Fracking effort in St. Tammany small part of exploration in large shale formation

Proposed drilling includes well along outer edge of Tuscaloosa formation

After word got out that a New Orleans energy production company is planning to drill a “fracking” well in St. Tammany Parish, several industry experts said a successful well along the outer edge of the underlying Tuscaloosa Marine Shale formation would likely create interest in adding more rigs to the area. Most, however, hedged their bets about whether the well will actually produce much oil.

For decades, oil and gas drilling in St. Tammany has been largely dormant. So when residents learned that Helis Oil & Gas is seeking permission to drill on a 960-acre tract of land near Interstate 12 and La. 1088, not far from Lakeshore High School, they began packing public meetings to ask questions and voice objections.

At stake for the company is a share of 7 billion barrels of recoverable but hard-to-reach oil tucked away in shale thousands of feet below ground.

The Tuscaloosa formation stretches from Texas through the center of Louisiana and into southwest Mississippi.

Over the past four years, energy companies leased hundreds of thousands of acres in the area of the formation, but efforts to tap into its reserves have been slow, experts say, as companies have worked to figure out how to crack into the softer rock in order to free up the oil.

The wells range from 10,500 to 14,500 feet deep and cost about $13 million each to build. That’s compared with the $10 million average price tag to drill and complete a well in north Louisiana’s Haynesville Shale, a natural gas field that also runs under parts of Arkansas and Texas.

Although it controls potentially as much as 60,000 acres in St. Tammany, Helis has proposed drilling only a single well so far, at a depth of about 13,000 feet. But what has some industry experts scratching their heads isn’t the depth but the location of the well, dozens of miles southeast of the Tuscaloosa formation’s core.

Overall, interest in the shale drilling effort has surged in the past year, the experts say. Most of the acreage has been leased by a few key players, and by most accounts, Helis Oil & Gas is not one of them.

There were 10 wells drilled in the Tuscaloosa formation in 2013. That figure has since doubled, according to figures from the Louisiana Department of Natural Resources.

Goodrich Petroleum Corp., an independent oil and gas producer, has leased more than 300,000 acres, with plans to spend up to $300 million this year exploring the Tuscaloosa formation. The company’s president, Robert Turnham, said earlier this year that Goodrich planned to drill as many as 45 to 60 wells in 2014 and to partner in dozens more.

Goodrich has started drilling a new well in West Feliciana Parish and plans to soon start drilling two wells in Amite County, Mississippi, the company reported in a quarterly filing to the U.S. Securities and Exchange Commission last week.

Another big player, Halcón Resources Corp., controls about 316,000 acres in the Tuscaloosa shale “play.” Company executives said last week they plan to drill 10 to 12 wells this year and to partner with other producers in 15 to 20 others.

Kirk Barrell, president of Amelia Resources, an exploration and production company in The Woodlands, Texas, said he’s optimistic about the Tuscaloosa formation’s potential. He expects drilling costs and the length of time necessary to drill a well to both fall as producers get a better grasp on the formation’s peculiarities.

While much of the action so far has been in St. Helena Parish and neighboring Amite County, Barrell expects that to shift this year, with more drilling in Tangipahoa Parish as well as East and West Feliciana parishes.

“Down the road, whether it’s two or five years, I think this shale will prove to be one of the most consistent, predictable and repeatable shales compared to other plays in the country,” he said.” To date, it has not been as popular just due to the depth and the associated costs.”

Land, in small quantities, is being leased for as much as $600 per acre, he said.

Barrell, whose company is also marketing about 142,000 acres of land in the formation to other operators, said he doesn’t expect a rush among energy producers to begin snapping up land in St. Tammany.

Though technology has greatly improved, he said he believes the area that Helis is targeting is “too far east and really southeast” of the core of the play. He said other wells have previously been drilled near that area, dating back to the 1970s and 1980s.

“My own geographical interpretation indicates that it would be a low probability of success,” Barrell said. “I would assume that they have a different interpretation than I do, which is fair. I hope it is successful.”

Helis’ president, David Kerstein, did not return a request for comment left with a company spokeswoman. Instead, the company provided a three-page statement outlining its history.

The drilling technique, called hydraulic fracturing, or fracking, involves injecting a mixture of water, sand and chemicals into the ground to fracture the rocks and increase the flow of oil and gas to the surface.

As drilling technology has improved and oil producers have started chasing resources once thought unreachable, fracking has become highly controversial in parts of the country, with concerns raised about its possible impacts on drinking water and other resources. Public officials in some communities have attempted to ban its use.

David Dismukes, associate director of the LSU Center for Energy Studies, said the Tuscaloosa formation is at a critical point where operators are hoping to start seeing returns after years of work.

“There have been a number of reports of relatively successful wells in that area,” he said. “The real key, I think, that’s going to start loosening up the purse strings, will be proving to the market that this is a play that can continue to produce on a consistent basis.”

Industry observers and others said it’s surprising that so much opposition to drilling has arisen in St. Tammany, a generally conservative, pro-business area where many people who work in the oil industry live.

“My guess is that people there probably support oil and gas activity pretty significantly. They just don’t want it in their backyard,” Dismukes said.

The privately owned Helis Oil & Gas was founded in New Orleans in 1934 by William Helis Sr., a Greek immigrant who got his start in the oil business during the Pennsylvania oil boom in the early 20th century.

Helis Oil & Gas has been active in the South and the Great Plains, including about 60 fracking wells in Wyoming and North Dakota. Those wells were drilled about 13,000 feet into the earth, according to the company. Helis has also drilled offshore.

Though few details about the company are publicly available, Eric Smith, an associate director of the Tulane Energy Institute, said the company has a solid track record.

“They’re a local company. They definitely know what they’re doing,” he said. “They’re a private company, so you don’t see their name thrown around a lot.”

In the meantime, Helis agreed last week to push back a “unitization hearing” before the state commissioner of conservation for 30 days, giving parish leaders additional time to research the company’s drilling proposal.

While some parish residents have waved signs reading “Frack Free Mandeville” and “Protect St. Tammany” at public meetings, Smith said he believes much of the hand-wringing has been overblown.

“We’re talking about one exploratory well in 1,000 acres,” he said. “You’re going to be hard-pressed to find it while they’re drilling it, and after they’ve drilled it, all you’ve got is a well sticking up. I think it’s been a lot of overreacting.”

Follow Richard Thompson on Twitter at @rthompsonMSY.