Urban drilling in Shreveport has returned, Paloma is leading the charge

East Daley Analytics says Paloma, now owned by the hedge fund Citadel, has increased drilling in the Haynesville Shale. Their rig count had jumped to five by mid-April.

“What we’re seeing is the age of urban drilling redux,” says mineral consultant Skip Peel. Peel says the original urban boom happened in the early days of the Haynesville Shale when companies like Twin Cities, who was working for Chesapeake, went into residential neighborhoods to sign up mineral leases.

Most of the expected urban drilling to follow never happened.

“It was a hard to find a surface location that would qualify by the state rules when the laterals were only about 4,000 feet in length. The play moved south into more rural areas where it was easier to drill and you didn’t have to go through all the headaches of trying to drill in the inner city,” explains Peel.

Now, urban interest is back because of longer lateral drilling, says Department of Energy and Natural Resources Communications Director Patrick Courreges.

In the past, drilling was done vertically- the drilling rig would sit right on top of the oil and gas that was thousands of feet straight down.

Now, one drilling pad can accommodate multiple lateral lines that start as vertical, then make a 90-degree turn to horizontal. These lines can run up to 15,000 feet in the Haynesville Shale. That reach, says Peel, puts a single south Shreveport well site within striking distance of a very large area.

A single rig that could cost up to $12 million can now run multiple lateral lines. Peel says he has been at single well pads housing 14 well heads. 

There can be challenges to drilling around urban residential neighborhoods and commercial areas, Courreges admits. He says the natural gas companies can ask to locate very close to adjoining property lines. If they want to locate closer than 300 feet, the affected property owner can request a hearing to protest.

Courreges says people have also raised concerns about noise and dust issues in the past. If there are problems of this sort, he says the Office of Conservation is a good place to start.

Peel says the mineral leases are not going to make small urban property owners rich. He speculates that the bonus might be $1000 an acre, with $200 for signing the lease and a 25% royalty. He says that standard lease is pretty good for small property owners.

“The standard lease is three years, and a lot of times it’ll have a two-year extension clause. So if it doesn’t get drilled when three years is up, it’s up to the lessee, the company or person offering the lease, to send another check that extends the period for another two years.” Once the company drills a well and starts production, he says, the lease can go on until production ends, possibly, decades. 

Peel says small urban landowners don’t really need to hire an attorney or a consultant to handle the mineral lease for them because they don’t have enough acreage to demand more.

“They can go to GoHaynesvilleShale.com and ask questions and get advice for free,” he suggests.

He says one thing you don’t want to be is unleased when all around you are. “You end up being an unleased owner, and that’s not good. First of all, you don’t get any royalties. Secondly, you don’t get paid anything until the well pays out which means when it recovers its costs to drill and complete.”