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What the Pro-Drillers in Southlake Don't Get About the Shale Gas Market

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Back in November, we wrote about Southlake, the well-heeled 'burb at whose city limits sign the fracking boom was knocking. In many ways, Southlake was emblematic of the difficulties gas producers faced as they followed the shale formation -- a mile underground -- out of the pastures and into densely populated areas.

Sometimes, they found, there was resistance. And nowhere in the Barnett shale region was that resistance as stiff as it was in Southlake, where conservative moms discovered that Sarah Palin's "Drill, Baby, Drill!" mantra wasn't such a rallying cry when they could see the derrick from their kitchen windows. So they petitioned the City Council again and again until it crafted a thorough drilling ordinance. In the meantime, two of the biggest players in the Barnett, XTO and Chesapeake, pulled out of Southlake altogether.

At the time, it wasn't entirely clear whether pulling up stakes was a response to tough municipal regulation, or just the low price of natural gas, which likely rendered the few wells they could drill within city limits economically nonviable.

Since then, Chesapeake has cut its operations in shale formations, along with Encana and other companies. The gas glut -- coupled with sagging demand for natural gas -- meant it simply didn't pay to play here. But now the pro-drillers of Southlake -- often landowning, longtime residents with mineral rights -- are making a second advance, circulating a petition calling for a new drilling ordinance -- one, they hope, will bring fracking back to Southlake.

Here's the problem: According to the Paragon Report, an investor's research service, that shockingly unseasonable winter we just had means that natural gas inventory levels increased in March for the first time since 1977. Gas inventories this summer are expected to exceed storage capacity. That means we have yet to see how far natural gas prices can fall.

I appreciate this Southlake group's gusto. Among them is Zena Rucker, an incredibly successful octogenarian who is one of the biggest landowners in town; once ran her own flight school; and can remember a Southlake that was populated mostly by Baptist farmers. Unfortunately for her, even a drilling ordinance that allows producers to frack a well sunk in the middle of a kindergarten class won't be enough to entice the industry to return to Southlake, at least for now.

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