By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
Dallas may have cultivated the image of an oil town in the popular imagination. In reality, fortunes here were built on oil extracted hundreds of miles away. Wildcatters just didn't expect there to be mineral riches under Dallas County, and until the last year, Dallas continued to look on enviously as Fort Worth and others in the 18-county Barnett Shale region drilled thousands of wells producing billions of dollars in natural gas. In February, however, Dallas finally got a piece of the action, as the city leased the mineral rights to 6,500 acres of city-owned land, including Love Field airport, for $34 million. And private landowners, including some homeowners, are beginning to see the dollar signs too.
"We're the last unexplored part of the shale," says Mark Duebner, executive general manager for the city. "As gas prices stay up, the revenue will be enough to make money for the gas companies."
Dallas is at the very edge of the Barnett Shale formation, which ends somewhere below West Dallas and was named after a 19th-century settler. Hensley Field, the decommissioned naval air station by Mountain Creek Lake, was leased to Fort Worth's XTO Energy, the second-largest player in the Barnett Shale. The land in the north, including Love Field and park land along the Trinity River all the way north to Royal Lane, was leased to Trinity East, a subsidiary of Keystone Energy.
"It's a speculative lease," says Steve Ford, vice president of Keystone. "The jury's still out on whether we can get gas from these areas. Geologically, the shale to the east is deeper and much different. It's going to be a challenge to get the Barnett to produce there."
It won't be the first time that drillers must surmount obstacles to get gas from the Barnett Shale. Drilling the formation was costly until 1997, when drillers began to use water to fracture the shale instead of an expensive gel. In 2003, the technology to drill wells horizontally was perfected. Instead of drilling straight down, operators could extract gas from more than a mile around from a central drill site, making the Barnett Shale even more profitable. In Dallas County, 166 oil and gas leases have been signed since 2006—most of them part of the city of Dallas' deal.
Angela Hunt and Mitchell Rasansky were the only city council members to oppose the lease of city land. At the time the bids came before the council, Hunt objected and wrote in her blog that she was "tired of our city whoring itself out for a few measley [sic] bucks...We need to protect our few natural assets like Timbercreek and the Trinity River." Hunt also criticized the city for counting the signing bonus from the lease in its proposed budget even before the council had approved it. The city adopted a new ordinance for gas drilling last year that would allow rigs to be placed within 300 feet of buildings if permits are approved by the city planning commission and the council.
Critics say that urban gas drilling poses a risk to residents, and groups opposing drilling spring up in most cities where the rigs sprout. They say that the risks of an explosion are too great and compounded by the pipelines that follow once a well has been drilled and is in production. But cities that have enacted stringent regulations have found themselves in court. Red Oak, an Austin-based gas production company, sued Flower Mound in July when the town rejected 15 variances to its gas ordinance for a Red Oak drill site.
Dallas city council member Steve Salazar, who represents District 6, with the most land leased by the city, says the drilling will take place in industrial areas. "Dallas doesn't have much shale under residential areas," he said. "There's some in the western side, around the industrial area around Walnut Hill and Luna. Maybe some liquor stores will be affected. There won't be as much impact." A possible site for a rig, he says, is the city's satellite recycling center at Harry Hines and Webb Chapel.
A little further north, Farmers Branch also sees the potential for gas income. Andy Gillies, director of planning for the city, says two wells have been proposed, both in sites west of Interstate 35 in "undeveloped areas" zoned light industrial and commercial. To the west, mineral rights to entire neighborhoods in Grand Prairie are now being snapped up, including next to Mountain Creek Lake and the Dallas-owned, gnat-infested Hensley Field.
"Not good enough," is how Dr. Blair Blackburn, executive vice president of Dallas Baptist University, characterizes the lease it signed in May of last year with Harding Energy Partners for the mineral rights to its 293 acres. "I've seen since we leased that they've been leasing property anywhere from $2,500 to $5,000 [per] acre in most eastern sections in Tarrant County," he says. "That's speculation, but at DBU we certainly contracted for a certain amount per acre, but it's not that significant." (He couldn't reveal the exact terms of the deal.)
The drilling at the university, which is in southwest Dallas on Kiest Boulevard and Mountain Creek Parkway, hasn't happened yet—Harding says it's busy drilling in other places—but Blackburn says the drilling sites have been selected, and Harding has done seismic testing to determine the composition of the shale below the campus. The drill sites are located in undeveloped areas of campus, Blackburn says. "The minimum distance the city requires is 300 feet from buildings," he says. "We probably have at least 2,000 feet."
"We understand the seismic has confirmed there is Barnett Shale in this section of Dallas County," he says. "We're a small, private institution. This is a welcome source of revenue for the campus, and it will let us do things. We're hopeful and prayerful that we'll be blessed by a bountiful well."
Neighbors near Dallas Baptist University include T.D. Jakes' Potter House and the Dallas-Fort Worth National Cemetery, where an employee told the Observer that, being part of the Department of Veteran Affairs and federal land, it would never allow gas drilling.
In the Mountain Lake Estates neighborhood, next to Mountain Valley Park and Florina nature preserve, residents claim not to know of any deals being cut in their neighborhood. "All I know is I heard somebody talking on the radio about the Barnett Shale," says homeowner Lee Thacker.
County records show that six homeowners in the neighborhood have signed leases for their mineral rights with XTO Energy. Recently, a contractor was surveying Mountain Valley Park for the energy company. His map showed homes in the neighborhood within a 600-foot radius of a proposed drill site to the land leased by the city.
"The gas companies are pretty aggressive," says Duebner, the city's point man on gas leasing. "They basically send out a letter with an offer of a bonus. We don't give legal advice, but we can educate residents on how leasing takes place and how neighborhood associations can work together to get a good deal."
Kim Ker, a Mountain Lake Estates resident, laughs when asked if there is a homeowners association in the neighborhood. "They've tried to start one three times and no one shows up," he says.