Eminent dominance (1/5)

By Lowell Brown and Peggy Heinkel-Wolfe
Denton Record-Chronicle
December 28, 2008

EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.

Expansion of natural gas industry into Barnett Shale leaves Argyle families little recourse

Jennifer Cole stepped across the parched ground of a North Texas autumn, past her dirt-caked backyard swimming pool, inching closer to a roaring machine. She watched it force its way through the earth, pushing dirt from side to side in waves like an ocean’s tide. Day by day, the bulldozer was remaking the lot behind her home on Britt Drive near Argyle, changing a sloped meadow dotted with oak trees and cattle into a flat and lifeless expanse. She shivered when she thought about what would fill the void.

Since the dirt-moving process began, dust clouds became so thick that her boys couldn’t make sense of them. “Mom, look! A sandstorm,” one said. Her sons didn’t understand why she wouldn’t let them use the pool or play outside after school. She looked down at the pool where a layer of grime clung to the bottom like black frosting, then back to the rolling bulldozer on the other side of the barbed-wire fence.

Cole didn’t know that what was happening behind that fence would consume the next three years of her life. She did know what the bulldozer meant, though. A gas rig was coming. It was Dec. 4, 2005 — a Sunday.

“Sunday,” she said above the roar, “is no day of rest.”

Jennifer Cole makes bark candy with her boys Jared, 12, left, and Gentry, 9, for a Christmas party. Cole has struggled to maintain a normal home life for her sons amid her neighborhood’s ongoing battle against a pending gas well behind their Argyle-area home. (Denton Record-Chronicle/Barron Ludlum)

Cole and her neighbors were among many visited that year by energy land men, deal-makers slowly blanketing North Texas after one company proved a decade ago that it could release the “sweet gas” — typically 95 percent methane, with small amounts of ethane and propane — of the Barnett Shale with a sand-and-water fracture.

But the thousands of natural gas wells and miles of high-pressure pipelines unfolding into a massive industrial zone would never be aggregated by government regulators. The latest federal rules continue the practice of exempting oil and gas that began in the 1970s.

In its publications, the Environmental Protection Agency details industry exclusions from federal environmental laws that touch nearly everyone else, from the neighborhood dry cleaner and the horse rancher to the gravel yard and the truck manufacturer.

Texas agencies flex few regulatory muscles over the industry, deferring to the Texas Railroad Commission, which, a century ago, assumed responsibility to maximize oil and gas production, not address the host of concerns that have come with the new urban drilling paradigm — a paradigm where once rural drilling has shifted into the heart of neighborhoods amid cities.

Faced with the eastward march of tank batteries and pipelines, cities of the Barnett Shale began exercising powers granted to them by the Legislature. The energy companies then resisted local rules meant to protect public health and safety, land use planning and economic development by filing a spate of lawsuits in the past year.

Meanwhile, the industry grabbed the biggest hammer in government’s exemption toolbox — the power of eminent domain — by forming their own utility companies. With it, they began connecting their gas wells like a giant dot-to-dot game across lawns and schoolyards.

Oil and natural gas are the decayed remains of organic matter that became trapped under layers of stone and sand long ago, said EPA scientist Philip Dellinger. In the case of the Barnett Shale, that decay took place more than 300 million years ago during the Mississippian Age, and the gas has been trapped ever since. Geologists found outcroppings of the black, organic-rich shale a century ago in San Saba County and named it after John W. Barnett, a settler there.

Some longtime residents knew of the shale’s potential in North Texas. Jana DeGrand, Cole’s next-door neighbor, remembers how her father, a tenant farmer, drilled for water, and natural gas would come up with it.

Energy speculators knew about it, too, but the tight rock held fast to its riches. As late as 1983, a Carrollton energy man resisted the urge to explore in Denton County.

“Every time I get the urge to look for gas, I just lay down until the urge passes,” Doug Durham said to a newspaper reporter then.

But another energy man, George Mitchell, believed decades ago that the shale could be broken. Energy workers speak emotionally, almost reverently, of Mitchell’s determination to unleash 26.7 trillion cubic feet of natural gas (I) bubbling beneath the feet of more than 3 million North Texas residents (II).

Once Mitchell’s company proved the work could be done with a solution that began with cheap, fresh water and sand, the drilling boom began. Thousands of vertical wells were dug between 1999 and 2005, primarily in Wise and western Denton counties.

Improvements in horizontal drilling followed. Operators turned their drill bits through the shale while watching a computer screen, like joy sticks on a video game, capturing gas thousands of feet from the well head and turning modest producers into multimillion-dollar holes.

With horizontal drilling under their command, the industry set its course for the more populated parts of Denton County and the mother lode of Tarrant County, where geologists believed some of the richest deposits lie. One Encana engineer, Jim Kramer, his eyes focused down the well holes as the company worked its way into Tarrant County through Keller, imagined out loud in 2006 about having the entire city of Fort Worth picked up and moved over so the company could drill.

The letters from land men in summer 2005 promised the Coles, the DeGrands and their Britt Drive neighbors a chance to cash in on the North Texas gas boom. Several rigs popped up near their Briarcreek Estates subdivision south of Denton that year — enough for some neighbors to question whether the towers of industry belonged so close by.

Earlier that year, Jana DeGrand and her husband, Darrin DeGrand, were driving home when they encountered a foot of mud on a road leading into the neighborhood. Trucks hauling dirt to a pad site on Fincher Road left a trail of debris, and heavy rains made the road nearly impassable. When the couple finally made it home, they recalled, mud clung to every inch of their car’s undercarriage.

Later, drilling at the same site rattled windows on Britt Drive a quarter-mile away. The noise continued nonstop for weeks. Darrin DeGrand recalled lying in bed at 3 a.m. many times, unable to sleep through the cacophony of mechanical grinding and squealing. His wife finally called the sheriff’s office to complain one day, remembering that a deputy once threatened to fine her daughter for playing her guitar too loudly.

“Can’t they stop between 10 and 6 so we can sleep?” she asked.

No, the answer came. It’s for the greater good.

In November 2005, a state inspector found oil-stained soil at a well site off Hickory Hill Road. Jana DeGrand, whose complaint spurred the inspection, said the stench was overpowering.

So the DeGrands were wary when a Lantana-based energy company started asking the Britt Drive neighbors to lease their mineral rights to allow more drilling in the area. The company, NASA Energy Corp., arranged an evening meeting to convince the neighbors to sign on. Huddled around a conference table inside a Denton bank, nearly a dozen neighbors peppered land man Jerry Pratt with questions.

“What happens if you damage our homes?” Darrin DeGrand asked, worried that vibrations from drilling or seismic testing would damage foundations. Where will the wellhead be? Others wanted to know.

The DeGrands believed that Pratt, who’d brought a jar of fracing sand for show and tell, initially tried to sidestep the questions. Pulling out a map, he pointed to spots where rigs might be. The DeGrands knew one of the spots instantly. It was right behind their house.

A few neighbors accepted Pratt’s offer of a $250 sign-on bonus (later increased to at least $500). But others asked to hold off until the DeGrands could research the matter.

“There’s always one crazy person in the neighborhood,” Darrin DeGrand recalled Pratt saying.

“Well,” he remembered replying, “I guess we’re it.”

Because the Energy Information Administration estimates the average well costs about $1.9 million to drill (III), land men know that acquiring the mineral rights from landowners can be the least expensive part of the deal. But media reports of payouts to landowners for signing the leases show the amounts can be highly variable. Similar to Pratt’s offer to the Britt Drive neighbors, residents of one Fort Worth neighborhood — primarily poor, black and elderly — received $200 checks to sign on the spot, in addition to a 20 percent royalty in 2006 (IV ). Two years later, residents in affluent areas of Johnson and Tarrant counties got more than 50 times that payout, with $25,000 to $30,000 per acre, averaging about $10,000 for each household simply to sign. Their agreements included royalty payments that varied from 25 percent to 25.5 percent (V).

Mineral rights run with the land in Texas, unless a previous owner retained them when selling, or has already leased them. In Dish, near the birth of the Barnett Shale boom, relationship problems between the landowner and the industry are like a family science study. Some landowners remain comfortable in their marriage to the industry as it goes into its second decade. Tiffany Pennington’s family negotiated a deal with Devon Energy that keeps them comfortable, she said, struggling to understand why others complain. Next door, Jim and Judy Caplinger bought their home on land with mineral rights already separated, leaving them without access to the underground riches. When the industry gets hungry — needing additional pipeline access or more land for another well — the couple watch as their nest egg shrivels, sometimes through eminent domain.

Their case is similar to many other families who, until recently, bought land in a Barnett Shale county not knowing that living in Texas, with its laws and rules covering mineral rights, can still pit neighbor against neighbor.

Some landowners negotiate more for the signing bonus than the royalty payout, which can last for three decades or more. One industry analysis found the average Barnett Shale homeowner would net about $775 per year for 30 years (VI). In their negotiations with landowners, energy companies went along with the splashy, upfront payouts for about a year. But after the credit meltdown this September, energy companies, including Chesapeake, Vantage, XTO and Titan, announced publicly that they would no longer be making those news-making payouts (VII).

The Briarcreek Estates subdivision, tucked into the Cross Timbers between Denton and Argyle, winds all the way along the creek that cuts through it, served only by a narrow, curving road off Hickory Hill Road that ends in a cul-de-sac. Britt Drive offers the only entrance and exit to the three dozen families who live in the neighborhood. They flocked here for the large lots — many are an acre or two — and the country feel. Hordes of birds, cardinals, finches and mockingbirds sing from the trees, and raccoons, opossums and armadillos search for food along the creek bed. Neighbors share fruits and vegetables from each other’s gardens and look after each other’s pets when they’re away. They gladly serve iced tea to guests, and strangers driving through are likely to be greeted with a wave and a nod.

Darrin and Jana DeGrand were among the first to build in the neighborhood. In 1996, the couple, with their three children and his parents, grabbed pickaxes and a lawn mower and cleared the acre lot themselves, beating back briars and underbrush. Darrin, a data technician for a telephone company, and Jana, an event marketer, designed the house on their home computer and built much of it themselves.

Gene and Jennifer Cole moved in next door to the DeGrands in 2002. Gene, a manager at a car dealership, and Jennifer, a stay-at-home mom and PTA volunteer, wanted their two young boys to grow up in the Argyle school district.

Like many of their neighbors, the Coles and DeGrands hurried to research their mineral rights once NASA Energy started dangling contracts in 2005. The DeGrands, who own adjoining lots and claim at least partial mineral ownership of one of them, refused to sign, hoping to keep any driller as far away as possible. The Coles dug out their house’s title policy, which shows they own three-fourths of the minerals on their lot, but they quickly learned that meant little.

Denton County lawyer Tom McMurray, who took over the area leases from land man Jerry Pratt, did his own title check and claimed the Coles owned no minerals. McMurray, through his CMC Exploration Co., was working with Grapevine-based Reichmann Petroleum to develop the well site behind the Cole and DeGrand homes. In a letter to the Coles in late 2005, McMurray offered a concession. The landowners decided to erect a wood fence along the property line to cut down on dust and noise and deter children from wandering into the site, he explained. “We do want to be good neighbors while also developing the assets of the mineral owners,” McMurray wrote. “Please understand that we follow the law and instruct our employees to do the same.”

Before the end of 2005, NASA Energy dropped a contract at the Coles’ door despite the disputed mineral rights. It went unsigned. Other neighbors joined the Coles and DeGrands in rejecting the land men’s offers. “We were told that it would work out to about $100 a month [in royalties] if things went really well,” neighbor Shari Skaggs said. “They told us we could get a free trip to Wal-Mart. No thank you. Definitely not worth that.”

The refusals would inconvenience future drillers, but the land men had already secured a deal with the mineral owners who mattered most: Steve and Vanessa White.

The four-wheeler zoomed across the field with a teenage boy and preteen girl behind the wheel. Gene and Jennifer Cole watched them through the barbed-wire fence from their backyard hot tub and waved when they caught the children’s attention. It was the summer of 2005, and the Coles had heard someone bought the 12-acre lot behind their home.

“Did you buy the property?” Gene Cole recalled asking, worried it might become a subdivision.

“Yes,” the children said. “We’re moving from Southlake.”

The Coles were relieved to hear the family planned to build a single house on the land.

Across the field, as their children met the Coles, Steve and Vanessa White sat on the bed of a pickup and popped the cork off a champagne bottle. They’d searched for a rural escape from Southlake and found it here, on an L-shaped lot with a creek running through it and plenty of space for their three kids and 12 horses to roam. “It had a nice marriage of wooded area and pasture for our animals,” Vanessa White recalled. “When we looked at building a home that would be comfortable and enjoyable for our children, it seemed like the optimal spot.”

The Whites said they didn’t buy the land with plans for a gas well, but they consented when the chance arose months later. Vanessa White is the president and chief operating officer of Discovery Geo Corp., an oil and gas exploration company based in Grapevine. Representatives of Reichmann Petroleum, a company with which she once shared office space, approached her about drilling on her family’s lot. The Whites agreed to allow a gas rig on three of their 12 acres. They assumed the drilling would be done by the time their house was built, but said they told the drillers to make the site as safe and unobtrusive as possible for their new neighbors.

Unaware of the Whites’ new plans, the Coles and DeGrands were perplexed, then increasingly alarmed when the bulldozer arrived to level the ground behind their homes. The pad site grew taller by the day. The workers arrived before dawn and left after dusk. Dirt hung in the air like a gritty fog.

As the sloped pasture behind them lost its shape, the neighbors started worrying about flooding. The neighborhood sits on the edge of a flood plain. Rainwater flowed downhill from the land behind them on its way to Briar Creek, which runs through the subdivision. Could the pad site reroute the runoff into our yards and homes? they wondered.

Jana DeGrand and Jennifer Cole called their elected officials to ask for help and were surprised to find little. Their county commissioner, Jim Carter, told them Denton County lacked the authority to get involved. The Texas Commission on Environmental Quality and Federal Emergency Management Agency passed them off to other agencies, they said. Their state senator, Jane Nelson, said they’d have to rely on the Texas Railroad Commission, which oversees the oil and gas industry. The commission’s then-chairwoman, Elizabeth Ames Jones, said she understood their concerns but had “very limited authority” over the location of gas rigs and other drilling equipment. DeGrand vented her frustrations in a column published in The Cross Timbers Gazette that fall. “There are no laws or ordinances in place to protect us,” she wrote.

The neighbors dealt with the stress of the looming problems in different ways. The DeGrands found time to work in their yard or on projects around the house — work that tired the body but enlivened the mind. Some nights, after they got their boys to bed, the Coles would sit on their bed and play Skip-Bo.

Jennifer Cole wipes away a tear while discussing a gas well that is planned to go up within 250 feet of her home. The prospect of a well so close by is stealing her sense of security, she says. (DRC/Bj Lewis)

In her darker moments, Jennifer Cole cried out to God to stop the drilling. Then, ashamed by her lack of faith, she repented because she knew her fear wasn’t from God.

“Lord,” she recalled praying instead, “I’m giving this to you. You can protect my children. I can’t.”

LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.

FOR REFERENCE

I. According to the U.S. Geological Survey, “Assessment of Undiscovered Oil and Gas Resources of the Bend Arch-Fort Worth Basin Province of North-Central Texas and Southwestern Oklahoma, 2003.”

II. Tabulated from North Central Texas Council of Governments 2008 county population estimates for Denton, Ellis, Erath, Hood, Johnson, Parker, Palo Pinto, Somervell, Tarrant and Wise counties.

III. Energy Information Administration, “Costs of Crude Oil and Natural Gas Wells Drilled, 1960-2006.”

IV. Pillar, Dan. “Leases give boost to an old neighborhood,” in the Fort Worth Star-Telegram, July 1, 2006.

V. Fuquay, Jim. “Lake Worth neighborhoods working on record gas lease,” in the Fort Worth Star-Telegram, Aug. 6, 2008.

VI. Powell, Gene. “OK, How much will my well pay?” in The Barnett Shale: The Official Magazine of Thriving on the Shale, published by Chesapeake Energy, summer 2008.

VII. Fuquay, Jim. “Another big neighborhood group sees its gas leasing put on hold,” in the Fort Worth Star-Telegram, Oct. 21, 2008.

Chapter 1: Neighbors along Britt Drive are approached by land men eager to drill in the Barnett Shale. Some are wary of the impact on their quality of life and question whether the amount of money offered is worth it.

Chapter 2: Urban drilling means these rough-and-tumble workplaces are closer to homes than ever. But its boom-or-bust nature creates a psychosocial environment for the Britt Drive neighborhood that fosters distrust of both sides.

Chapter 3: Cities are trying to preserve their authority to make rules for health, safety and welfare, but the industry is pushing back. Britt Drive neighbors watch one such battle unfold in their backyard.

Chapter 4: A doctrine of exemption allows the industry to develop oil and gas resources without having to study the environmental or health impacts of their work. Britt Drive neighbors worry about how drilling would affect their environment.

Chapter 5: Industry insiders sometimes marginalize gas drilling opponents, but the conversation about where to draw the line in urban drilling persists. The Britt Drive neighbors’ quest to keep drillers away grows increasingly desperate.