.

Why? Well, almost any city or state across the country could answer that without even knowing the particulars. Discovery of natural gas on city property could help "Cowtown's" local government make at least some progress in its struggle with unprecedented urban growth made even more onerous by dwindling cash resources. Such seems to be the plight of most cities, these days. In short, they need new revenue sources to help pay for essential city services, including police and fire departments, to name just two. With producing wells, Fort Worth ostensibly could earn income from lease bonuses and rentals, various taxes on production operations, and even revenues from being a working interest owner.

The opportunity to be in the gas business--if it ultimately is perceived by city leaders as an opportunity and not a political career-ender--stems from the fact that Tarrant County, in which Fort Worth is nestled, is right on trend with the growing Barnett Shale play, one of the largest natural gas drilling and production trends in North America.

Not only that, but producing companies are haunting city hall corridors pleading for permits to drill inside the city limits. No specific company has been named, but the list of producers engaged in Barnett Shale drilling reads like a "Who's Who" of medium and large independent companies. Oklahoma City-based Devon Energy, among others, is a leading Barnett Shale driller, with gas production all across the trend, including several wells in non-urban corners of Tarrant County.

In addition to running beneath Tarrant County, the Barnett Shale play cuts a wide swath down from the Oklahoma line through Denton, Wise, Parker, and Johnson counties. The play began in the Wise County area in the 1970s, but expanded rapidly in all directions across North Texas in the late 1990s.

Fort Worth City Council members last month agreed informally to hire outside experts, including an experienced landman, to spend the next few months looking at the possibilities of intra-city drilling.

Mike Moncrief, the city's mayor, comes from a family that includes pioneers of the early Texas petroleum industry. The family owns Fort Worth-based Moncrief Oil International, an independent producing company. The company has producing properties throughout the Texas-Louisiana area, and is engaged in exploration as far away as in the Republic of Azerbaijan.

Moncrief, who took office in May, said he specifically asked city staffers to explore the city drilling idea. "The name of the game is get your straw in the ground as soon as possible,'" he told the Fort Worth Star-Telegram recently. Such a statement might earn someone the J.R. Ewing Prize for Insensitive Utterances in most nonproducing states. However, the director of the city's engineering department, Doug Rademaker, furthered Moncrief's approach, saying that, based on estimates, a "good" Barnett Shale well could generate $2.2 million for the city during its expected eight-year productive life, and even a "poor" one could put $376,000 into city coffers.

The money generated from gas production would go into the city's general fund for later dispersal to municipal services organizations.

But City Council isn't rushing into anything. While they consider the proposed drilling to be a potential moneymaking effort, they vow to pursue it carefully, as one would handle dynamite. Officials will be compelled to make sure it doesn't detract from neighborhoods, communities, or the quality of life in Fort Worth, a rolling, picturesque city nestled on both banks of the Trinity River upstream 20 miles or so from Dallas.

Oilpatch folks--and perhaps even those not directly involved in the petroleum industry--are probably tired of hearing about horizontal drilling being a "new" technology that cuts down on the number of wells needed to develop oil and gas reserves. However, for Fort Worth, it probably was a key factor in even considering the drilling idea.

Officials believe it is possible for producing companies to drill multiple horizontal wells to the Barnett Shale, which lies roughly 7,500 ft. beneath the Fort Worth area, and perhaps even to shallower oil sands, from well pads located on the grounds of a number of the city's wastewater treatment plants, as well as from one or two of its numerous, heavily wooded parks. Wells also could be drilled on cleared property near several municipal airport sites, including Meacham International Airport on the city's northwest side. Extensive landscaping of well sites probably would be required at such locations.

Under the informal proposal, Fort Worth could lease city land provided that no drilling would occur on a street, alley, or public square in a densely populated part of town. Public hearings also would be required for any proposed granting of leases and/or drilling permits. Other specific regulations cover insurance, noise and air pollution, and operating hours. Existing ordinances also currently prohibit wells within 300 ft. of habitable structures.

To obtain a lease, companies would have to make competitive bids, with winners determined by a management organization that would consider the lease terms, as well as the bidder's reputation, financial condition, safety record, and history of compliance with pertinent federal, state, and regional regulations.

Of course, all this will get a lot of loud opposition. In fact, it already has. Environmental groups are protesting, mostly about drilling on dedicated parklands. Many citizens, particularly those who live near proposed well sites, also are nervous about the idea.

And, of course, the city is growing rapidly. The Fort Worth-Arlington Metro area's 2001 population totaled more than 1.7 million persons, and Texas A&M's State Data Center estimates it will top 2 million by 2015. There's a current real estate boom in the metro area, and both existing and new homeowners, as well as real estate developers, are concerned that drilling might lower property values. City officials assert that all such concerns would be addressed before any permits were granted.

Drilling inside city limits really isn't such a foreign idea in areas where oil and gas is a major industry. In fact, even the Oklahoma State Capitol in Oklahoma City has a producing oil well on its grounds, the pump jack seesawing away around the clock. It's a source of civic pride there.

There was even a proposal back in the early 1970s to allow drilling in Houston's spacious Memorial Park, where a producing company owned by George Brown, co-founder of Brown & Root, owned mineral rights. That idea was shot down pretty quickly. But some wonder whether the City Council of Houston, a top-liner among cash-strapped cities, would even consider resurrecting that idea in the interest of much-needed city revenues. Maybe so.

And of course everyone--or everyone in California, at least--knows that the Los Angeles Basin has literally thousands of producing oil wells, most of them located inside city limits from Laguna Beach to Los Angeles itself, though no new ones have been drilled since the 1980s. In Long Beach, even the city has tax revenue and working interest in much of the production from the venerable Wilmington oil field, which passes under one of the most highly populated areas in the state.

While Governor-Elect Arnold Schwarzenegger insists that the State of "Colifornia" will never consider opening up drilling in state waters, where much unproduced oil exists, would he ever consider allowing oil companies to form joint ventures with municipalities, or even with the state government, to help eat away at skyrocketing city debt--and at that $38 billion state budget deficit? Probably not.