Folks in Southwest Mississippi may not realize it but boardrooms of oil companies from New York to Odessa, Texas, have their little part of the world in their cross-hairs.
Lured by the prospect of extracting billions of barrels of premium oil and gas from a couple miles below ground, the companies are coming to town to hand out loads of dollars — and Texas-size headaches.
Created millions of years ago, the Tuscaloosa Marine shale trend spans nearly three million acres in Louisiana and Southwestern Mississippi. A 1997 study by the Louisiana State University Basin Research Institute estimated the TMS contains around seven billion barrels of recoverable oil. Only in recent years have deep-ground horizontal drilling techniques been perfected to make mining the trend cost-effective.
Amite County Chancery Clerk Ronny Taylor had “landmen” swarming his records room the last few years, most days with 40 to 60 researchers going over land records.
Taylor is still peeved that they left behind about $100,000 in damage to his aging property books. Their search for available mineral rights has been in a lull the past few months, giving Taylor time to get some of the damaged books either repaired or scanned.
The lull has also given Taylor time to contemplate a future in which a couple thousand horizontal bore oil wells dot his county. “This is kind of like a cow’s cud. The more you chew on it the bigger it gets,” said Taylor, who under Amite County’s beat system of government serves as county administrator, treasurer and chancery clerk, a role he has had for 18 years covering five terms as chancery clerk.
Just how big things can get is not fully known, but Taylor and others have visited the Haynesville Shale play in the Shreveport area and Eagle Ford shale drilling region of South-Central Texas.
Two conclusions from the tours: When the boom is on, it gets going really fast and things could swirl out of control for the three-county region without some help from the state, Taylor said.
“We are sitting right here on the honey hole,” he said of Amite County and the shale oil and gas deposits believed to be far beneath its ground.
Amite County’s population is around 13,400 people, a count that Taylor says has stayed about the same since before the Civil War. The county maintained roads held up OK when their main use was helping farmers get their crops to market.
But the massive truck traffic that has supported the drilling that has occurred so far has given Amite County officials a glimpse of what will come when development of the Tuscaloosa Marine Shale trend begins in earnest.
Even now, “You just can’t envision the amount of road damage and traffic” Amite County is having, Taylor said. “They told us to anticipate about 2,500 18-wheeler loads per well.”
The result so far?
“What we’ve experienced in the last year and a half is 100 percent failure of our county roads. When I tell you 100 percent failure, we have blacktopped roads that have gone back to gravel.”
Sadly, Taylor said, the ruined roads can’t be patched.
The oil companies, principally Encana Oil & Gas and Goodrich Petroleum, have promised to help replace the damaged roads, he added. No reimbursements have come yet, and may not come until the companies start turning profits on their wells, according to Taylor.
For now, the companies are providing limestone rock for damaged roads in some parts of the county, he said.
Amite County gets an average $30,000 a month from the state’s 6 percent oil and gas severance tax. Taylor said he is unsure what amount to expect once the severance tax drops to 1.3 per cent on revenues generated from horizontal drilling wells that go into operation after July 1.
“You just can’t know what you don’t know,” he said, though he hopes Amite can keep its status as a debt-free county.
That could be difficult with a tax base of only about $80 million, Taylor added.
The decision by legislators this past session to cut the oil & gas severance tax from 6 percent to 1.3 percent “kind of took the wind out of our sails” he said, though he emphasized he understands the incentive the lower tax will give for drilling new wells and thus pumping up the economies of Amite, Wilkinson and Pike counties.
“The severance tax initiative I think is a good idea in the long run,” he said. “Originally, we were upset about that. We saw that severance tax as the funding mechanism for this highway,” he added, referring to the four-laning of Mississippi 24, a project originally scheduled as part of the statewide 1987 highway but one that never got started.
“That is the only east-west corridor we’ve got. It is going to be imperative that we get this four-laned.”
No funds for Mississippi 24
The future looks as if the oil company trucks will be on that road en masse before the state has the money to widen it. “It is estimated to four-lane Highway 24 from McComb to Woodville would cost approximately $700 million,” said Tom King, Mississippi Department of Transportation’s central district commissioner.
“That is a large amount of money that currently does not exist,” King said in an email reply to a series of questions about transportation planning in the three-county region.
The absence of funding has halted all purchasing of right of way for the four-laning, according to King.
When money does come, MDOT will first focus on building the section of Highway 24 from McComb to East Fork “because McComb, of course, will be a hub of the activity in the Tuscaloosa Marine shale play,” he said.
Britt Herrin, executive director of the Pike County Economic Development District, agrees his home county will be a hub for the impending oil and gas boom. All the more reason, he said, for the state to get serious about funding the Highway 24 expansion. “We have had heartburn on this because it is the last unfinished part of the 1987 Highway Bill,” he said.
The McComb highway work, MDOT’s King said, would be followed a bypass around Liberty, the Amite County seat.
King conceded the trouble that is ahead for Liberty without a bypass, noting the massive increase in truck traffic from development of the shale play will run through the town.
Highway 24 forks with Mississippi Highway 48 in front of the Amite County Courthouse in Liberty. Trucks will need to go from Highway 24 to Highway 48 to make the shortest route to the oil wells in the south of the county, a move that will require the big rigs to do a 90-degree turn, Chancery Clerk Taylor said.
“At least fast-track the bypass,” he pleaded.
In neighboring Wilkinson County, Chancery Clerk Thomas C. Tolliver is carrying a smaller load than his Amite County counterpart. His county on April 1 hired an administrator, a move that relieved him of county executive duties.
Tolliver nonetheless has studied the challenges ahead for his home county of 34 years. “We’re getting together on the things that affect” infrastructure such as building codes and transportation, he said.
The first task is for Woodville, the county seat, to drill an additional water well. The town has maxed out its current water capacity, he said.
In the meantime, Wilkinson County is working on making agreements with the oil and gas production companies on helping to pay for the increased infrastructure costs that are ahead, according to Tolliver.
Awaiting a boom along Ohio River
Experts predicted a boom to hit Ohio towns along the Ohio River as part of the Utica Shale trend, where hydraulic fracturing operators are in pursuit of natural gas a little more than 1,200 feet below ground. A boomlet instead has occurred, though the Ohio Department of Natural Resources predicts a much greater potential for development, once pipelines and processing plants are built.
Exploration of the Utica trend has been under for only three or so years.
For now, the impact in Steubenville, located on the Ohio River just a few miles from the new wells, has been mostly confined to increased truck traffic, increased retail sales and booked-up hotel rooms, said Christopher Petrossi, planning director for Steubenville.
Petrossi said it is too early to know what will unfold, but noted: “I think overall people are happy with what they are seeing.”
With natural gas prices still in a sustained slump, producers are taking their time with the Utica play. The consensus, Petrossi said, is that the city feels fortunate the growth has come slower than expected “so we can adjust to it easier.”
Steubenville is much more accustomed to dealing with a loss of population than growth in population, having dropped from around 30,000 residents in 1970 to about 19,500 in the 2010 census.
Manufacturing job losses accounted for most of the population decline, according to Petrossi. The Utica play gives an opportunity to regain manufacturing jobs of some sort, he said. “We’re hopeful for manufacturing,” he added, and noted negotiations are under way to put maintenance and storage for the well drillers on land that until recently was home to the soon-to-be-demolished RG Steel mill.
Oil and gas sector consultant Charlotte Batson, principal of South Mississippi-based Batson & Co., suggests it’s a mistake for people to think hydraulic fracturing is a short-term proposition.
“It won’t be like most boom and busts,” she said.
She studied the infrastructure implications and economic opportunities for Pike, Amite and Wilkinson counties presented by the Tuscaloosa Marine Shale play. What is ahead, she said, will be “up-close and personal,” with loads of both traffic and noise. “That is just the reality of it,” said Batson, who last year completed her 400-plus report titled “Best Practices in shale and Gas Development.”
In exchange, the region will see “prosperity that has never happened in this part of the state and won’t happen again on this magnitude.”
This type of horizontal drilling, she said, is more rigorous than conventional bore drilling. It is more resource intensive and requires more maintenance and activity over an extended period of time, Batson said.
The drilling in some plays can run 40 years to 50 years, she said. “After that is the work over, the refracking of the wells and a whole set of other things that have to be done.”
The industry expects initial operations on the Tuscaloosa will draw only 10 percent of the reserves. “That means that 90 percent o the oil is still down there which is what all the subsequent operations are going to be going after.
She said the scale of the work and the decades it will span are “incomprehensible to people. It’s incomprehensive to me, too. It’s just unbelievable.”
Just how unbelievable the scope of the drilling could get is reflected in calculations by Ronny Taylor, the Amite County Chancery clerk. He starts with Amite County’s 720 square miles, which total 465,000 acres. The township units by which the wells are allocated total 1,320 acres to a unit.
“Just using that analysis there will be about 349 units in Amite County, where they are predicting eight wells per unit,” Taylor said.
That would be 2,792 horizontal wells.
His calculations show 327 units in Wilkinson County. Applying the eight wells per unit measure brings a total of 2,616 wells.
He said he is unsure how many truck trips it will take to service each well but he intends to persuade MDOT to put traffic counters near some operating wells next year.
You can’t prepare fully for something until you know what’s coming, he said. “We want to get this right. Then we can serve as a model for the rest of the state.”