Gas Leases

By now just about everyone has heard about the natural gas boom in Northwest Louisiana, called the Haynesville Shale.

As with any boom, the talk of the town is money. Less than a year ago, companies were paying $150 per acre lease bonuses with 1/6th royalty, and now rumors are flying around about $25,000 bonuses and 1/4th royalties.

Of course, not everyone is going to become independently wealthy, nor have huge bonuses and royalties. I believe that if the trend continues, the significant dollars invested in Northwest Louisiana will raise the quality of life for every person in the region. Just look at Fort Worth, North Central Arkansas and Oklahoma - areas widely considered “recession proof” now that significant natural gas discoveries have been made there.

Unfortunately, what is making some people extremely happy is angering and frustrating others. Recently in Northwest Louisiana, there have been groups and coalitions considering filing lawsuits against natural gas and exploration companies because people feel like they have been cheated. Their explanation is that because they signed a lease previously for substantially less money than they would have received today, the gas companies should be forced to compensate them for their “losses.”

Lease values are largely based on speculation and current market conditions. Assuming the Haynesville Shale is not completely uniform, some owners who received $10,000 per acre in lease bonus payments may only receive modest royalties - if a well is drilled at all.

Conversely, some of the $150 per acre lessors may be in the “sweet spot” of the play and receive millions of dollars in well revenue, even at lower royalty shares.

Although lease values seem to be escalating with no end in sight, it would take just one dry hole to condemn a large area and lease values in that vicinity could drop like a stone.

The boom that is taking place in North Louisiana is benefiting everyone in the area; we’ve just begun to see the positive impact companies will have on our communities.

There is the obvious benefit of the bonuses and royalties, but the bigger benefit is what else is happening in the region. Parish and city governments will receive record tax dollars, and an industry supported tax package will raise the parish tax allocation by $2 million.

There is so much positive activity going on, and it couldn’t happen at a better time.

Most of the country is struggling with gasoline prices and an economic slowdown, and we are blessed with possibly the largest natural gas find in the history of our country.

We need to take advantage of this opportunity. We should expect and hold accountable the companies that are exploring and producing in Northwest Louisiana, but we should not be trying to take advantage of them.

Let’s do what we can to support production of the Haynesville Shale - doing so will benefit us all.

[Via The Advertiser]