Searcy, Arkansas: Online News

BY LAURA STEVENS ARKANSAS DEMOCRAT-GAZETTE

    CENTER RIDGE — Boardwalk Pipeline Partners LP has started building a 167-mile, $500 million pipeline to take natural gas from the Fayetteville Shale in north-central Arkansas to market. A peak of about 1,300 people will be employed in Arkansas during the construction, which is expected to be complete early next year.

    Conway County Judge Jimmy Hart estimated at a news conference Monday morning that 250 Arkansans thus far are employed by the project, which began construction in May. The payroll is an estimated $57 million.

    The Fayetteville Shale, a natural-gas formation that stretches from north-central Arkansas to the Mississippi River, is expected to have a $22 billion impact on the Arkansas economy between 2005 and 2012, according to a study by the University of Arkansas. However, state officials have said that number may be exaggerated.

    Originally announced in December 2006, Houston-based Boardwalk’s pipeline was expected to cost $360 million. Since then, the price tag has gone up because of increased labor and materials costs, said Mike Mc-Mahon, senior vice president and general counsel for Boardwalk.

    “Since we’ve experienced increases in prices on some of the other projects we’ve completed, we’re estimating a little bit higher than what we first reported on costs,” McMahon said during a phone interview Monday.

    Gov. Mike Beebe toured the construction site in Center Ridge on Monday morning. “Not just for this area, but for the whole state, this is jobs; it’s employment,” he said. “It’s the opportunity for people to make money and spend money. That helps the retailers — that helps every aspect of the Arkansas economy.”

    Boardwalk’s Fayetteville Lateral pipeline is part of an almost $5 billion investment to link unconventional natural-gas sources to the company’s already established main transportation lines.

    The Arkansas pipeline will run from Grandview to Lula, Miss., where it will meet Boardwalk’s pipeline that runs from Louisiana to Ohio. Also part of the project is the Greenville Lateral line in Mississippi, which will run from Kosciusko to Greenville. Two other pipelines will transport gas from Texas’ Barnett Shale and from Oklahoma’s Woodford Shale.

    The process to construct the 36-inch diameter line in Arkansas requires surveying, digging a trench, hauling in the pipe and welding pieces together, coating it and X-raying it and then testing it with air pressure, said Walter Bennett, vice president for operations with Boardwalk.

    The first section of the Arkansas pipeline, from Grandview to Letona, should be operating by August and transporting 800 million cubic feet of natural gas per day, McMahon said. After the line is completed, it will transport up to 1.3 billion cubic feet per day to Mississippi, he said.

Chesapeake has 158 producing wells

By Jack Willems

The Daily Citizen

Simmons First Bank hosted a forum at Searcy High School regarding the Fayetteville Shale natural gas play Tuesday night. The forum featured three speakers who presented various aspects of the shale play and what it meant for White County.

“The Fayetteville Shale is like gravy on an already diverse economy,” said Brooks Davis, president of Simmons First Bank. “It's not all positive though, and we need to be cognizant of the negative aspects.”

Chesapeake Energy has 158 producing wells in the Fayetteville Shale, and 95 percent of them are located in White County, said Danny Games, director of corporate development for Chesapeake Energy. The company currently has 17 operational rigs, and will have 23 by the end of the year.

“White County has probably seen as much or more activity as any other county in the shale,” Games said. “As a result, you are seeing an incredible amount of traffic.”

Chesapeake Energy has estimated that there will be 9 trillion cubic feet of natural gas underneath the land they have leased in the shale, Games said. Southwestern Energy has estimated that there will be 11 trillion cubic feet of gas underneath the land they have leased in the shale, said Micheal Ratchford, senior geologist at the Arkansas Geological Survey. There is an estimated output of 2.9 billion cubic feet per well, and about 10,000 wells should be drilled within the next 20 years, Ratchford said.

“We have enough gas to power the state for 120 years,” Ratchford said.

The gas infrastructure in the county needs expanding, however. A pipeline is needed to transport the gas, and Texas Gas Transmissions is currently planning 167-mile pipeline to do just that. Freshwater is needed to fracture the shale, so sources of freshwater must be created. Reservoirs are planned for rain collection purposes. Lastly, there needs to be disposal wells to pump hazardous fracwater into the ground so that it does not become a danger to wildlife. There is currently one disposal pump in the state near Clarksville, and there are permits to create several more in the Fayetteville Shale area itself, Ratchford said.

Chesapeake is constructing a 40-acre surface lake by taking excess water from the Little Red River, Games said. A 48-inch pipeline will be built in order to transport the water at a low pressure. The pipeline would pose no threat to boating or to the habitat, Games said.

“This has been signed off on by every federal or state agency,” Games said.

White County has several logistical problems that must be solved in the next 20 years, said Jim Cottom, district manager for Weatherford Technologies, a company that fractures shale so that gas can be pumped.

Two current problems are that the roads in the county are not built for hauling oil field equipment and Searcy has no bypass for trucks, Cottom said.

“If any of you have some influence in the city council, see if you could get that done,” Cottom said.

The ability to attract, train and retain quality personnel is another difficulty of operating in this area, as are rising fuel prices, Cottom said. Fracing the shale involves pumping large amounts of water and sand into a well at high pressure. The availability of sand and water is another major problem in this area. Fracing takes 60,000 to 70,000 gallons of water per well.

“This year the ponds are full and the streams are full, but in the future it will definitely become an issue,” Cottom said.

In fracing, water is mixed with proppant, which is sand or bauxite, Cottom said. When it is pumped into the ground, it fractures the shale, allowing the gas to escape. The water is pumped out while the proppant remains in order to keep the fractures open. Sometimes the fracwater is mixed with chemicals to make it gel, and it must be disposed of properly. In this part of the Fayetteville Shale play, not many chemicals are used, he said.

“Our fluids are pretty simple fluids, but they are used in pretty large volumes,” Cottom said.

The natural gas in the Fayetteville Shale will not be accompanied by oil because the shale was superheated in the past, creating a dry gas, Ratchford said.

“This area has gotten very hot,” Ratchford said. “This reservoir has been cooked.”

The Fayetteville Shale will introduce an estimated $18 million in the local economy, Games said. Drilling will create more than 11,000 jobs, and last year alone, it increased tax revenues by nearly $55 million, he said.

“It's hard for us to get our arms around something of this magnitude,” Games said. “It is happening incrementally over six or seven counties.”

Natural gas is a clean burning hydrocarbon and 98 percent of all natural gas used in the United States is found in North America, Games said.

Gas company to install line at own expense

By Warren Watkins

The Daily Citizen

Local officials gave the go-ahead Tuesday for a natural gas services company to hook up to the Searcy sewer system.

Members of the Searcy Board of Public Utilities voted to approve a request by BJ Services to connect a forced main to their system, allowing construction of the company’s $82 million regional headquarters to continue.

Clarence Buckner, director of the water and sewer utilities, attended a pre-construction meeting for BJ Services Wednesday, held to distribute and explain bid specifications for the headquarters.

BJ Services will install the line at their own expense from the building site on South Main Street in Searcy, under Highway 67, between the airport and Main Street and to a point near Our Shepherd Lutheran Church. Buckner said the Searcy sewer system has adequate capacity to handle the increased flow.

A new street leading to the headquarters will be built adjacent to Searcy Thrills on Wheels Skate Center and Arcade at 3579 S. Hwy. 367.

In other business, the board approved an annual budget with $6.5 million in expected revenue and $5.9 million in operating expenses, wages and salaries, leaving a surplus of more than $600,000. The board will invest $50,000 in capital improvements and has dedicated $1.1 million to payment on bond principle.

Not reflected in the budget is expected rises in chemical prices, which Buckner estimates at 33 percent.

“We hauled in a load of lime the other day and the transportation cost as much as the lime did,” Buckner said.

Plans to improve the water plant, paid for with a rate increase, have been postponed until next year, Buckner said.

“We were pumping 14 million gallons a day at time last summer,” Buckner said of the water purification process, which begins with water taken from the Little Red River. “Our capacity is 15 million gallons a day. The health department doesn’t like us to go over 80 percent of capacity.”

Lawn watering increases water use during summer months, Buckner said.

“We’ll hold our breath this year that it doesn’t get real hot and dry before we get a few rains,” Buckner said. “If it wasn’t for lawn watering we wouldn’t have a problem.”

The utility sold 3.9 million gallons of water in June to natural gas development companies, and rural water districts serviced by the Searcy water utility in turn sell even more water to the gas companies. Since July 1 the utility has sold 23,577,200 gallons to the companies, bringing in $69,457.85.

The board voted to lease mineral rights on its property to Chesapeake Energy, the same company chosen by the City of Searcy. Most of the utility’s land was leased for $400 per acre up front and a 20 percent royalty. The utility held out 20 acres between the water plant and the sewer plant from the lease agreement.

Searcy Schools to benefit from BJ Services

By Warren Watkins

The Daily Citizen

The Searcy School District is looking at an increase in revenue as BJ Services, a natural gas development company, builds its $82 million regional headquarters in Searcy. The company will pay estimated property taxes of more than $6.2 million in the next decade.

“If they were to build the building in 2009, we wouldn't put it on the books until 2010, then they actually wouldn't pay taxes until 2011,” said Debra Lang, White County tax assessor.

Lang said that with more than 70 natural gas-related companies now active in the county, millions of dollars in drilling and production equipment must be assessed.

“Our county's just booming,” Lang said. “When we get all this put together, we're all going to be blown away.”

Reappraisals of property in the county is expected to be done in August, Lang said.

“I think we're going to have roughly an eight percent increase in assessments,” said Tony Wood, superintendent of Searcy Schools.

The amount from BJ Services that will go to the school district can be estimated by beginning with the initial figure of their investment, $82 million in property, land, buildings, improvements and equipment, and finding the assessed value by multiplying that figure times 0.20, giving an assessed value of $16.4 million. Because the Searcy School District millage rate is 0.0362, one multiplies that rate times the assessed value to find the amount sent to the state.

“The first 25 mills of that would have no impact on us, because it is the uniform rate of tax which is equally divided among all children in the state,” Wood said. “The remaining 11.2 mills is money that stays in our district.”

The estimated result, then, is a full rate of $183,680 in one year alone specifically for the Searcy School District from BJ Services. Because the full rate will not be paid for five years after an incentive package was offered to and accepted by BJ Services from the Searcy City Council, the company will make payments in lieu of taxes which will equal half of their tax rate for the first five years. The district will receive about $91,840 a year the first five years the property is on the books and the full amount after the fifth year.

“I'm really pleased to see an increase in our tax base,” Wood said. “ I would like for us to continue to operate without having to look at an increase in the revenue stream by asking for money from the people, and right now we are certainly able to do that.”

Revenue from BJ Services will also be sent to other recipients. The following estimates are for the full rate:

County general: With a millage rate of 0.0019, the county general fund would receive $31,160 a year.

Country roads: With a millage rate of 0.0012, the county road department and the City of Searcy Street Fund would each receive $9,840 a year (total $19,680).

County library: With a millage rate of 0.001, the library would receive $16,400 a year.

City of Searcy: With millage rates of 0.0004 each, the firefighter's pension fund and the police pension fund would each receive $6,560 (total $13,120).

7 new positions approved, projections raised

By Warren Watkins

The Daily Citizen

A combination of increased sales tax revenue and strict adherence to financial planning resulted in seven new positions being created for the White County government Tuesday night.

The quorum court approved a new 911 dispatcher, a new narcotics detective for the sheriff's department, a new office worker for the circuit court clerk and four new road department employees.

“We're very blessed to be in a position of economic growth not only from the job market but from our tax base,” said White County Judge Michael Lincoln. “There are other counties that are already out of money for their fuel budget and they're struggling for ways to overcome their shortfalls.”

Lincoln said he remarked to White County Treasurer Janet Hibbitts at the meeting that she had just given the strongest financial report that had ever been given in the history of the county.

White County's portion of the one-cent county wide sales tax is up 22 percent over last year, bringing in $1,998,358 in the first five months, compared to $1,635,771 in the same period last year, an increase of $362,587. With 42 percent of the fiscal year already expired, 55 percent of the original projections have been reached in the county general fund, 56 percent in the county road fund, 79 percent in the capital improvement fund and 68 percent in the law enforcement tax fund.

Hibbitts announced she had revised revenue projections in the county road fund for the year, raising them $98,000, allowing more money to be appropriated without going over percentage limitations. State law prohibits counties from appropriating more than 90 percent of projected revenue in both the road fund and the general budget.

“Part of that is a better handling of the budget,” Lincoln said of the healthy financial report. “The sheriff we have handles his budget extremely well. That's due to Major Kyle Stokes, who does an excellent job handling the budget, too.”

Lincoln said budgets in every county department are on target right now as far as expenditures go, in spite of significant rises in fuel costs. Highest users of fuel in the county government, because of the nature of their work, are the sheriff's department, road department, tax assessor's department and the office of emergency management.

The cash balance in the law enforcement tax fund is $1,709,747, compared to $743,003, an increase of $966,744 over this point last year.

“That, in my opinion, can be directly attributed to the gas exploration presence in our county, and the spending they are doing in our county,” Lincoln said.

The county has 25 more scheduled monthly payments to make on the law enforcement center.

Before the meeting began, David Evans of Southwestern Energy Company presented the White County Sheriff's Department with a $5,000 grant from the company's Everyday Heroes program. The donation follows grants to the Pangburn and Rose Bud police departments and nine White County volunteer fire departments for $2,500 each. The Everyday Heroes program was created to salute and honor organizations that safeguard communities in the Fayetteville Shale play. Southwestern Energy has contributed $32,500 through the program in White County.

Hallwood Energy picks up new partner

A significant player in the Fayetteville Shale has a new partner.Ý Hallwood Energy has entered into a new agreement with a subsidiary of Talisman Energy Inc.Ý The deal involves Talisman’s Fortuna unit, which will commit $125 million to accelerate Hallwood’s current drilling program.Ý In return, Fortuna would receive a one-third interest in Hallwood’s assets, which includes acreage in Arkansas’ Fayetteville Shale play and the Texas based Barnett and Woodford shales.

Hallwood’s 2008 drilling program calls for eleven wells with the potential for up to 1,000 locations on evaluated lands in the area.Ý Talisman Energy Inc. is an independent upstream oil and gas company headquartered in Calgary, Alberta, Canada.Ý Hallwood is headquartered in Dallas and has a substantial production presence in Searcy.

Floor Hand Training program begins

By Warren Watkins

The Daily Citizen

Evidence of high-paying jobs coming to White County through natural gas development can be seen in the enrollment figures of the Floor Hand Training program at Arkansas State University-Searcy, a technical campus of Arkansas State University-Beebe.

The program trains 10 workers a week for employment on gas drilling rigs, using classroom and hands-on experiences. The first three days of the week are spent learning about equipment, safety, first aid and cardiopulmonary resuscitation, while on Thursday and Friday the students don gloves and green hard hats to climb onto a huge steel rig simulator to learn by experience. Students get 40 hours of instruction during the week.

Robert Watkins, who has 38 years experience in the gas industry, supervises work on the rig simulator, located on Davis Drive behind the Searcy campus, which is at 1800 E. Moore Avenue.

“They used to call it roustabout training,” said Dottie Whiteside, director of the economic development center at the Heber Springs, Beebe and Searcy campuses of Arkansas State University. “This is our third class. Last week all of them would have gone to work but three of them wanted to go to Oklahoma for further training.”

Until July 1 the program is being conducted in partnership with the High Plains Technology Center in Woodward, Okla., after which the Searcy school will be in charge. Three gas drilling companies, Chesapeake Energy, Nomac and Union Drilling, paid $150,000 for the rig simulator, also donating tools and supplies.

“It’s the only one like this in the state of Arkansas,” Whiteside said.

There is no charge for the program, which is supplied through a grant from the U.S. Department of Labor. To register, those interested should go to HPTC.net and fill out an application or go to the school’s campus and pick up an application.

“They can fill it out on site,” Whiteside said. “We will even mail it to Oklahoma for them.”

Prospective students must be able to pass a drug test their first morning of the training, and no high school diploma is required.

Classes have already been filled for the next six weeks.

“Many of the students are young, big husky guys in their 20’s and this is fantastic for them, I think,” Whiteside said. “We’ve had some ladies in the programs, which I was surprised at.”

Graduates are being hired by local companies for jobs paying $17.50 to $25 an hour, Whiteside said, and Dr. Eugene McKay, chancellor of Arkansas State University-Beebe, said some students could land jobs making $50,000 a year.

Kathy Deck, director of the Center for Business and Economic Research, a part of the Sam M. Walton College of Business at the University of Arkansas at Fayetteville, has said White County is where the most explosive growth is being seen in development of the Fayetteville Shale Play.

“On that simulator, they learn how to keep their fingers, and how to lower pipe into the ground,” said Don Harlan, vice chancellor for the Searcy campus. “This is not going to make them a good operator, but it will give them the basic skills.”

A ribbon cutting will be held at 11 a.m. May 16 at the rig simulator site.

LITTLE ROCK- Now that drilling in the Fayetteville Shale play has been under way for more than two years, a larger percentage of Chesapeake Energy Corp.’s jobs on drilling rig crews are filled by Arkansans, a company official said Tuesday.

When Chesapeake, the second-largest operator in the play, and Southwestern Energy Co., the play’s largest operator, began drilling in 2005, Arkansas didn’t have a large pool of job candidates seeking employment in the field.

“So initially the rig crews were brought in from other states where there had traditionally been that sort of backbone of a work force,” Danny Games, Chesapeake’s corporate development director, said Tuesday during a speech at an economic forecast conference hosted by the University of Arkansas at Little Rock.

This time last year, roughly 10 percent of Chesapeake’s jobs on drilling rigs in the Fayetteville Shale were filled by Arkansas, Games said. The jobs pay $55,000 a year and up.

“Now that number is about 40 percent and incrementally grows as we can train and expand,” Games said.

Chesapeake currently employs 354 people in Arkansas, and 299 of those employees work on rig crews.Ý Currently, Chesapeake operates 14 rigs in the play, but the company plans to increase that number to 25 rigs by early 2009.

Since beginning operations in the promising Fayetteville Shale play, where company officials plan to drill for years, Chesapeake and other companies are collaborating with local colleges to offer a simulated drill rig class to Arkansans.

The first class of nine students was held last week at Arkansas State University in Searcy, Games said. Classes are booked for the next six to seven weeks, he said. Enrollment limits are set at 10 students per class.

The Daily Citizen

The natural gas boom in White County keeps getting bigger, despite shocking projections from last year, or even last month.

Kathy Deck, director of the Center for Business and Economic Research, a part of the Sam M. Walton College of Business at the University of Arkansas at Fayetteville, spoke to the Searcy Economic Club Tuesday, giving a report of natural gas development in the Fayetteville Shale Play.

“When you look at the places that have been developed by some of the gas companies, you see White County is at dead center,” Deck said. “I think that White County is at the very beginning of a long, lucrative period, economically speaking.”

In 2007, the county saw more jobs and the construction of the regional headquarters of Chesapeake Energy, allowing the local economy to diversify so as to not overly depend on manufacturing.

“We’re the fastest growing part of the state,” said Brooks Davis, president of Simmons First Bank in Searcy.

Decker said she had findings from the Bureau of Labor Statistics that supported Davis’ statement, showing how jobs are being created in White County.

Chesapeake has said they are increasing their drilling rig count in the county from 14 to 25 by the end of the year.

Workforce training has already begun to allow local citizens to join the gas development job hunt.

“We have full classes lined up for a couple of months,” said Dr. Eugene McKay, Chancellor of Arkansas State University at Beebe, which has a branch in Searcy where 10 students a week are graduating from the school’s Floor Hand Training program, a 40-hour course of intensive training preparing students for jobs as floor hands on the gas rigs. “It’s very intensive, with a lot of one-on-one work. They tell me these people can make $50,000 a year. If you can produce 10 graduates a week, think what that will do in just six months.”

Letain DeVore, chairman of board for the Searcy Regional Chamber of Commerce and an associate broker at Re-Max Advantage Realtors, said the economic impact of gas development has been felt in her business.

“People are starting to buy houses as they move in here,” DeVore said. “At first it was more temporary.”

Local bankers have verified Deck’s assessments.

“You’re starting to see a lot of money coming in now, the royalty payments,” said Donnie Miller, president of Regions Bank of Searcy. “What everybody was guessing at, we’re getting the checks.”

Miller said multiple wells are now being developed in locations where only one well existed before.

When Deck’s first study was published in 2007, some had skeptical reactions to the projection of a $5.5 billion economic impact.

“People said, ëYou’re out of your mind. You can’t be serious about this,’” Deck said.

Those predictions turned out to be understated, with new figures showing the boom is 62 percent larger than thought a year ago and will create a $22 billion impact by 2012, bringing 11,000 new jobs and producing $2.1 billion in tax revenues for the state, counties and cities.

Deck said the gas boom was “an economic kick in the pants” for the eight core counties most impacted by the Fayetteville Shale Play: White, Cleburne, Conway, Faulkner, Franklin, Johnson, Pope and Van Buren. Those counties have been historically economically depressed and are now seeing a boom that is bringing a 50 percent increase in sales tax revenues, Deck said.

“White County is where we see the most explosive growth,” Deck said.

Of the over 200 local leaders who attended Deck’s lecture, held in the Heritage Building at Harding University and hosted by Chesapeake, several commented on concerns related to the gas development.

Davis said he had concerns about what the gas boom is doing to the county’s infrastructure.

“Everyone’s working together well but I still don’t know we have a complete solution to those larger issues surrounding our roads,” Davis said.

White County Judge Michael Lincoln, who said he has forged a relationship with the major gas companies for reimbursement for repairs to county roads caused by gas companies, said the continued investment in the county showed their commitment.

“I’m very pleased with the agreements we have,” Lincoln said. “They continue to honor what they say they will do.”

LITTLE ROCK - Chesapeake Energy Corporation (NYSE:CHK) dedicated its new Fayetteville Shale Corporate Development Office today in Little Rock.

“The opening of our Fayetteville Shale Corporate Office is further proof that Arkansas and the Fayetteville Shale remain an important focus for Chesapeake's natural gas exploration efforts and a vital region for increasing the clean burning natural gas supply in the United States,” said Aubrey McClendon, Chesapeake's Chairman and Chief Executive Officer.

Chesapeake began its natural gas drilling operations in Arkansas in 2005. Today, the company has 12 rigs in operation, has drilled more than 180 wells and has 138 producing wells with an average daily production of approximately 135 million cubic feet.

Last month, the Center for Business and Economic research at the University of Arkansas released the findings of a study that indicates the natural gas industry will have an $18 billion impact on Arkansas' economy over the next five years and will create more than 11,000 new jobs.

“The University of Arkansas' study confirms our belief that the natural gas industry is driving the state's economy,” said McClendon. “The opening of our newest office, along with our continued investments in Arkansas, is proof that we plan to be here for a very long time.”

In dedicating the new office in Little Rock, Chesapeake announced a $50,000 donation to Arkansas Rice Depot and a $25,000 donation to THEA Foundation.

“We are honored to help support these worthy organizations,” said Martha Burger, Chesapeake's Senior Vice president of Human and Corporate Resources. “Chesapeake believes in adding value to the communities where we operate by providing financial support to community efforts that enhance the quality of life.”

The Arkansas Rice Depot is a respected leader in domestic hunger relief. In 2007, the organization distributed more than six million pounds of food. While Arkansas Rice Depot is best known for its statewide food bank, it also operates the Food For Kids program in over 500 schools in Arkansas, including White County. Food For Kids provides schools with ready-to-eat food that is given to children who have problems in schools because of hunger at home.

THEA Foundation was started in 2001 by Paul and Linda Leopoulos in honor of their 17-year-old daughter, Thea, who died in a car accident earlier that year. Thea's love of art inspired the couple to help provide educational opportunities for students interested in the arts. Chesapeake's donation will go to the foundation's Art Across Arkansas program, which will distribute art supplies to elementary schools in White, Van Buren, Faulkner, Cleburne and Conway Counties.

Chesapeake is the nation's most active driller for natural gas with 142 rigs currently in the United States. Additionally, Chesapeake is the largest independent producer of natural gas in the nation and the second largest producer of natural gas in the Fayetteville Shale with approximately 600,000 net acres of leasehold.

BY LAURA STEVENS ARKANSAS DEMOCRAT-GAZETTE

    Natural-gas companies’ future spending will make “completely irrelevant” a recent study on the economic impact of drilling in the Fayetteville Shale formation in north-central Arkansas.

    That was the observation made Tuesday by Aubrey Mc-Clendon, Chesapeake Energy Corp. chief executive.

    The companies will spend between $75 billion and $100 billion in the next decade in development of the formation, McClendon said at the Arkansas Economic Development Foundation’s luncheon at the Statehouse Convention Center in Little Rock. “It really can be transformative,” McClendon said.

    The study, partially funded by Chesapeake, projected a five-year total of $12.5 billion invested by companies, from 2008 through 2012. As a result, the Fayetteville Shale, where most of the production is in a fivecounty area in the north-central part of the state, is expected to have an almost $18 billion impact on the Arkansas economy during that same time frame, creating about 11,000 jobs, according to the study.

    “The danger of doing a study where you ask companies to project their future activities is that they constantly revise those projections,” Kathy Deck, director for the Center for Business and Economic Research, which conducted the study, said in an e-mail. “If market conditions are favorable, then it is unsurprising that companies accelerate their investment plans.”

    Natural-gas futures for May closed at $10.21 per 1,000 cubic feet Tuesday on the New York Mercantile Exchange. The first week of January saw futures prices in the $7.80 range, up about a dollar from prices in October, according to the U.S. Energy Information Administration. McClendon said that gas has to stay between $6 and $7 to maintain the economic viability of the expensive type of drilling used to extract natural gas from the shale.

    In October, a Chesapeake spokesman said the company might decrease its 2008 investments in the shale if naturalgas prices dipped too low, and in a January interview with the Arkansas Democrat-Gazette, McClendon said the company planned to increase drilling in the Fayetteville Shale with 20 rigs by the end of 2009, but an increase in the state’s severance tax “could mess it up,” he said.

    But Chesapeake’s opinion changed as the state approved a new severance tax and natural gas futures skyrocketed.

    McClendon’s projection of as much as $100 billion directly invested by companies is “staggeringly large,” Deck said. “The state obviously experiences accelerated job growth and tax revenues under that scenario. The state only benefits when companies make bigger investments sooner.”

    If the new projected numbers happen, Jeff Collins, of Streetsmart Data Service in Springdale, said “I think you’d have to look at it as a huge windfall for the state, particularly during an economic period when manufacturing has been struggling.”

    However, he said the numbers are highly reliant on market conditions.

    “It’s one thing to have that kind of potential, it’s another thing to realize it,” Collins said. “Clearly relatively high naturalgas prices and, I think, success with the initial efforts exceeding expectations are the two reasons why you see those kinds of estimates of future investments.”

    McClendon said, “We’re going to continue to put capital where we think it can have the best impact, and right now Arkansas is a good place to be spending money.”

    The energy company has the second-biggest presence in the producing area of the shale after Southwestern Energy Co. Mc-Clendon said the company will probably spend about $15 billion to drill wells on the company’s approximately 600, 000-acre leasehold.

    A Southwestern spokesman did not immediately return voice mail and e-mail messages Tuesday evening.

    Late last month, Chesapeake announced it would be increasing rigs drilling in the shale from 12 to 25 by early 2009 “in response to the company’s recent 10 percent increase in expected estimated ultimate per well recoveries,” according to a news release. During his speech, McClendon said the company will “spend $1 billion a year for as long as we can project.”

    The state Legislature recently approved an increase to the state’s severance tax, one of the lowest in the nation, from threetenths of 1 cent per 1,000 cubic feet to 5 percent of the market value, with some exemptions for lower-producing wells. The new tax will go into effect in 2009.

    “I’m not going to say I was OK with it,” McClendon said about the new severance tax. Chesapeake worked with the governor to make sure incentives were included, but he added that other states have lower rates. “We’re satisfied with it, we’ve moved on and we’re ready to start increasing our investments in the state.”

    McClendon said natural-gas prices were another factor in the company’s increased presence, as well as the wells’ production numbers.

The chief executive of Chesapeake Energy Corp. said Tuesday the Fayetteville Shale natural gas formation will transform Arkansas' economy, but said any additional tax burdens or regulations could drive business away from the state.

"You all are in a unique situation to see an event that will potentially transform this state into an economic powerhouse of the mid-South," Chesapeake Chief Executive Officer Aubrey McClendon said at a luncheon for the Arkansas Economic Development Foundation in downtown Little Rock.

McClendon said his company won't lobby for any changes in the increase on Arkansas' severance tax on natural gas recently enacted in a special session this month. Chesapeake, the largest leaseholder in the Fayetteville Shale, agreed to support the tax hike along with other natural gas firms after negotiations with Gov. Mike Beebe's office.

The tax increase, which takes effect Jan. 1, will eventually raise $100 million annually for state highways. It replaces a rate that brings in about $660,000 a year.

The tax hike includes temporarily lowered rates for some wells, but McClendon warned against the Legislature considering any other increases or regulations. He said the company's recent natural gas discovery in the Haynesville Shale in Louisiana is an example of why the state should avoid any further tax hikes.

"It certainly can draw away. That's why Arkansas has to be careful with the regulatory environment and tax environment," McClendon told reporters before his speech. "There are other competing plays in nearby states that are every bit as good as the Fayetteville, if not better, so you have to stay competitive."

Chesapeake announced last month that it would more than double its number of rigs from 12 to 25 and will drill about 300 wells a year in the state. McClendon predicted the company would spend more than $1 billion in the state annually in the coming years.

"We're going to continue to put capital where we think it can have the best impact, and right now Arkansas is a good place to be spending money," he said.

McClendon predicted that the shale's economic impact would be much higher than the nearly $18 billion that a recent University of Arkansas study said would come to the state over the coming five years.

"We're about to make that completely irrelevant, I think, with what we and others in the industry are going to do," McClendon said. "The way I see it, we're going to spend somewhere between $75 and $100 billion in your state for the next decade or so."

The company is satisfied with the tax hike, said McClendon, who indicated he accepted the compromise grudgingly.

"I'm not going to say I was OK with it. ... In a compromise nobody is completely happy with it, but it's something we can live with," he said.

McClendon suggested that Arkansas consider setting aside some of the severance tax revenue in an endowment fund that could be used in the future if natural gas prices go down and money from the tax hike drops. Under the tax plan signed into law, 95 percent of the severance tax money will go toward highways and roads and 5 percent toward general revenue.

"It would give Arkansas some advantages that really no other state in this part of the country has," McClendon said.

Beebe said after the luncheon that setting aside the money for any kind of endowment was unlikely.

"We'll have to see how it happens, but right now the people of Arkansas need highways and we need highways for economic development," Beebe told reporters. "Unless the numbers significantly change, it's an option that may be more of a want-to than realistic."

During his speech, McClendon said his company is also opposed to the introduction of any new coal plants in Arkansas.

"It makes no sense, to me, for the people of Arkansas to subject to pollution levels from higher consumption of coal when you have this gas bonanza," he said.

The Daily Citizen

BJ Services Company broke ground for their new regional headquarters in Searcy Tuesday.

The regional headquarters will allow BJ Services to provide pressure pumping and other oil field services to the natural gas industry in the counties involved in the Fayetteville Shale play. The company is investing about $82 million in the regional headquarters, which will employ approximately 150 people by late 2008.

The headquarters will be in a new 64,000-square-foot facility to be constructed on a 40-acre site at 3750 South Main Street. The property, which is near the Morning Sun community, is bordered on the west by Highway 67 and on the east by South Main Street.

“This is the big one,” said Danny Games, director of corporate development for Chesapeake Energy, which contracts work to BJ Services. “This is the bread and butter.”

White County is now “ground zero” for the Fayetteville Shale play, Games indicated.

“White County is seeing the bulk of the economic investment and the resulting economic activity, compared to the other Fayetteville Shale play counties. They're getting the lion's share of the current investment right now.”

Wayne Hartsfield, president of the Searcy Regional Economic Development Corporation and chairman of Regions Bank of Searcy, said recruitment efforts to get BJ Services to locate in Searcy began in June, 2006.

“BJ Services looked at different communities around Arkansas,” Hartsfield said. “Buck Layne and his staff at the Searcy Regional Chamber of Commerce have spent many hours working with BJ Services and the community.”

Hartsfield said Searcy Mayor Belinda LaForce, the city council and city workers also contributed to the effort to lure the gas services company to Searcy.

“This is amazing,” LaForce said. “To think of $82 million brought into the community. What an investment! About a year and a half ago, we lost 750 manufacturing jobs in Searcy, and this will help with the employment situation.”

White County Judge Michael Lincoln used the announcement to remind gas industry officials of their part in preserving the county's roads. Since the beginning of the gas development boom in the county, controversy has surrounded the use of roads by the heavy trucks used in the industry.

“New, high-quality jobs will help expand our economic base throughout Arkansas,” Gov. Mike Beebe said in a press release.

Beebe did not attend the announcement, held at the Searcy Regional Chamber of Commerce one mile north of the construction site, but a number of state officials were in attendance.

“BJ Services Company exemplifies the contributions being made to this growing industry through repeated investments in Searcy and White County,” Beebe said.

On Jan. 2, BJ Services opened a temporary headquarters in Doniphan Industrial Park in Searcy.

The new headquarters is planned to open in the spring of 2009.

“BJ Services is very excited about our move to Searcy, Arkansas,” said Ronney Coleman, vice president North America pressure pumping services for BJ Services Company. “This is a great opportunity for us and the local community.”

BJ Services provides pumping, process and pipeline, chemical, tubular and completion services to oil and natural gas companies worldwide.

“The City of Searcy is pleased to welcome BJ Services to our community and to have worked with the Arkansas Economic Development Commission to make possible industrial and commercial growth for Searcy and White County,” said LaForce. “Searcy is excited about the prospect of partnering with BJ Services in utilizing our workforce and providing stable economic growth to our area.”

Additional information can be found at www.bjservices.com.

Fracturing company to create 200 new jobs in Searcy location

Weatherford Fracturing Technologies, a product line of Weatherford International LTD. (NYSE: WFT), recently held an open house at its new Searcy facility. The Searcy location will allow Weatherford to provide pressure pumping and other oil field services to the natural gas industry in the region. The company is investing several million dollars in the facility that will employ more than 200 people by late 2009. The 12.5-acre site, located at 111 West Booth Road, formerly housed the Atlas Carrier Trucking Company.

Jim Cottom, district manager, Searcy operation, said Weatherford's management chose to locate a new facility in Searcy to target the rapid expansion of the Fayetteville Shale Play.

“We made a conscious effort to hire and train local people rather than bringing in trained people from outside the community,” Cottom said. “We feel that in the long term, hiring local people with ties to the community will provide us with the best workforce - one that will help the Searcy operation to be successful.”

The company provides pumping, process and pipeline, chemical, tubular and completion services to oil and natural gas companies worldwide.

For more information on the company, visit www.weatherford.com.

BJ Services to build $15 million headquarters in southeast Searcy

By Warren Watkins

The Daily Citizen

The Searcy City Council approved a tax incentive Tuesday night for a natural gas development company, enticing the corporation to build its headquarters in Searcy and bring hundreds of jobs to the community.

BJ Services will be refunded sales tax paid on building materials for the $15 million facility, built on 40 acres inside the city limits directly west of Chesapeake's Nomac facility near Morning Sun. The site is on the southeast side of Hwy. 67, opposite from most of the city, and will receive water and sewer service from Higginson.

The deal for the Tax Back/Advantage Arkansas incentive was brokered by Buck Layne, president of the Searcy Industrial Development Corporation and the Regional Chamber of Commerce, who spoke to the council at its agenda meeting Thursday and its Tuesday meeting.

“Good job, Buck,” said Alderman Carl Nutter after the unanimous vote.

Mike Gillespie is construction manager for BJ Services and will be overseeing the project.

“We have not completed all the drawings yet,” Gillespie said. “We'll have a groundbreaking ceremony but that's not been announced yet.”

The headquarters will include areas for truck maintenance, storage of materials and equipment and administrative offices.

“It will be a support facility which will be the heartbeat of the company for us,” Gillespie said. “About 150-200 employees will work out of the building.”

Design engineering will take four to six months and completion of the project will take 18 months.

“When you've got as many trucks as we're going to be running and the equipment, it takes a lot of support staff, and with the environmental issues we have to take care of each and every day,” Gillespie said.

Gillespie said now that the city has signed on to the tax incentive program, county and state officials will also be asked to approve it.

“The success of our continued economic development efforts is largely due to the partnership of the city with the Searcy Industrial Development Corporation, Metro Little Rock Association and Teamwork Entergy Arkansas,” said Mayor Belinda LaForce. “BJ Services is going to be a major player in our future economy here in Searcy considering their millions of dollars of investments here locally, both capital and in workforce development. We welcome BJ Services and hope they find Searcy and White County to be as profitable for them as we believe they will be for us.”

In other business, the council passed a budget ordinance waiving bidding and approving fuel purchases from AC Oil for $42,443.93, and authorizing payment of a $12,730 balance for Relativity software purchased in 2007 and $25,000 for a maintenance agreement on the Relativity software for the police and court departments.

The Daily Citizen

ALBION - The gas boom in White County became even larger as the leading development company dedicated its regional headquarters here Thursday.

Chesapeake Energy has drilled 146 wells in the Fayetteville Shale in Arkansas, with 135 in White County, 97 of which are producing. The new field office will support 35 workers organizing subcontractors who employ hundreds of roustabouts, well hands and others.

“It's going to put a bunch of money in a lot of people's pockets that didn't have any money,” said Dickie Rambo, who owns 200 acres between Albion and the Little Red River. “It's like a gold rush.”

Rambo has four wells on his property, all developed by Chesapeake, and one in the same section. Another is on the way on his land, Rambo said, and he began to receive royalty checks on two of the wells five months ago.

“It's exciting to have their headquarters in Searcy,” said Searcy Mayor Belinda LaForce. “We have close communication with them and are able to have them close by if we need to talk to them about the issues. It's going to be a long-term presence.”

About 500 people attended the event, hearing remarks by Aubrey McClendon, chief executive officer of Chesapeake and owner of the National Basketball Association's Seattle Supersonics.

“My feeling is that this will be an office that will be expanded three or four times down the road,” McClendon said. “Some of our field offices in Oklahoma supply up to 400 people.”

McClendon said Chesapeake, Southwestern Energy and others have just scratched the surface of the gas boom in White County, although he discounted ideas the Moorefield Shale, which lies underneath the Fayetteville Shale, will be a major gas producing strata. Gas leases signed to give permission for drillers into the Fayetteville Shale also allow drilling deeper into the Moorefield Shale.

Chesapeake plans on drilling 5,000 wells in the Fayettevile Shale play, with two-thirds of them in White County.

“We want to be the best neighbors they've ever had,” McClendon said of the company's interaction with local residents. “The challenge is that for every Chesapeake employee that we have, there will be 10-15 other employees not employed by Chesapeake but working on Chesapeake wells. We continue to hire a lot of young people.”

McClendon presented Dr. David Burks, president of Harding University, with a $100,000 check for scholarships.

“This will be for students who are going into science and engineering,” Burks said.

The graduates will take leadership positions in the gas industry, according to Chesapeake and Harding officials.

A training facility for vocational workers in the gas industry is being built with Chesapeake's support at Arkansas State University-Searcy, including an on-campus gas well simulator. That training facility is expected to open this spring and will see students come in for 40 hours of instruction during one week.

“It's probably the biggest economic shot in the arm we've experienced,” White County Judge Michael Lincoln said of the gas boom. “The benefits will far outweigh the problems as far as the exploration process.”

McClendon thanked local residents who attended the event for “embracing people you've never met before.”

“The people of this area are about to see an economic boom the likes of which they've never seen before,” McClendon said.

The Daily Citizen

Dub Gentry had a set of Christmas lights that were much brighter than others in his neighborhood - in fact, the two dramatic flames shooting 50 feet in the air could be seen for miles up and down Highway 16 on Christmas Eve.

Three wells are on Gentry's property, just 200 yards from his carport, and gas from two of them was being burned off while his family celebrated the holiday. Gentry reports no safety problems with the well operations, which are being completed by Chesapeake Energy.

“We've had three or four incidents where people have called in, and it turned out that's what it was,” said Tamara Jenkins, coordinator for the White County office of emergency management and 911 system. “We've since had conversations with officials of different companies, and now they call us before they do it.”

Jenkins said the events, called flares in the gas industry, are basically controlled burns.

The fires produce flickering orange and yellow light that is diffused on nights with high humidity or fog.

“We have received an occasional report of the glow in the sky, but no known complaints about them,” said Jeremy Clark, chief deputy for the White County Sheriff's Department.

Mark Raines, spokesman for Chesapeake, said the burn-offs were part of a highly-controlled process.

“We safely burn, or flare, the gas so that we do not put methane into the air,” Raines said. “It also stops the fumes from being in the flow-back tanks. This practice also helps to determine the types of fluids in the well, the pressure and flow rates and other characteristics of the underground reservoir.”

The amount of gas burned varies from well to well depending on the strength of the well, how long it takes to clean the well or to see water recovery down to a level that can be controlled during production, Raines said. Burned gas is not metered to the extent of sellable gas but goes through a test separator with estimated volumes.

No royalties are lost by property owners because of flares because the wells are still in the flow back and clean-up stage so the company can prepare to sell the gas, Raines said.

“The burn is actually conducted for safety reasons,” Raines said. “It is safer to burn, or flare, the gas than it is to flow to a tank and have the fumes on location.”

The question that has occurred to some involves how the fire is started. A gas worker does not have to hold a match to the escaping gas.

“An electronic-spark pilot light ignites the fire,” Raines said.

The length of a typical burn varies depending on how long it takes to clean the well, but on average it is about five days, Raines said.

Don Harlan, Vice Chancellor of ASU-Searcy, received a $75,000 donation from Sam McCaskill, Nomac President and Dr. Eugene McKay, Chancellor of ASU-Beebe, is presented with a $75,000 donation from David Fisher, Vice President of Drilling Services for Chesapeake.Ý Chesapeake and Nomac donated money to construct a drilling rig simulator that will be located on the ASU-Searcy campus and will provide students with hands-on instruction.Ý The rig will stand approximately 60-feet tall and have 20-feet by 20-feet platform, which is about half the size of a fully operational drilling gas rig. Construction for the rig is set to begin immediately.Ý Enrollment will begin on January 2 for classes, which are tentatively scheduled to commence in March.Ý Call 501-207-4075 or log on to www.asub.edu for more information.

The Daily Citizen

When officials at Arkansas State University-Searcy heard about natural gas drilling in White County a few years ago, they felt a need to help this new industry in the state, said Don Harlan, Vice-Chancellor of ASU-Searcy

“We asked what we could do to prepare the populace to drill natural gas,” Harlan said. “In regard with our dealing with the natural gas industry, we believe our major role is to listen to the gas industry folks about what their needs are and find a way to meet those needs.”

ASU-Searcy announced Wednesday that, in cooperation with Chesapeake Energy, Nomac, Union Drilling and High Plains Technology Center, it will create a program training people for careers in drilling. The program will involve hands-on training on a simulated drilling rig that will stand approximately 60-feet tall with a 20-foot by 20-foot platform, which is about half the size of an operational gas rig. Classroom training developed by the High Plains Technology Center will also be included in the program.

“We intend by this to create personal wealth, increase the income of local families and increase the profitability of these companies,” said Les Wyatt, president of the ASU system. “ASU absolutely believes in a relationship between higher education and economic development.”

To pay for the program, Cheasapeake Energy and Nomac, a wholly owned subsidiary of Chesapeake Energy, will donate $75,000, said Eugene McKay, Chancellor of ASU-Beebe. Union Drilling will donate $50,000, McKay said. High Plains drilling will provide the instructor and pay the instructor's salary, he said. The drilling simulator will take three months to build and the training program will simulate a 40-hour week on a drilling rig, McKay said.

High Plains will only provide the instructor until June 30, by which time ASU-Searcy's program must be able to stand on its own legs, said Bill Jackson, Assistant Superintendent of High Plains Technology Center. High Plains has trained over 5,000 people for careers in the natural gas industry in the last five years, Jackson said.

“When the industry moved, we moved with it. Now it's moved here, so we are moving with it,” Jackson said. “We are here to serve in whatever capacity we have to make sure the program lasts after June 30.”

The demand for drill workers has grown rapidly lately, said Chris Strong, President and CEO of Union Drilling. With the price of oil raising, the demand for natural gas has increased, Strong said. The number of drilling rigs has gone up to meet demand, but this brings up training issues, Strong said.

“We don't want people coming in who don't have that training,” Strong said. “They are more likely to be injured, and we don't want that for the community.”

Chesapeake Energy leases more land than any other company in White County, and with the number of rigs going up, it needs a locally trained labor force, said Dave Fisher, Vice-President of Drilling Services for Chesapeake. Currently, 45 percent of employees working for Nomac in the Fayetteville Shale Play are Arkansans, and they hope to see that number increase, Fisher said.

“We want to hire more Arkansans to work with us and drill natural gas,” Fisher said.

Not only will the jobs be available, they pay well, Strong said. The entry level positions pay $50,000 a year on average, while shift supervisors are paid between $75,000 and $80,000 a year, Strong said. Top positions in drilling rigs often pay six figures, Strong said. The natural gas industry “provides opportunity for high rewards, but it's hard work,” Fisher said.

“We believe natural gas can reduce the nation's dependence on foreign oil, and the Fayetteville Shale can be a big part of that,” Fisher said.

The Daily Citizen

The City of Searcy will receive $489,775 from Chesapeake Energy as up-front money on mineral rights leases for city property.

Attorney Don Raney reported to the council in a called meeting Tuesday that the latest figures after title searches have been done by Chesapeake show the city owns 877 acres. The council voted five to three to accept Raney's recommendation, formulated after negotiations with Chesapeake, which split the city into three sections with differing up-front amounts and royalties.

Voting to accept the bid were Aldermen Mary Ann Arnett, Jim Dixon, Dale English, Jackie Liles and Mike Chalenburg. Opposing the deal were Aldermen Kyle Reeves, Carl Nutter and Mark Derrick.

A controversy that has disrupted gas development in White County is on its way to resolution, according to Gov. Mike Beebe.

Beebe told The Daily Citizen earlier this week that a compromise has been reached in principle concerning issuing truck permits.

Gas development companies working in north White County have had difficulties using heavy trucks in recent months because of weight limits on state highways and an inability to obtain proper permits from the state.

“We have reached an agreement, in principle, with the Arkansas Highway and Transportation Department that would allow us to use those weight-restricted state highways in question — Highways 305, 310 and 124,” said Mark Raines, spokesman for Chesapeake Energy. “We are still working through the details of the agreement and hope to have it finalized soon.”

Raines said drilling sites in north White County had been impaired because of the controversy.

“We have not worked at locations that have required use of those restricted highways,” Raines said. “Instead we have moved some planned operations elsewhere in White County until this issue is resolved, which is about to happen.”

Beebe said the agreement would be re-evaluated after a year.

John Thaeler, senior vice president of SEECO, Inc., parent company for Southwestern, confirmed an agreement in principle has been reached.

Sen. John Paul Capps of Searcy said he felt the severance tax issue would also be worked out without the question being referred to voters in a public election. Capps said there would probably be a resolution within months and that he would support a bill in the next legislative session which would raise the severance tax.

“The governor’s preferred scenario is to pass a severance tax increase in the 2009 legislative session,” said Matt DeCample, a spokesman for the governor. “He feels that is the first avenue you should pursue for new public policy, with the possibility of an initiated act.”

Beebe is guiding the issue toward a solution in the legislature, DeCample said.

“Going into the ë09 session, his attitude will be, ëHere’s our proposal,’ and if it doesn’t pass the legislature is prepared to lead the effort to put it on the ballot,” DeCample said.

Talks to work out an acceptable raise in the severance tax are ongoing, along with research, DeCample said.

“The Department of Finance and Administration is studying very thoroughly how this industry and this product is taxed around the region, in other states,” DeCample said.

The relationship between the state and gas companies is not broken down, DeCample indicated.

“The governor has not ordered restrictions on gas industry trucks,” DeCample said. “The highway department controls that. The governor does feel strongly about sustaining that balance between insuring those who use the roads and who potentially damage the roads pay their fair share to maintain the roads, but at the same time preserving the economic development for that region, and the Fayetteville Shale has been a big source of economic development for that region.”

The Daily Citizen

It's really just a matter of numbers. Geologists estimate the Fayetteville Shale natural gas formation in Arkansas to be 300 million years old. Economists believe natural gas drilling activity will have a $350 million impact on Arkansas' economy by the end of next year.

Meanwhile, the 72,000 White County citizens remain mostly uninformed and unsure about the entire thing.

The natural gas industry is progressing so rapidly in White County that it will boggle the mind to try and keep pace. In addition the three most active companies here - Chesapeake, Southwestern Energy and Hallwood - several smaller businesses attempting to capitalize on the Fayetteville Shale activity have also arrived in the area. New jobs - filled mostly by folks foreign to White County - are being added daily. And natural gas rigs are plummeting through the county's soil this very second.

The Daily Citizen

As Chairman of the Arkansas legislature's Joint Performance Review Committee, Rep. David Ev