ENERGY REPORT

June 19, 2008

Ben Fortson Jr.

Marvin Gearhart
2008 Legends
Luncheon
Honorees
T
 Inside
Barnett Shale Symposium Speakers
4 MARK METZLER • Texas Alliance of Energy Producer
5 JOHN S. BAEN • University of North Texas
6 DAN JARVIE • TCU Energy Institute
7 JOHN HOLDEN • Jackson Walker LLP
9 ROGER BEECHAM • Shannon, Gracey, Ratliff and Miller, LLP

10 Seeking oil in the Barnett Shale

EOG goes for the crude

12 Refurbishing the past

XTO remakes historic building for Barnett Shale duties

15 The new Barnetts

New shale plays are developing around the country

18 Q&A
The shale doesn’t stop here anymore Dan Steward, author of The Barnett Shale Play:
Phoenix to the Fort Worth Basin, A History
I received a call a few weeks ago from a woman who had been approached by
an “agent,” she said, who wanted to give her a bonus for some mineral rights to 21 Texas Alliance of Energy Producers
her land. She said the “agent” said her property was directly above some shale
2008 Fort Worth Legends Award Winners
rock that was important to several energy companies. She wondered what she • Marvin Gearhart
should do. • Ben Fortson
This would be typical of the calls I’ve received for the past several years, except
this call was not from Tanglewood, East Fort Worth, Cleburne or even
Weatherford. It was from New York state.
24 Fort Worth Museum of Science and History
That’s right, the little shale play that started here has grown up, put on long Journey to the center of the Barnett Shale
pants, graduated and headed east.
We knew it would happen, but so soon? 27 Finding the right spot
Despite the fact that shale plays are exploding from here to New York, we still Fort Worth Energy works with large independents
have plenty to talk about here. As you will see, we’re just getting started and there
are still plenty of topics for analysis, argument and discussion. And not just here 29 Patrick Reardon
either, but around the state, the nation and the world. Our Barnett Shale Breakfast
Changes in oil and gas reserve rules
Symposiums are the perfect place to start the discussion.

Robert Francis 30 Barnett Shale Education

Editor Local community colleges begin training
Fort Worth Business Press
31 James Frederick Korth
Publisher Reporters Advertising Executives Cantey Hanger LLP
Banks Dishmon Elizabeth Bassett, Betty Dillard Mary Schlegel, Elizabeth Northern
Aleshia Howe, John-Laurent Tronche Andrea Benford, Robert Southerland
Chairman, Advisory Board Leslie Wimmer Annie Warren
Richard L. Connor 32 Alex Mills
Correspondents Vice President/Operations
Editor John Armistead, Will Brackett Texas Alliance of Energy Producers
Shevoyd Hamilton
Robert Francis Tonie Auer, Dell Cain
Receptionist
Associate Editor Production
Brent Latimer Olivia Jacobs 33 Ed Ireland
Michael H. Price
Clayton Gardner Barnett Shale Energy Education Council
Photographers
Managing Editor Glen E. Ellman
Lists
Crystal Forester Mary Kennan Jon P. Uzzel
35 When the past returns
Accounting Office
Anjanette Hamilton Don Woodard’s oilfield classic

3509 Hulen, No. 201 • Fort Worth, TX 76107 37 Charts

817-336-8300 • Fax: 817-332-3038
www.fwbusinesspress.com • E-mail: bizpress@bizpress.net Powell Barnett Shale Newsletter
The entire content of this newspaper is copyrighted by the Fort Worth Business Press 2008, with all rights reserved. Reproduction or use,
MEMBER
without permission, of editorial or graphic content in any manner is prohibited. The Fort Worth Business Press (USPS 004-204) is published 2006

weekly, 52 times a year, for $95 per year by Texas Community Newspapers Inc., 3509 Hulen, No. 201, Fort Worth, TX 76107. Periodical TEXAS PRESS
Postage Paid at Fort Worth, Texas. POSTMASTER: Send address changes to the Fort Worth Business Press, 3509 Hulen St., No. 201, Fort ASSOCIATION AWARD WINNER

Worth, TX 76107.
Cover art by Jon P. Uzzel
June 19, 2008 Energy Report ✦ 3

Barnett Shale’s oil potential creates stir in gas play
T
he excitement intensi-
fied about the poten-
tial of oil in the
Barnett Shale when news
leaked out about new wells
being completed in the
northern part of the tradi-
tional natural gas play.
Mark Papa, CEO of
Houston-based EOG MARK METZLER
Resources Inc., said the oil
Texas Alliance of
play is something new and Energy Producers
has become efficient
because of the new technology being developed.
“We are in the early stages of a major sea
change in the onshore oil and gas business caused
by technical improvements in horizontal drilling,”
Papa told reporters at the company’s annual ana-
lysts meeting.
“It is a really, really big deal,” he said. “The
magnitude is underestimated by Wall Street and by
other exploration-and production companies.”
He believes the horizontal drilling techniques
developed in drilling for gas reserves in the Barnett
Shale will have major implications for oil drilling
and production, too.
Apparently, oil and gas analysts took Papa’s
comments to heart as EOG’s stock surged to a 52-
week high of $124.73 immediately after the
announcement.
EOG has drilled several new oil wells in
Montague and Clay counties, which border the
Red River. Montague County has the second high-
est oil production in the 19-county region with 1.2
million barrels of production so far. Wise County,
immediately south of Montague, has had 4.1 mil-
lion barrels of production and is the largest oil pro-
ducer in the Barnett Shale.
Leasing activity has picked up in Archer and
Young counties, too.
EOG is trying to keep the information as quiet
as possible until they get its acreage under lease.
Economic impact
The Fort Worth Chamber of Commerce com-
missioned economist Ray Perryman to conduct a
study of the economic impact the natural gas play
is having on the citizens of North Texas.
He noted that last year he predicted a 20 per-
cent increase per year, but the economy increased
50 percent in 2007.
He also found activity in the Barnett Shale is
responsible for 8 percent of the economic activity
in North Texas.
Perryman said the activity created 83,823 per-
manent jobs and pumped more than $8.2 billion
into the local economy.
With the natural gas play in full bloom and the
oil play beginning to bud, the oil and gas economy
of North Texas appears to be on the verge of a
bountiful harvest.
4 ✦ Energy Report
SYMPOSIUM SPEAKERS
The Energy Information Administration predicts
demand for natural gas and crude oil to continue
to increase the remainder of this year and next
year.
Natural gas
Total natural gas consumption is expected to
increase by 1.4 percent in 2008 and by 0.5 percent
in 2009. The residential and commercial sectors are
expected to lead consumption growth in 2008
because of the projected 5.4 percent increase in
heating degree-days compared with 2007. In con-
trast, the projected 12.4 percent decline in cooling
degree-days from the warm summer of 2007 is
expected to leave consumption of natural gas in
the electric power sector relatively unchanged.
Finally, the declining real value of the U.S. dollar
and some recovery in the fertilizer market are
expected to contribute to slight growth in industrial
sector output and natural gas consumption in both
2008 and 2009.
Total U.S. marketed natural gas production is
expected to increase by 4.6 percent in 2008, then
decline by 1.1 percent in 2009. Despite current
repairs at the Independence Hub, production from
the Federal Gulf of Mexico is expected to increase
by 4.2 percent in 2008. Sustained high rig counts
in the lower-48 onshore region are expected to
lead to an increase in onshore production of 4.9
percent in 2008, according to the EIA.
Through the first four months of 2008 liquefied
natural gas (LNG) imports totaled an estimated 115
billion cubic feet (Bcf), considerably lower than the
import total of 283 Bcf at this time last year. The
shift of LNG away from the United States this year
results from higher prices available to LNG suppliers
for deliveries to both the Asia-Pacific region and
Europe. Although EIA still expects significant addi-
tions to world LNG productive capacity through
2009, recent delays in bringing new liquefaction
projects to full operational capacity and current
high demand in other parts of the world will con-
tinue to constrain LNG shipments to the United
States. In 2007, LNG imports totaled 771 Bcf. The
2008 LNG import forecast is revised downward to
580 Bcf from 680 Bcf in last month’s EIA Outlook.
As of April 25, working natural gas in storage
was 1,371 Bcf, 3 Bcf below the five-year average
(2003-2007), and 255 Bcf below the level during
the corresponding week last year.
The Henry Hub spot price averaged $10.49 per
million cubic feet (Mcf) in April, $0.74 per Mcf
above the average March spot price. Continuing
cool weather (heating degree-days were 6 percent
higher than normal in April), sagging imports of
LNG, lower inventories and higher oil prices have
all contributed to the recent strength in spot prices.
Uncertainty over natural gas demand by the electric
power sector during the summer and the possibility
of hurricane-related supply disruptions later this
year could impact spot prices in the coming
months. On an annual basis, the Henry Hub spot
price is expected to average $9.69 per Mcf in 2008
and $9.41 per Mcf in 2009, increases of $1.10 and
$1.09 per Mcf, respectively, from last month’s
Energy Information Administration Outlook.
Crude Oil
Production. In 2007, domestic crude oil output
averaged 5.1 million barrel per day (bbl/d),
unchanged from 2006, according to the EIA. Total
output in 2008 is projected to grow by only 10,000
bbl/d. In 2009, domestic crude oil production is
projected to average 5.3 million bbl/d, up 210,000
bbl/d from 2008. Federal Gulf of Mexico output is
expected to rise by 260,000 bbl/d, but declines are
projected for Alaska (30,000 bbl/d) and the lower-
48 states (20,000 bbl/d).
Total petroleum consumption of liquid fuels and
other petroleum products averaged 20.7 million
bbl/d in 2007, essentially unchanged from 2006.
Based on projections of weak economic growth
and record high crude oil and product prices, con-
sumption is projected to decline by 190,000 bbl/d
in 2008, a sharper drop than the 90,000 bbl/d
decline projected in the previous outlook. After
accounting for projected increases in ethanol use,
U.S. petroleum consumption is projected to fall by
330,000 bbl/d. In 2009, total petroleum and other
liquid fuel consumption is projected to rise by
210,000 bbl/d.
Oil Prices
West Texas Intermediate crude oil prices, which
averaged $72.32 per barrel in 2007 are projected
to average $110 per barrel in 2008, up about $9
per barrel from the projection in last month’s
Outlook, and $103 per barrel in 2009, up about
$11 per barrel from the previous outlook.
The Energy Information Administration projects
regular-grade motor gasoline retail prices, which
averaged $2.81 per gallon in 2007, to average
$3.52 per gallon this year, up 16 cents from last
month’s outlook. The motor gasoline price is
expected to average $3.66 over this summer (April
through September). These projections reflect our
assumption of a sizable narrowing of refiner gaso-
line margins from last year, attributable to weak-
ness in gasoline demand and growth in ethanol
supply. In 2009, regular-grade gasoline retail prices
are projected to average $3.44 per gallon, 20 cents
higher than in the previous outlook.
EIA estimates that diesel fuel retail prices in
2008 will average $3.94 per gallon, up from $2.88
per gallon last year. This reflects global strength in
diesel demand that is contributing to a widening of
the margin between diesel prices and crude oil
costs since last year. Retail diesel prices are project-
ed to average $3.67 per gallon in 2009. ER
Mark Metzler is chairman of the Texas Alliance of
Energy Producers and president of Felderhoff
Production Co. in Gainsville.
Fort Worth Business Press

Valuation and tax implications of the Barnet Shale
A
long with the bless-
ings of various
forms of income
from the current oil and gas
boom, also comes the
“curses” of those pesky
taxes that help keep this
great country, state, coun-
ties, cities and school dis-
tricts running. The only
JOHN S. BAEN
thing worse than no cash
University of North Texas
or having no direct income
from the oil and gas boom, is getting lease bonus
money, damages money and royalty
payments….and being ignorant about your taxes
that are due at the end of the year. Worse yet is
not realizing that these income blessings are all
taxable, if not now, eventually.
I am not a CPA, not a lawyer, however, I am
wise enough to know I need one of each in my
life to maximize my income and honestly defer,
reduce or avoid altogether my federal, state and
local taxes.
The valuation of pipeline rights of ways and
mineral rights, (undeveloped, leased, drilled/pro-
ducing, partially developed or fully developed) is
important for many reasons and the conclusions
require multiple approaches to estimate their
value depending on the intended use and pur-
pose of the appraisal.
The basic over-simplified version of oil and gas
associated income and tax issues are as follows:
Bonus payments at signing of a lease:
This taxable income in the year received and is
added to your other ordinary income.
Question: Could you defer, not sign, the lease
until January? This could delay taxes until the fol-
lowing year.
Well-site damages on your land
Can be claimed as ordinary IRS income or
preferably treated as “damages” that reduce your
basis or cost/price paid at the time you acquired
the property. While still reportable, this changes
the “value” of the damage payment and converts
the “income” from ordinary income to capital
gains (taxed at 15 percent in 2008) when and if
the property is sold.
Question: If they drill on my homestead and
there are no taxes due on the sale (zero taxes due
up to $500,000 – tax free profit) of my home-
stead, is it ever taxed?
Royalty payment IRS taxes:
Yes, these payments are taxable every year by
the IRS and there are few expenses or deductions
to reduce or avoid paying the tax.
Question: How can I minimize these taxes?
Now you need a CPA.
• Depletion allowance: A small portion of
the income is excluded from taxation.
• Your annual royalty income statement:
The statement will be sent to you and the IRS at
June 19, 2008
SYMPOSIUM SPEAKERS
the end of the year by the oil company but is
more income than you actually received. Danger –
Most oil companies send a gross income state-
ment before legitimate expenses (you did not
receive this amount of money).
Question: How can I reduce these taxes?
Keep every check stub, and every monthly report,
which is called a “check and well/lease detail
statement.” Common deductable expenses
include, but are not limited to, the following.
• State severance taxes
• Marketing changes (rip off to us)
• Compressor charges
• Pipeline/Transportation charges
• Other exotic charges (there are many)
Texas State Severance Taxes:
No options here, everyone pays and your
check always has this tax taken out first.
Texas is a wealthy state and has no state
income taxes due to our blessings of oil and gas.
A visit by the Penn State Team in my office should
lead to Pennsylvania following the Texas model.
They pay no severance taxes. Our Texas $8 billion
surplus is due to the following taxes collected at
the well head on every drop and cubic foot of
natural gas.
Severance taxes:
Oil = 7.5 percent on every barrel produced at
market value. That is $9.75 per barrel of oil at
$130 per barrel.
Natural gas = 5.6 percent or 50 cents per
1,000 square feet (mcf) at $9.
Question: How do I know if I am getting paid
fairly or how much oil and gas is actually being
sold under my land?
Trust me, you are not getting cheated and I
will explain this at the seminar.
Local ad valorum taxes and royalty:
Oil and gas rights and their values in Texas are
not taxable as part of your real estate until oil and
gas is produced and sold. One of the biggest little
“dirty” secrets in the oil and gas boom is that you
will get an end-of-the-year tax statement from
the appraisal district on the present accessed/mar-
ket value of your royalty income stream – just like
you do on your house. A good idea is to save 5
percent to 8 percent of your monthly income to
pay your city and school taxes in December. Oil
companies pay their part, but never yours.
There is much confusion on this for several
reasons:
• The tax offices are running months behind
due to the 8,600 wells drilled in North Texas and
delays in information, reporting and royalty pay-
ments held in suspension on many wells.
• Outside contracting firms handle your oil
and gas valuation and tax statements from far-
away places, like Austin.
• The appeal process is cumbersome, time
consuming and quite often the information pro-
vided on your statement is wrong. Not all wells
show up in the data, but local taxes will eventual-
ly be due and payable or your rights can be sold
on the courthouse steps.
• The Texas law and valuation model on royal-
ty/mineral taxes is complicated, but in my opinion,
friendly to the oil companies and royalty owners,
and is much less than “true market value.”
Pipeline easements and damage payments:
All income is reportable to the IRS but not all
income is taxable the year received if you have
good representation at the time an easement is
signed and also have a good professional and
qualified CPA and appraiser. The actual damage
income to the value of the land and remainder of
your land can be deferred until the land is sold,
similar to the well-site damages. I recommend
two checks: one for the granting of the easement
(taxable) and one for damages, marked damages.
Estate taxes on mineral rights to the IRS:
Danger – You are likely unaware that you have
a Texas lotto ticket that you have won that has an
income stream from royalty that has a market
value of 50 months to 60 months of income plus
potential mineral right values worth much more
(all known and unknown oil and gas producing
zones). Without estate planning at your death,
the present value of your mineral estate will be
values by the IRS and will be added to your estate
and taxed at 35 percent to 55 percent on monies
you or your heirs have not yet received. If you
receive $10,000 per month royalty checks and
you are over the estate exclusion limits after con-
sidering the value of all your other assets, (house,
business, cash, collectibles, stocks, bonds, etc.)
your estate could easily owe an additional
$200,000 to $300,000 to the IRS because of the
value of your royalty and minerals rights.
Question: How can I reduce these estate
taxes and liabilities, but yet still get the money to
spend in my life?
• Time your death carefully. Fifty-five percent
will be the new tax after Bush’s tax relief expires
and greatly depends on year of your death and
the exclusion amounts for any given year through
2011.
• Deed your minerals to a trust or family limit-
ed partnership.
The “best” of the two options are topics of
huge discussions between CPAs, estate planners,
lawyers, professors and owners. Oil and gas
income are blessings, but taxes will be paid.
Dividing your land into two estates (surface and
minerals) is a wise decision for many reasons and
only requires a mineral deed ($350 to $500 per
deed) and a valuation of both estates to establish
an IRS basis or remaining values. ER
Baen is a professor of business at University of North
Texas and offers several articles on the Barnett Shale
and oil and gas topics at
www.coba.unt.edu/firel/baen
Energy Report ✦ 5

Petroleum source rock: A trap for natural gas
W
here is the most
likely place to
find hydrocar-
bons in a sedimentary
basin? In a petroleum
source rock.
Petroleum source rocks
are formed from the depo-
sition, preservation and
decomposition of biological DAN JARVIE
matter. This biological mat-
Worldwide Geochemistry
ter can range from micro-
organisms such as plankton, bacteria and algae to
plant debris. Globally, it is estimated that only 1
percent of deposited organic matter is preserved,
the remaining portion being consumed or altered
by biological activity requiring the presence of
oxygen.
Preservation of organic matter occurs under
specific environments such as oxygen-deprived
conditions in deep water marine settings. The
Barnett Shale is one such accumulation containing
preserved organic matter deposited and preserved
under oxygen-deprived, marine conditions. How
do we know that it is a marine sediment? The
answer is the presence of marine fossils. This also
means that about 300 million years ago, the
future Fort Worth basin was under several hun-
dred feet of sea water.
Most petroleum (oil and gas) is formed from
the thermal decomposition of organic matter,
which requires exposure to heat. In geologic
terms this is accomplished primarily by burial of
sediments and then exposing them to elevated
temperatures as heat from the mantle is conduct-
ed through sediments to the surface.
Temperatures for thermal oil and gas formation
from biological material is relatively high – about
80°C to 200°C – with the bulk of oil being
formed between 80°C and 150°C (ca. 175°F -
400°F) and the bulk of gas forming between
150°C and 200°C (300°F -400°F).
Present-day temperatures of the Barnett Shale
at 4,000 feet to 8,000 feet are about 80°C
(175°F). Thus, we know it had to have been
buried to much greater depths in the geological
past, perhaps as deep as 15,000 feet in order to
account for the thermal decomposition of the
organic matter to petroleum.
How did this burial and subsequent uplift tran-
spire? First, the South American craton pushed
upward and over the North American craton,
which we identify as the Ouachita Thrust Front
(just east of Fort Worth). This resulted in subduc-
tion and subsidence of the already deposited
Barnett Shale downward closer to the mantle
resulting in a high heat flux through the sedi-
ments. There may also have been hot fluids
pushed through more porous sediments from the
thrust front resulting in even more heat exposure.
Additional sediments were deposited on top of
6 ✦ Energy Report
SYMPOSIUM SPEAKERS
the Barnett Shale, which were later eroded, i.e.,
removed by surface geological processes, during
uplift of the basin resulting in the present-day
depth of burial of the Barnett Shale. This is why
there is more gas production to the east and
more oil production to the north and west – high-
er temperatures were reached in the gas prone
areas.
Thus, a key role for the geochemist is to iden-
tify the degree of cooking of the source rock in
the geological past.
The trap
A petroleum source rock will generate oil and
gas, much of which is expelled out of the source
rock and migrates into a trap. Conventional
exploration looks for such traps and then, if suc-
cessful, produces oil or gas or a mixture of the
two from the reservoir rock.
A petroleum system involves all the compo-
nents and processes necessary to generate, expel,
migrate and trap petroleum. Conventional pro-
duction is from a trap, i.e., a closed container,
where it was filled with oil and gas that migrated
from a petroleum source rock that may be nearby,
i.e., hundreds to thousands of feet away, or far
away, from tens of miles to upward of hundreds
of miles away from the trap.
What is different about the Barnett Shale? It is
source, trap and seal – it is a self-contained petro-
leum system. There is no need to identify a specif-
ic trap and account for hydrocarbon charge via
expulsion and migration from a source rock. Thus,
rather than looking for subtle traps where petro-
leum might be trapped, a shale resource play such
as the Barnett Shale can be mapped in terms of
depth and thickness of the shale rock “kitchen”
over miles and hydrocarbon charge is present
because… it is the source rock for petroleum.
The keys to successful Barnett Shale gas pro-
duction are identifying those areas where the for-
mation is organic-rich, sufficiently thick, and suffi-
ciently cooked to convert the preserved organic
matter to hydrocarbons.
The next problem is for production geologists
and engineers – how do we get it to flow petrole-
um – either gas or oil? This was a key to the com-
mercial development of the Barnett Shale and
Mitchell Energy personnel figured out how to do
this, and Devon Energy figured out how to make
marginally economic wells into highly economic
wells by drilling horizontally.
Two plays
There are two plays in the Barnett Shale: shale
gas and shale oil. The primary interest in the Fort
Worth Basin is shale gas as a large portion of the
shale has been sufficiently cooked to convert both
preserved organic matter and retained oil to gas.
However, the Barnett Shale does generate oil in
areas where it has not been sufficiently cooked to
gas and thus, becomes a potential shale oil play
where primarily oil would be produced. This is
semantically different from oil shale such as the
Green River Oil Shale, found in various Rocky
Mountain basins, which can be converted to large
amounts of oil by physically heating masses of the
rock. However, when these processes are con-
ducted over short periods of time (days to years),
the temperature requirements for such a process
are much higher (350°C). One then has to consid-
er the energy balance from such a process: the
energy input has to be less than potential energy
output of the generated oil, otherwise the process
is a waste of energy. It increases supply, but the
energy balance can be a net gain of zero or even
negative.
How do we evaluate the Barnett Shale or
other shales for their native oil and gas produc-
tion potential? A geological chemist (geochemist)
analyzes pieces of the rock or samples of oil or
gas to assess various characteristics. For example,
we want to know if shale is sufficiently organic
rich to yield commercial amounts of petroleum so
we measure total organic carbon. Typically the
Barnett Shale in the main producing area aver-
ages 4.5 weight percent organic carbon in the
total rock mass. However, its original organic car-
bon content was likely about 7 weight percent or
higher. The difference is the amount of carbon
that would be found in all the oil and gas gener-
ated, i.e., 2.5 weight percent. This amount of
generative organic matter may appear to be a low
amount, but when converted to oil or gas equiva-
lents, this amounts to about 150 million barrels of
oil equivalent per square mile where the Barnett
Shale is 350 feet thick.
Remember the Barnett Shale has expelled a lot
of hydrocarbons and this is verified by conven-
tional oil and gas production. In fact we estimate
the Barnett Shale has previously expelled approxi-
mately 60 percent of the hydrocarbons that it
generated. Thus, only 40 percent of its total
hydrocarbon generative potential remains in the
shale, and only a small portion of this is being
produced.
The second key parameter that we need to
know is the extent of cooking of the shale – its
thermal maturity – is it in the oil window or the
gas window? Barnett Shale in the oil window will
flow some gas with oil, but the rates will be sub-
stantially lower due to the incomplete conversion
of organic matter
When compared to other source rocks around
the world in terms of its total generative poten-
tial, the Barnett Shale ranks in the top 20 percent
of all petroleum source rocks. ER
Jarvie is president of Worldwide Geochemistry LLC
and a member of TCU’s Energy Institute Board of
Directors.
Fort Worth Business Press

Continued conflict: mineral developer and surface owner
T
he nature of the
activity in the Barnett
Shale has increased
the conflict between the
mineral developer and the
surface owner. The
encroachment of the
Barnett Shale and other oil
and gas developments into
urban areas and the expan- JOHN HOLDEN
sion of urban development Jackson Walker LLP
into traditional mineral
development areas have increased the historical
friction between the surface and the minerals.
This conflict has affected homeowners, developers
and ranchers alike.
Mark Papa, CEO of Houston-based EOG
Resources Inc., said the oil play is something new
and has become efficient because of the new
technology being developed.
Many people are wondering why the mineral
estate is the dominant estate. As the original
courts involved with that determination reasoned,
were the minerals not the dominant estate, the
surface owners, especially those who did not own
any minerals, would not permit the development
of the tract and thus the minerals would never be
developed. Thus, those minerals would never con-
tribute to the energy needs of the country.
While the mineral estate is the dominant
estate, the courts have attempted to provide
some protection to the owner of the surface. The
accommodation doctrine was developed in the
Getty case. There it was held that an oil company
that had other means by which its mineral estate
could be developed should accommodate a sur-
face owner that had a pre-existing irrigation sys-
tem that had no other means to use its surface
for its existing agricultural purposes. In essence,
where an existing surface use could be accommo-
dated by the mineral owner, the mineral owner
would be required to do so.
There have also been legislative attempts to
level the playing field, such as statewide Rule 76,
where under certain specified circumstances, a
surface developer could require a hearing before
the Railroad Commission of Texas to create a
“qualified subdivision.” In essence, surface devel-
opers could obtain through a hearing before the
commission a determination that limited the min-
eral development of the subject surface to speci-
fied drilling locations.
Today the most common method of reaching
an accommodation between the mineral and sur-
face owner is the use of a surface use agreement.
The surface use agreement can be created at
almost any time. Frequently a surface use agree-
ment is created at the time the minerals are sepa-
rated from the surface or at a later date when
June 19, 2008
SYMPOSIUM SPEAKERS
mineral development is being sought. Often the
negotiation of restrictions on mineral develop-
ment occurs at the time the owner of both the
surface and the minerals attempts to sell the sur-
face while retaining ownership of the minerals. If
the purchaser of the surface is unable to obtain
ownership of the minerals along with the pur-
chase of the surface, the purchaser will seek to
restrict the development of those minerals by
excluding the use of the surface for such develop-
ment entirely.
The Barnett Shale formation is ideal for such a
solution because most minerals are developed
from wells with locations as far away as 4,000
feet from the tract being developed. While it is
difficult to foresee both the surface use and the
mineral development needs in advance, the fact
that the surface footprint used is small in relation
to the aerial extent of the minerals developed pro-
vides an opportunity to resolve the issue in a
manner that meets everyone’s needs.
Problems naturally arise from the inability of
the parties to know exactly what will be needed
by both the surface and mineral developer in the
future because precise uses are frequently
unknown at the time an agreement is reached.
Many parties are content to reach an accommo-
dation with the lessee oil company developer
attempting to drill a well on the property. They
are overlooking the fact that leases expire and
future owners will not be bound by such an
agreement unless all mineral owners and the then
lessee have agreed to any surface restriction. Care
should be taken to get all the parties to the table
and resolve the issues forever. For logical reasons,
the earlier this is done, the better it is for every-
one.
Pipeline tensions
Additional tension is created by pipelines and
their right of condemnation. Increased production
has increased the need for the expansion of
pipelines of every nature. Obviously bringing
pipelines through urban areas can be expensive
and time consuming for pipeline companies and
disruptive for surface users. The negotiation of
rights of way and easements tend to achieve bet-
ter results for all parties.
Frequently pipelines will accommodate surface
owners both in terms of route and other desired
objectives. For the surface owner, a negotiated
resolution almost always provides a better solu-
tion for there is a significant likelihood that unless
the pipeline operator has made an error, it will
prevail in obtaining the right of way. So long as
the pipeline operator has properly registered with
the Railroad Commission of Texas and has the
right of condemnation, it is not a question of
whether the pipeline will go through, it is simply a
question of what amount of damages will be
paid.
The same issue of what constitutes damages
and how damages are calculated is at issue in
pipeline rights of way and in mineral develop-
ment. Conflict has increased between the mineral
owner and surface owner regarding the location
of wells and the right of ingress and egress for
purposes of gathering lines and access to drill
sites. While it is generally true that the mineral
owner has a right to burden the surface estate to
the extent necessary to develop the minerals
under that surface, special rules and facts can
result in limitations on the methodology and
extent of the mineral developer’s activities. The
same thing is true with regard to geophysical
activity on the properties. Surface owners should
consult with professionals to determine the man-
ner in which activities are being conducted is con-
sistent with the rights of all parties involved.
Another significant development has resulted
from the creation and revision of municipal ordi-
nances. Municipalities have attempted to divide
the line between meeting the desires of their citi-
zens while encouraging a growing revenue source
during times of growing revenue needs.
Frequently municipalities have increasing restricted
and delineated the timing and manner in which
mineral activities can be conducted. It has become
increasingly important for all parties to participate
in the development of the ordinances to ensure
the needs of all parties are met to the greatest
extent possible.
We will see increased activity in the develop-
ment of law regarding municipal ordinances. The
supremacy of municipal ordinances that conflict
with the powers of other entities will be tested.
Recently, landowners, through the Internet
and other communication technology, have
become more united in demanding concessions
from oil companies and making others aware of
their rights. They have banded together to collec-
tively achieve results that were previously unob-
tainable by individual owners. With the develop-
ment of minerals in “rooftop” areas or housing
developments, oil companies have encountered
organized negotiation of leases and activities,
which has impacted both the results achieved and
the manner in which all parties approach attain-
ing their objectives.
The future undoubtedly will be shaped by leg-
islation, judicial determinations and the increased
use of technology and technological advance-
ments. ER
John Holden is a partner in the Business Transaction
section and a member of the Energy practice group
of Jackson Walker LLP.
Energy Report ✦ 7

Unique title issues in the Barnett Shale gas play
N
one of the title
issues discussed
below is collectively
unique. They have evolved
as oil and gas law devel-
oped. The development of
the Barnett Shale has creat-
ed an economic boom for
North Texas that has caused
title issues to come to the
ROGER E. BEECHAM
forefront concerning title to
Shannon, Gracey,
the minerals that underlie
Ratliff and Miller, LLP
the urban areas. While
there are more title issues that may affect proper-
ty interests, I have chosen a few that are worthy
of discussion. They are unique to mineral owner-
ship and to operators concerning their ability to
drill and operate in the close quarters of urban
areas.
Restrictive covenants and deed restrictions
These restrictions may limit an operator’s use of
the surface and subsurface for drilling an oil and
gas well. These restrictions are normally of record
and included in the deed conveying the property
or in a separate instrument filed of record. These
limitations will be enforceable if they are created
prior to the severance of the minerals from the
surface estate. Dyegard Land Partnership v.
Hoover, 39 S.W.3d 300 (Tex. App.—Fort Worth
2001).
Non-surface use
An operator has the right to the reasonable use
of the surface to conduct drilling operations sub-
ject only to limits imposed by the lease. Some of
the problems can be avoided by the landowner if
he enters into a surface use agreement. This
agreement may provide for the non-use of the
surface in drilling operations. A landowner should
be aware that such agreement providing for sur-
face damages will not require the lessee to reme-
diate subsurface contamination or damages.
Unless the surface use provisions are contained in
the lease, this agreement must be negotiated as a
separate contract. Humble Oil & Ref. Co. v.
Williams, 420 S.W.2d 133 (Tex. 1967); Jones v.
Getty Oil Co., 470 S.W.2d 618 (Tex. 1971) and
Fenner v. Samson Resources Co., Not Reported in
S.W.3d, 2005 WL 2123043 (Tex. App.—Houston
[1st Dist.] (mem.op.).
Deeds of trust and other liens
In most subdivisions, the properties are going
to be subject to deeds of trusts securing notes
financing each individual lot located within the
subdivision. This deed of trust creates a lien on
the property. Other liens may be created on the
lots by home improvement loans, home equity
loans, delinquent taxes, judgments and other obli-
gations. Under the chain-of-title rule, any opera-
June 19, 2008
SYMPOSIUM SPEAKERS
tor is deemed to know all the facts of the liens
included in this chain-of-title through which he
acquires his oil and gas lease. For example, if a lot
is pledged as collateral by a deed of trust securing
a purchase money loan, and the owner subse-
quently leases the minerals under his lot, the lease
will be subject to the deed of trust. If production
is obtained under the oil and gas lease before the
royalty can be paid, a subordination or a release
of the deed of trust covering his property must be
obtained. The same requirement applies to all
other liens that may be filed on the property. If
subordination or a release is not obtained, the
operator may escrow and hold the royalty pay-
ments until such subordination or release has
been obtained. Without a subordination, if the
property is foreclosed, the lease may be terminat-
ed. Williams v. Jennings, 755 S.W.2d 874 (Tex.
App. – Houston [14th Dist.] 1988); Stowe v. Head,
278 S.W.2d 120 (Tex. App.—Tyler 1987, no writ).
Strips and gores
Under Texas law, when a deed conveys land
abutting a right-of-way, title to the center of the
right-of-way also passes by the deed. State v.
Fuller, 407 S.W.2d 215 (Tex. 1966); Cox v.
Campbell, 135 Tex. 428, 143 S.W.2d 361 (1940);
Rio Bravo Oil Co. v. Weed, 121 Tex. 427, 50
S.W.2d 1080 (1932); Reagan v. Marathon Oil
Company, 50 S.W.3d 70 (Tex. App.—Waco 2001,
no pet.). This general rule applies even if the
description of the land terminates at the right-of-
way, unless a contrary intention is expressed in
plain and unequivocal terms. Under the strips-
and-gores doctrine, it is presumed that a grantor
has no intention of reserving a fee interest in a
narrow, adjoining strip of land when such land
ceases to be useful to the grantor after the con-
veyance. To overcome this presumption, the
grantor must explicitly reserve in the deed with
plain and specific language an interest in a nar-
row strip of land adjoining the conveyed land.
Cantley v. Gulf Production Co., 135 Tex. 339, 143
S.W.2d 912 (1940); Cox v. Campbell, 135 Tex.
428, 143 S.W.2d 361 (1940). This rule applies to
city lots for they are adjoining streets and ease-
ments that were acquired by public dedication,
easement or eminent domain. If the right-of-way
is acquired by deed, this doctrine may not apply
and the mineral interest underlying the interest
may belong to the grantee.
References to documents not filed of records
The chain-of-title doctrine may also affect
instruments referenced in recorded documents. In
the Westland Oil case, several sections of land
were leased to the oil company. This oil company
entered into a farmout agreement with a second
company who in turn transferred these rights to a
third company. The second company subsequently
farmed out these same rights along with some
other rights to a fourth company but referenced
an operating agreement between the second and
third company that was not filed of record. The
third company drilled and earned assignments of
oil and gas interests under its farmout. The fourth
company brought suit against the third company
claiming it did not have notice of the first farmout
agreement because it was not filed of record. The
court said due to the operating agreement being
referenced in the second farmout agreement, the
fourth company was charged with knowledge of
the first farmout agreement and took subject to
it. Westland Oil Development Corp. v. Gulf Oil
Corp., 637 S.W. 2d 903 (Tex. 1982). These types
of transactions usually affect the oil and gas oper-
ator more often than the land or mineral owners.
If a landowner or mineral owner is examining title
to the minerals underlying a tract of land, if
extrinsic instruments are referenced in the public
record but not recorded, a thorough search
should be made to locate and examine the refer-
enced instruments.
Reserved minerals
While one may acquire a tract of land insured
by a title policy, he or she may not know if he or
she owns the minerals unless a title search is con-
ducted. If the minerals are not present, they may
have been reserved in a prior deed or conveyed to
a third party. If one does not own the minerals,
he or she is not entitled to royalties under a lease
but may have his or her surface used for drilling
purposes. Humphreys-Mexia Co. v. Gammon, 113
Tex. 247, 254 S.W. 296 (1923).
Pooling and unitization
Most leases allow interests from one or more
leases to be pooled into a drilling unit or unitized
to cover an entire reservoir. This action in most
cases is voluntary on the part of the operator. The
pooling of interests may cause ones royalty inter-
est to be only a portion of the royalty expected if
not all of the lease is pooled. Smith and Weaver,
Texas Law of Oil and Gas § 1.1.D (LexisNexis
2007).
Conclusion
In the Barnett Shale, urban area tracts are
being drilled that have never been subject to oil
and gas development. One may own the surface
but not own the underlying minerals or one may
own all the minerals under a lease but not receive
all the royalty he or she feels is due. If one owns
property, his or her surface acreage may be deter-
mined by title insurance but to ascertain owner-
ship of his or her mineral interest, a title examina-
tion must be conducted. ER
Roger E. Beecham is a partner at Shannon, Gracey,
Ratliff and Miller LLP.
Energy Report ✦ 9
PHOTO BY GLEN E. ELLMAN
Robert L. Gaudin, CEO
of Grande Energy Co.
EOG’s quest for oil in the Barnett Shale
By John Armistead
Special to the Business Press
T
he Barnett Shale in the Fort Worth Basin of North Texas is synony-
mous with natural gas – and a lot of it. But one company, already
flush with success in finding natural gas in the area is also making a
case for getting oil out of the Barnett Shale.
Crude oil? In the Barnett Shale? Houston-based EOG Resources Inc.,
the No. 4 producer of natural gas in the Barnett, is betting that it can
recover plenty by using the right technologies.
Crude oil has been recovered from other geologic formations in parts
of the Fort Worth Basin for many years, but EOG’s venture will be the first
large scale attempt to try to coax oil from the Barnett Shale, a formation
that has been a producer of huge volumes of natural gas.
“We have proven that you can pull crude oil from the Barnett in our
fairway counties of Archer, Clay and Montague in North Texas,” said Mark
Papa, EOG Resources chairman and CEO, during a recent investor confer-
ence. “It will be more difficult to capture the oil from the Barnett forma-
10 ✦ Energy Report
tion, and initially we’ll probably realize a production of only about 2.5 per-
cent of the available in the Barnett.”
Papa says his company has proven that high quality oil is in the north-
ern extension of the Barnett Shale in substantial enough quantities to pro-
ceed with exploration and realize a good return on the investments. The
chairman and CEO of the Houston-based energy company spoke on the
oil prospects for the Barnett Shale a Stanford C. Bernstein and Co.
Strategic Decisions Conference on May 28.
Papa added as techniques for oil drilling and recovery in the shale
improve – just as they did for gas – the percentage of recoverable oil will
increase.
“With several exploratory wells we have proven that this can be done,
and we are doing everything we need to do for our ramp-up early in
2009,” says Papa.
EOG is not to be taken lightly. In September 2007 the low-key compa-
ny brought into production the biggest Barnett Shale horizontal well to
that time with its Fowler Unit No. 4H in Johnson County.
EOG had revenues of $4.2 billion in 2007 and had total estimated net
Fort Worth Business Press
proved reserves of 7,745 billion cubic feet equivalent, of which 6,669 billion
cubic feet were natural gas reserves and 179 million barrels, or 1,076 Bcfe,
were crude oil, condensate and natural gas liquids reserves, as of the end of
2007. About 67 percent of EOG's reserves are located in the United States.
One of the first things EOG is doing in its quest for developing crude oil
resources from the Barnett Shale, Papa says, is constructing a gas plant to
process natural gas in the oil-bearing shale.
“In these northern counties, there is no infrastructure, so we are having
to build our own. There are no gas or oil pipelines and no processing facili-
ties in the area of our leases,” he says.
EOG, as of the first of this year, had 250,000 net acres under lease, pri-
marily in Clay and Montague counties. The economically viable trap is about
40 miles east to west and 20 miles north to south, according to the compa-
ny. EOG estimates its potential net reserve range in these counties is from
227 million to 463 million barrels of oil equivalent in the Barnett Shale. The
shale is estimated to be from 250 feet to 700 feet thick in the area, accord-
ing to the company.

A ‘sweet’ prospect
Papa pointed out the crude oil in this area of the Barnett is comparable in
quality to the West Texas sweet crude.
“What we have seen is normal, high quality crude, or sweet crude in the
40 to 42 degree range. If West Texas sweet is bringing $130 a barrel, for
example, then the oil we are recovering should be valued at about the
same,” he says.
Papa added EOG will have no measurable production from its oil wells in
2008 while it continues exploratory drilling and putting together an infra-
structure to process and move products. The company as of May had com-
pleted eight horizontal wells and about a dozen vertical wells. EOG plans to
drill 60 to 80 wells in 2008, about 160 in 2009, and as many as 240 in

PHOTO COURTESY OF EOG RESOURCES

2010, according to Papa.
Papa says the expected after tax rate of return on the oil production
could be in the range of 50 percent.
“If you have the first mover advantage in an area like ours in the north-
ern extension of the Barnett, and establish your position well, your rate of
return on investment can be more significant. The advantages flow through
your profit and loss statement and establish a leading position with your
peer group,” he says.
EOG estimates the finding cost per barrel of oil in the play at $18 and the
lifting cost at $5.
Even though the oil is more difficult to get out of the shale, EOG says,
the experience gained from the initial exploration and production likely will
have application to other wells as the recovery techniques improve.
Little wonder that EOG and others are interested in the possibilities of
Barnett Shale oil as the price of crude oil has increased significantly in recent
months, hitting $130 per barrel in late May of this year.
Difficult issues
New technological advantages and techniques are coming that may make
oil in the Barnett Shale a reality, says Robert Gaudin, founder, chairman and
CEO of Grande Energy Co. of Fort Worth, but there remain some difficult
issues to overcome.
“I respect EOG’s technological capabilities,” he says. “The company has a
lot of very smart, very capable people developing their technical expertise. If
anyone can be successful in working through the problems in the oil win-
dow in the Barnett, it probably will be EOG.
“There is still a long way to go, but with development of new technolo-
gies, like new stimulation approaches for enhancing fracturing, and the price
of oil, it is promising. And, EOG doesn’t quit in the face of adversity.”
Gaudin added that for a long time there has been talk about the oil win-
dow in the Barnett Shale but there have been so many uncertainties as to
how get the oil out of the formation.
“There are several possibilities for achieving some success in getting oil
out of the Barnett,” he says. “One is with the Marble Falls formation sitting
on top of the Barnett. If porosity is good enough, oil might be recovered in
those good spots. Another promising oil recovery might be through the
Forestburg Lime separating the upper and lower Barnett Shale. In some areas
the separation might be good enough to provide accumulations of oil. The
third major possibility is in areas where the Barnett Shale is naturally heavily
Mark Papa, chairman
and CEO of EOG
Resources
fractured. Access to oil is better in these areas, although once the easy oil is
pulled from the fractured areas, the production drops off precipitously. To
get further recovery may require new types of fracturing techniques to
enhance recovery.”
By the book
Dan Steward, who now works for Republic Energy Corp. of Dallas, but
was with Mitchell Energy in the early years of Barnett Shale development,
says he too was impressed with EOG and the company’s application of tech-
nology both in Barnett Shale gas recovery efforts and in its success in the
Bakken Shale oil recovery efforts.
“Their work in the northern tier of the Barnett Shale is encouraging,” he
says. “I think what we are beginning to see is more of a fractured shale play
rather than an oil resource play at this time. That may change to a resource
play over time and with improvements in techniques”
Steward, author of The Barnett Shale Play, Phoenix of the Fort Worth
Basin: A History, added “It is the understanding of people familiar with oil
in this particular part of the basin that EOG is trying some stimulation tech-
niques not previously used in the Barnett Shale. It is going to take some time
to get all the elements of recovering oil from the formation working for suc-
cess.
“As with a lot of the successes in the Barnett Shale gas recovery, the
improved technologies are the major benefit of the time, money and hard
work in exploration and production. These technologies will have far-reach-
ing beneficial effects in the future.”
EOG is predicting production of about 83 million cubic feet of natural gas
per day by next year in the oil-producing area, and 191 million cubic feet a
day in 2010. In 2007 EOG averaged 254 million cubic feet of gas a day in the
core area of the Barnett, according to the Railroad Commission of Texas. ER

June 19, 2008 Energy Report ✦ 11

 Modern use for an early 20th century la
XTO resurrects By DEL CAIN
Special to the Business Press
the Swift & Co
S
he’s 106 years old but she doesn’t look a
day over… well, over a day if you ignore the
question of style. “She” was the office and
Building for administrative building for Swift and Co. at their
meat packing facility in the Fort Worth
Stockyards.
Barnett Shale The French Colonial-style building was meticu-
lously restored by XTO Energy Inc. The building
duties was acquired by the company in May 2006, work
began in July of that year and the interior was
ready for use by the company’s Barnett Shale
operation late in 2007 and the exterior work was
completed in March 2008.
Photos by Jon P. Uzzel
In the late 1890s, both Swift and Armour and
company were courted by some of Fort Worth’s
leading citizens to locate meat processing plants
at the then-bustling stockyards and cattle market.
Both companies were won over and two plots of
12 ✦ Energy Report
land were provided; one on the north side of
Exchange Street and one on the south. A flip of a
coin awarded the southern site to Swift and con-
struction started on both plants in 1902.
Completed the next year, the office building
anchored a plant that eventually included about
50 buildings and employed, at its height of opera-
tion in the late ’50s, around 1,700 people.
The two companies were, in fact, responsible
for a significant portion of the population growth
in the area during the early part of the 20th cen-
tury as people were drawn to the prospect of
steady work at the two plants.
Two new towns were established, North Forth
Worth and Niles City (named for one of the origi-
nal investors in the Stockyards, Louville Niles of
Boston, Mass., but both were soon absorbed into
the city of Fort Worth. The Stockyards investors
built about 70 rental houses on Stockyards-owned
property in Niles City, located just east of the
Stockyards as the township was incorporated
Fort Worth Business Press
y landmark
The Swift Building was refurbished by XTO Energy Inc.
almost entirely on land they owned. The shape of
Fort Worth was also changed as the businesses
grew and employees needed more places to live
convenient to work. Developments, such as Rosen
Heights located just west of the plants, were
planned to provided that housing.
The 28,000-square-foot building remained
offices for Swift until 1971. Then, after two
decades of declining business – due primarily to
the development of feed lots, cattle sales and
meat-packing operations in smaller towns – the
company shuttered its Fort Worth operation. That
decline also was fed by the increasing use of
trucking to replace what had been a commodity
shipped primarily by rail ever since the invention
in 1878 of the first practical refrigerated rail car
by engineer Andrew Chase. Chase, in fact, had
been hired to do just that by Gustavus Swift, then
president of Swift. The plant and offices were
shuttered and so, too, was a vast economic
engine for the city of Fort Worth.
June 19, 2008
From drill site to restoration
Asked about the impetus to restore older
buildings such as this and the W. T. Waggoner
Building and others, Joy Webster, vice-president
of facilities for XTO says, “Oh, it absolutely starts
with Mr. Simpson, [Bob R. Simpson, CEO].”
She continues to explain it is his view that
there is value in “older things.” As an antique col-
lector himself, he sees what you buy of value that
you can keep or restore will not only be of value
to the community but will increase in value for
the owner, Webster says.
In addition to the Waggoner and Swift build-
ings, XTO also refurbished and restored the Baker
Building, built in 1910, in downtown Fort Worth.
The building is now known as the Bob R. Simpson
Building and is also used for corporate offices.
The oil and gas firm continues to grow along with
the energy industry. In 2007, XTO had $5.5 billion
in revenue and currently has more than 2,000
employees worldwide.
The Swift building came to XTO’s attention ini-
tially when employees from the company’s
Barnett Shale operation were seeking out drill
sites near the Stockyards. Excited about their find,
they told company officials of their discovery. In
short order, Webster was called by the building’s
owner who wanted to show it to her as potential
headquarters building for XTO. Although the
building was obviously too small, she was eager
to see it simply because of its history. That tour
persuaded her the building was not only deserv-
ing of restoration, but it would make an ideal
location for the company’s Barnett Shale division.
One result of this has been recognition from
the National Trust, which presented Mr. Simpson
with its Hero Award. While the Swift Building is
part of the Stockyards National Historic District,
there is also an effort currently to have the
building given an individual designation because it
has now been rescued from the list of “endan-
Energy Report ✦ 13
gered treasures,” where it rested for some time.
“Our preservation awards recognize excellence
in the restoration, rehabilitation or adaptive use of
historic buildings or sites,” says Mary Saltarelli, of
Historic Fort Worth Inc. “The Swift and Co.
Building was on our ‘Most Endangered Places List’
for two years. XTO saved it and adapted it for
their use — their work is an example of historic
preservation as economic development.”
A tour is enlightening as it reveals the lengths
to which the company went to preserve the her-
itage of the building. From the recreated fence
outside to the carefully restored mosaic of the
Swift and Co. logo in the entryway to door facing
caps modeled from a surviving original, the
restoration is impressive. Even the floors are lum-
ber reused from the three layers of hardwood
flooring found when the interior was stripped out
for restoration. There was enough of that for
most of the first two floors as well as the third,
which was originally a rough finished storage area
and has now become the office conference room
dominated by 40 feet of a U-shaped conference
table built from old shelving found stored there.
History abounds
Everywhere one looks there are reminders of
the building’s origin. There is a lighted display
case holding Swift and Co. memorabilia, some
donated and some found during the reconstruc-
tion. Letters and pictures from the building’s first
incarnation abound and even more are still resting
14 ✦ Energy Report
in Webster’s XTO office waiting for their proper
place. There are even touches to recall the build-
ing’s 20 years as an Old Spaghetti Warehouse
restaurant. A marble-topped table from that time
sits in the corner of a hall and the restaurant’s
stained glass windows now filter the light into the
conference room.
Behind the main building is a brick structure
that once served as the “time card building.” It is
the space that all employees, whether they
worked in the office or in the plant had to pass
through to clock in and out for their shifts. That
has been restored as a place to maintain more
memories of Swift. Enlarged photographs of the
plant and the work that went on there are
mounted as windows between panes of glass so
that natural light floods them and makes them
even more impressive. The high point of this little
addition is an 8 feet by 10 feet reproduction of a
photograph that is mounted on the end wall. It
was taken, probably sometime in the ’30s or ’40s,
and shows a group of eight to 10 men all outfit-
ted in suits and hats. They are the company’s buy-
ers and are poised to ride the Swift-provided bicy-
cles down the hill to the Stockyards for their day
of buying livestock.
One of the conference room walls displays
laths from the original attic, which are covered
with graffiti from 1902 on – names and dates
that people inscribed in pencil in that storage
space. As they perhaps hoped, their names will
carry on and still be associated with the history of
the building that likely was the center of their
lives so long ago.
Sarah Biles, administrator of the Stockyards
Museum and member of the North Fort Worth
Historical Society says, “It’s a gorgeous building,
one of the three – along with the Coliseum and
the Stock Exchange buildings – of the most
important and beautiful here in the Stockyards.
XTO did a wonderful job.”
There is a sense of “museum” about the place
and yet, it is clearly a place of work. No surprise
as XTO has more than 250,000 net acres in play
in the prolific Barnett Shale. The Fort Worth firm’s
current gross production in the Barnett Shale
reached 620 million cubic feet estimate (MMcfe)
per day in the first quarter of 2008 – the No. 2
producer in the shale.
So, while there is a “museum” quality to the
site, there are also busy people doing their jobs
wherever you go in this space, but they seem to
take pride in what their employer has accom-
plished here.
“What this, (the packing plants and the Fort
Worth Stockyards) was in its day, the Barnett
Shale is for this area today,” says Webster. “So it’s
fitting to locate our local operation in this beauti-
ful building and maintain its presence in our com-
munity.”
Not a bad compliment for a 106-year-old –
even if she is a building. ER
Contact Cain at bizpress@bizpress.net
Fort Worth Business Press
New shale plays
join Barnett Shale
as gas producers
By Robert Francis
Fort Worth Business Press

W
ith the price of oil and gas on the rise and
energy a top concern among U.S. con-
sumers and economic analysts, it should be
little surprise that energy companies are seeking new
sources of energy – particularly natural gas.
As anyone in Texas, particularly North Texas, can
attest, the Barnett Shale has created an economic
boom unprecedented in recent times, while at the
same time creating more than a few difficult political
and social issues.
While the Barnett Shale has been responsible for
more than 3 trillion cubic feet of natural gas, the
technology used to “crack” the shale in the Fort
Worth Basin is now being put to use in other shales
around the country. Some of those shales may some-
day prove to be larger than the Barnett.
Here are some of the larger shale plays around the
country.

Haynesville Shale
Perhaps the closest shale play to the Barnett Shale,
the Haynesville Shale is located East Texas and
Northwest Louisiana. At its recent annual meeting on
June 6, Chesapeake Energy Corp. officials said the
company owns or is committed to more than
500,000 acres of leashold and has completed six
wells in the area. Officials of the Oklahoma City-
based company said at least 12 drilling rigs are antici-
pated in the area by the end of the year and at least
30 by the end of 2009.
Chesapeake CEO Aubrey K. McClendon said the
firm’s initial success in the area has prompted it to
accelerate drilling activity to “generate substantial
production growth and capture outstanding financial
returns,” according to a release from the company.
“Our technical analysis of the play over the past
two years combined with the impressive drilling
results on our first six horizontal wells and wells
recently drilled by others in the industry continue to
support our assessment that the Haynesville Shale
play could potentially have a larger impact on the
company than any other play in which we have par-
ticipated to date,” said McClendon.
To date, McClendon and company, along with XTO
Energy, are the only Barnett Shale operators vying for
leaseholds in the area, about 280 miles east of Fort
Worth; however, several smaller companies have
claimed a stake in the shale.
Houston-based Petrohawk Energy Corp. officials
said in April that the company entered into
agreements with several private parties to acquire

Energy Report ✦ 15
 additional leasehold interests in the Haynesville Shale area
and now has more than 70,000 net acres.
“This expansion in the emerging Haynesville Shale play
is part of our ongoing efforts to add substantially to our
lower-risk, higher-margin inventory of drilling opportunities
in core areas where we bring experience and economies
of scale to the table,” said Floyd C. Wilson, chairman,
president and CEO, in a release.

Marcellus Shale
The Marcellus Shale covers an area of 54,000 square
miles, from upstate New York, across Pennsylvania into
eastern Ohio and across most of West Virginia. In total
area it is larger than the entire state of Pennsylvania.
According to a recent study by Penn State University
and the State University of New York at Fredonia, the play
could contain as much as 50 trillion cubic feet of recover-
able natural gas.
One of the big players in the Marcellus Shale is Range
Resources Corp., which has more than 1.1 million net
acres in the play. Range’s Fort Worth neighbor XTO Energy
Inc. made a big push in the play in April when it pur-
chased 152,000 net acres from Linn Energy Chesapeake,
EOG Resources, Cabot Oil and Gas, and Anadarko
Petroleum also have major stakes in the area.

Fayetteville Shale
According to a recent study from the Univeristy of
Arkansas, natural gas drilling in the eight-county
Fayetteville Shale play will produce a $17.9 billion eco-
nomic benefit to the state through 2012.
Houston-based Southwestern Energy Co., Chesapeake
and XTO Energy have made major investments in the
state. In April, XTO Energy purchased 55,631 net acres in
the Fayetteville Shale from Southwestern Energy fro $520
million.
“XTO’s shale play strategy is focused on growing our
acreage positions in the right geographic and geological
locations across the premier shale basins. This acquisition
expands our visible growth potential in the Fayetteville
Shale,” said Keith A. Hutton, XTO president, in a release
at the time. “Given our engineering assessment, we
expect the acreage, which is contiguous to our core devel-
opment footprint, to hold resource potential in excess of 1
Tcfe (trillion cubic feet estimate). With the pipeline infra-
structure already in place, our immediate plans include
using four drilling rigs in 2008 and at least six rigs in
2009. We expect proved reserves attributable to this
acquisition to grow to 160 Bcfe this year and at least 325
Bcfe by year-end 2009. Overall, our operational teams are
dedicated to making XTO a top producer and value cre-
ator in the Fayetteville Shale.”
Woodford Shale
Located in the Arkoma Basin in southeastern Oklahoma,
the Woodford Shale has not yet shown the same amount
of activity as some of the other shale plays, but companies
continue to eye the area. Newfield Exploration Co. is a
major player in the Woodford Shale with 165,000 net
Like several other Barnett Shale
players, Range Resources is making big
moves into other shales plays, such as the
Marcellus Shale, part of the Devonian
Shale, in Pennslyvania and West Virginia.
The company is also pursuing a coal bed
methane play in Virginia.
Map courtesy of Range Resources.
acres, but Devon Energy and Chesapeake also have some projects in
the area. Devon, for example, plans to drill 107 wells in the
Woodford Shale in 2008.
Bakken Shale
Shale plays are not just limited to natural gas.
In a recent report, the U.S. Geological Survey published a new
assessment of the Bakken Shale play of North Dakota and Montana.
The report says that 3 billion to 4.3 billion barrels of undiscovered oil
are technically recoverable with current technology and industry prac-
tices. This estimate by the USGS made the Bakken Shale the largest
continuous oil accumulation in the lower 48 states. In addition, the
USGS has estimated total oil-in-place at 200 to 400 billion barrels.
In May, XTO Energy officials said the company was purchasing
352,000 net acres in the Bakken Shale, located in Montana and
North Dakota. EOG Resources Inc. of Houston also has interests in
the Bakken Shale play. ER
Contact Francis at rfrancis@bizpress.net

16 ✦ Energy Report Fort Worth Business Press

Enjoy a little appetizer
812 Main Street • Fort Worth, Texas
817.877.3999
 Barnett Shale veteran compiles personal,
comprehensive account of play’s early days
In conclusion, I hope that the
reader will get a sense of the
complexity of the play and a
better understanding why it is
often referred to as the 17
year overnight success. There
were many times during its
early life that the Barnett play
was on the verge of failing,
and had it not been for the
conviction, commitment and
determination of George P.
Mitchell and Mitchell Energy, it
would not be what it is today.
– Author’s Note from The Barnett Shale Play: Phoenix
to the Fort Worth Basin, A History by Dan B. Steward
18 ✦ Energy Report
By JOHN-LAURENT TRONCHE
Fort Worth Business Press
D
an B. Steward is a consultant of
geology at Republic Energy Inc.,
and the author of The Barnett Shale
Play: Phoenix to the Fort Worth Basin, A
History. Steward, formerly of Barnett Shale
trailblazer Mitchell Energy, wrote the book
at the request of Mitchell’s George P.
Mitchell, seen by many as the father of the
shale play. Steward’s book is for sale
through the Fort Worth Geological Survey,
one of the publishers, and can be pur-
chased online at www.fwgs.org for $40.
How did you get involved in
developing and writing this Barnett
Shale chronicle?
I had been involved with the Barnett
almost since its inception. The first well
was drilled in spring 1981. I came to work
in October of ’81 right at the time they
put a slightly larger stimulation on the
Barnett, wasn’t much but we got some
gas out of it. Over the years, from 1981 till
we merged and Devon took us over I was
involved in all aspects of the Barnett, and I
tended to act as a liaison of sorts to geolo-
gy. I then took a job with Republic Energy.
In July of 2005, I assisted about four or
five other people and we gave George
Mitchell an update on the Barnett Shale.
A day after, Mr. Mitchell asked if I
would write a history of the Barnett Shale.
He felt like I knew a lot of its history, a lot
of the important wells and the different
technologies we used. And he wanted me
to write it according to the way I remem-
bered it. He asked me in July 2005, and I
had a manuscript written by August of
2006. I turned the manuscript over to
George Mitchell, he turned it over to the
Fort Worth Geological Society and the
North Texas Geological Society. And they
published it, and the proceeds go to schol-
arships for college funds, and its own
operations.
How was the writing process?
I spent my career trying not to write. I
don’t like writing. I didn’t want to write
this. My wife had suggested I write it, and
I said, ‘No.’ When Mr. Mitchell asked me
to write, there were only two people who
could’ve written it. That was Mr. Mitchell
and an old boss of mine at Mitchell
Energy. This book is not about me. It’s
about Mitchell Energy, George Mitchell
and what the Barnett Shale team did. I am
the historian that documented it. I don’t
want people to think I wrote this for my
own ego, or my own edification, I wrote
this because George Mitchell asked me to.
How did you gather the information,
and to whom did you speak while
writing your book?
When Mr. Mitchell asked me to do this,
he told me ‘Dan you were there, you saw
all of this, you write it from your perspec-
tive.’ I sat down and started pulling from
my remembrances, and I keep personal
journals and I started going through to
pick out what I remember and there was a
Web site I used to reconstruct the chronol-
ogy of it. I had to reconstruct the history
and do a lot of estimated recovery analysis
from this Web site.
I tend to write chapter to chapter, and
as I wrote them I’d give them to my
friends at Mitchell and see if they remem-
bered it differently. In one or two cases I
had a number or two wrong, but I don’t
remember any significant points changed. I
would say that I asked probably 30 to 40
people review it. I wrote things and then I
asked people to review it. I don’t believe
that I went to people before I started writ-
ing. I tried to write something the way I
remembered it, and then I went to people
afterward. And most of those people were
people who were in the trenches, as
opposed to senior management. … A
number of people, when they read it, they
said, ‘Damn, I forgot all about that.’ ER
Contact Tronche at jtonche@bizpress.net
Fort Worth Business Press
w

Ben Fortson, left, and Marvin Gearhart receive the Fort Worth Legends Award from the Texas Alliance of Energy Producers.
Fortson career built on acquisition
By Tonie Auer
Special to the Business Press
Getting to know Ben Fortson Jr. isn’t easy. If you ask him to name
his business philosophy, he tells you simply: to acquire oil and gas
leases.
That’s it.
A man of few words, but great accomplishments.
At the helm of Fortson Oil Co. in Fort Worth as an independent oil
producer, Fortson grew up in the oil industry and made it his life.
He was born in Oklahoma City and moved to Fort Worth at the
age of 4 when his father established Fortson & Polk Oil.
He graduated from Fort Worth’s Paschal High School and attended
the University of Texas for two years before serving in the military and
returning to graduate from Texas Christian University in 1957. Soon
after, he made two of the most important decisions of his life — he
married Kay Kimbell Carter, and he accepted a job with Champlin Oil,
which was his first foray in the oil business.
On the job for Champlin — a Fortune 500 company — Fortson
compiled files in the lease records department. Six months after tak-
ing the job, he was offered a scout position in the land depart-
June 19, 2008
Veteran oilmen
receive ‘Legends’
honor
Photos by Jon P. Uzzel
Gearhart continues innovations
By Tonie Auer
Special to the Business Press
Throughout his almost 60 years in the petroleum field, Marvin
Gearhart evolved by applying technology to solve problems. That is
his secret to success; never static, but moving forward and staying on
top of where the industry is going.
“I grew up in the business,” Gearhart recalls. “My dad was a driller
and a pumper. So, from a very young age I listened to my dad and
another cousin and his father talk. Sunday dinners, that was all we’d
talk about, the oil business. Growing up in the business, it is in your
blood.”
Innovations developed by Gearhart and his partner, Harold Owen,
paved the way for key technological advances such as horizontal
drilling, which has helped make the Barnett Shale possible.
Today, Gearhart is the chairman of the board for Gearhart Co. He
recently was honored by the Texas Alliance of Energy Producers with
their Fort Worth Legends award (See sidebar, pg. 23).
It was 1949 when Gearhart graduated from Kansas State
University and went to work as a wireline logging engineer with
Welex Jet Services in Fort Worth. In 1955 he and Owen
Energy Report ✦ 21
Fortson
After a year in the fields of Oklahoma, he returned to Fort Worth and
set up his one-man operation that would eventually turn into Fortson Oil
Co., which is known for acquisition and divestiture, exploration and pro-
duction services in the Permian Basin and South Central regions.

Short-lived setback
The energy downdraft in 1998 had a ripple effect throughout the
industry, and like many of his counterparts throughout the sector, he
began to downsize Fortson Oil. Dismantling the company that took him
nearly 40 years to build was painful, but the setback was short-lived.
Two years later, with his characteristic determination and optimism, he
set the company on a course to begin accumulating mineral leases in
the East Texas Bossier Sand Play. The company resumed drilling and, in
partnership with three major independents, has drilled more than 350
wells during a seven-year period.
That simple business philosophy of acquiring oil and gas leases is
because “they are the least expensive component of a prospect, start to
finish.”
“Ben is a personal friend and I like him very much,” says Marvin
Gearhart, chairman of the board for Gearhart Co., another oil industry
firm in Fort Worth, and a co-winner of the Fort Worth Legends Award
from the Texas Alliance of Energy Producers.
“He has always been in the production side of the business and I have
always been on the service side plus building and selling equipment to
the service industry,” says Gearhart. “In my opinion, the industry views
Ben very positively and as someone the local industry respects and can guess you could say that anyone who pumps money into our industry
count on him to do what is good for our community and our industry. I makes him a good industry leader because without the financial
resources to drill wells, we don’t have an industry.”

Community service
Texas Alliance of Energy Fortson’s business successes are matched only by the community
achievements he and his wife have made.
Producers Fort Worth Since 1964, he has served on the board of directors of the Kimbell Art
Foundation, helping to realize Kay Kimbell’s vision of building a world-
Legends Award class art museum. The Kimbell Art Foundation, established in 1935 by
Kay Kimbell, operates the Kimbell Art Museum in Fort Worth. The public
art museum, which opened in 1972, was started with a gift from
The Texas Alliance of Energy Producers implemented Kimbell of several hundred works of art. Today the museum houses
its Legends Merit Award program to honor members pieces dating from antiquity into the 20th century. When Kimbell died in
that had made a long-time contribution to the 1964, he left his fortune to the Kimbell Art Foundation to establish and
betterment of the industry, community and country. support the Kimbell Art Museum.
Fortson’s wife, Kay, has served as president and chair of the board of
directors of the Kimbell Art Foundation since 1975 and as a director
2002 Amon G. Carter and family 2003 S.B. (Burk) Burnett
since 1956. She is also an active trustee of Texas Christian University,
Kay Kimbell and family Dixon (Dick) Thomas
where Fortson is a trustee emeritus.
E.A. and W. A. Landreth Harbison
In just one of the examples of the Fortsons’ generosity, in 2005, the
and family Charles Anthony Fischer
couple contributed $1 million to the Brown Foundation Institute of
W.A. “Monty” Moncrief
Molecular Medicine for the Prevention of Human Diseases at the
and family
Sid Richardson and family University of Texas Health Science Center at Houston to help unravel the
molecular mysteries behind human diseases.
2004 H. E. (Eddie) Chiles 2005 B. J. Kellenberger That gift was designed to establish a distinguished chair, named for
Frank Darden Jr. Arch Rowan the Fortsons, in the new Research Center for the Neurosciences. The
Edgar Sperry Hill Charles Rowan endowed faculty position would help the insitute recruit a top scientist
James Houston Hill, to conduct research into the fundamental causes behind neurodegener-
George Pat Hill ative diseases like Alzheimer’s, Parkinson’s and amyotrophic lateral
sclerosis.
2006 William L. Adams 2007 Bob R. Simpson Additionally, the Fortsons received the 65th annual Golden Deeds
Charles W. Seely Award from the city’s Exchange Club, in recognition of their extraordi-
nary contributions and citizenship in the mid 1990s.
2008 Ben Fortson In 2007, Fortson and his wife celebrated their 50th wedding anniver-
Marvin Gearhart sary. They have four children and 11 grandchildren. ER

22 ✦ Energy Report Fort Worth Business Press

 Gearhart
formed Gearhart-Owen Industries Inc. a wireline service provider and
manufacturer of logging trucks and wireline tools, which eventually
had more than 14,000 employees in 27 countries worldwide.
“When I graduated from school, I had three opportunities to
work. Welex (Jet Services) was an independent just getting started, so
I got into wireline logging because it was interesting to me,” he says.
“I stayed with it until a sales manager changed to a drilling bit com-
pany and I went with him. Then Harold Owen and I started our own
business, so I got back into wireline business and stayed in it for 35
years. When I sold it, I got back in drill bit business.”

Innovations
In the 1970s, Gearhart began developing an innovative series of
open-hole tools and computerized analysis systems, completing the
task in 1975. The result – a Direst Digital Logging system, outper-
formed existing analog systems used by competition and began gen-
erating significant income for Gearhart-Owen.
The company also developed Measure While Drilling technology.
MWD not only saved drilling companies time and money because it
eliminated the wireline, it helped make directional drilling easier
because down hole tools were able to send directional data back to
the surface without disturbing drilling operations.
By the end of that decade, the company was one of the fastest
growing companies on the New York Stock Exchange.
After the acquisition of Gearhart Industries in 1988 by Halliburton,
Gearhart formed Rock Bit International. This company manufactured
drill bits and MWD systems. He sold the business in 2005 and started
his current effort, which focuses on drilling tools and systems for the
Barnett Shale and horizontal drilling.
Gearhart has released a new line of digital surveying and surface
monitoring tools since the company’s inception. The company’s goal
t is to lower costs to customers and set a new precedent for what the
industry has come to expect from Gearhart: quality digital tools.
“Technology is the biggest aspect (of how the industry has
c
changed over the years),” Gearhart says. “That is the whole thing
that makes the Barnett Shale possible — the new technology. I try to
apply new technology to solve problems. We were already here right
n
in the middle of the Barnett Shale, so it came in all around us.”
with more than 90 years of combined oilfield problem solving experi-
Today’s industry ence. The years of solving problems have resulted in numerous
Observing the energy industry today, Gearhart says he never antici- unique processes, papers and U.S. patents. The Gearhart Co. under-
pated “anything like the prices and the levels they are reaching now takes a number of new tool development projects both for its own
— it just seems surreal. My main focus has always been new technol- interests and in collaboration with third parties who have specific
ogy and how to drill and produce wells more efficiently and how to downhole tool developments that the Gearhart name has always
get them to produce more. It is only because of horizontal drilling been famous for.
and new fracturing techniques that makes the present boom eco- Gearhart doesn’t plan to retire any time soon, either, despite his
nomic and, of course, as prices go up, it drives the activity up,” he long illustrious career.
says. “It’s not my style of living,” he says. “That is for different folks. My
His current focus, The Gearhart Cos., provides innovative downhole work is my hobby and my enjoyment. It is not like going to work for
survey tools, drilling instrumentation, geological services, gas detec- me; it is like going to have fun. If you’d rather be doing that than
tion services and high quality custom built wireline trucks with a spe- anything else, you might as well keep doing it.”
cialty in the area of oil well surveying, surface data acquisition and Gearhart lives in Fort Worth with his wife, Jan. Together they have
control, MWD tools and services and wireline trucks. four children and 14 grandchildren. He is a Legion of Honor Member
Gearhart continues to focus on developing state-of-the-art technol- in the Society of Petroleum Engineers and active in numerous other
ogy and has assembled a team of geoscientists and petrophysicists organizations. ER

June 19, 2008 Energy Report ✦ 23

 Museum of
Science & History:
Journey to the center
of the Barnett Shale
By MICHAEL H. PRICE
Fort Worth Business Press

museum tells the story of its surroundings, whether nestled

A among upon the prehistoric remains of the La Brea Tar Pits in

Los Angeles or the tribal strongholds and Cavalry enclaves of
the Palo Duro Canyon near Amarillo. A combination of education
with participatory entertainment is implicit, as far as the savvier
museums are concerned.
Texas’ oil-and-gas industry has inspired such memorable outcrop-
pings as the East Texas Oil Museum at Kilgore and an imposing
Derrick Room at the Panhandle-Plains Historical Museum at Canyon
— seemingly a working oil-patch outpost of the last century, await-
ing the return of its drilling crew.
A striking addition to the lore of energy promises to bring
the Fort Worth Museum of Science & History to the world-
wide forefront of its field. The $20 million Energy Adventure
development — part of an overall $75 million reconstruction
of the Museum of Science & History — derives in part from
the practical experience of local leaders in the industry itself,
headed by family-tradition oilman Charlie Moncrief, and in
part from the ability of the exhibit developers to find appeal-
ing spectacle in scientific fact.
“The starting-point,” explains Moncrief, “is the starting
point — the very creation of the universe itself. The big
bang, I mean.”
In a cosmic process of connect the dots, the Energy
Adventure will trace the big bang theory along a route lead-
ing directly to North Texas’ Barnett Shale formation, the pres-
ent-day source of what Moncrief characterizes as “the great-
est gas play in the world.” The exhibit promises to equip its
visitors with an understanding of fuel, from prehistoric ori-
gins to practical applications and futuristic possibilities.
The breakthrough attraction will represent a basic compo-
nent of the museum. The energy displays will account for more than will contain many, many appealing attractions — from the familiar
10,000 square feet of the overall 140,000-square-foot property elements of the original museum, to such entirely new components
along Gendy and Montgomery streets. The museum is due for com- as the energy exhibition and our developing relationship with the
pletion during the fall of 2009. [Texas & Southwestern] Cattle Raisers Museum.”
Moncrief, as head of the energy-show fund campaign, is nearing Already, the museum’s Omni Theatre, a superscreen-movie venue
completion of a $20 million underwriting objective. His three-year left standing in a general razing of the original property, has begun
campaign for the Energy Adventure exhibit has attracted such princi- to show exterior modifications that will match the new construction.
pal corporate donors as XTO Energy Inc. of Fort Worth and Chief architect Ricardo Legorreta has designed the museum with a
Oklahoma City-based Devon Energy Corp., both with immense combination of earthen tones and vivid splashes of color.
stakes in North Texas’ Barnett Shale gas play. The benevolent-foun- Moncrief, when first approached with the idea of developing an
dation interests of Fort Worth’s influential Darden family represent energy exhibit, sensed the Barnett Shale must become a focus of
key early support, Moncrief says. such a project.
“We’ve got a brand-new building going up, out here,” says Van Science had long known that tremendous reserves of fuel lay
A. Romans, president of the Museum of Science & History. “And it within the dense rock of the Barnett Shale, formed hundreds of mil-

24 ✦ Energy Report Fort Worth Business Press

 Key donors and advisers
Among contributors to the $75 million capital campaign for the
Fort Worth Museum of Science & History are these companies, institu-
tions and individuals — all of which and whom have demonstrated a
particular interest in the Energy Adventure exhibit:
XTO Energy Inc. will be recognized as lead donor for the energy
gallery, and Devon Energy Corp. will be recognized as lead donor for
a 4-D theater inside the gallery. The museum also cites significant
contributions from Burnett Oil Co. Inc.; The Discovery Fund; Lowe
Foundation; T.J. Brown & C.A. Lupton Foundation; Chesapeake Energy
Corp.; Chief Oil & Gas; EnCana Oil & Gas (USA) Inc.; Exxon Mobil
Corp.; Wm. A. and Elizabeth B. Moncrief Foundation; Jane Rector;
Charlotte and Jim Finley; Range Resources Corp.; Encore Acquisition
Co.; Marshall R. Young Oil Co.; Collins and Young LLC; Rex and Renda
Tillerson; EOG Resources Inc.; and Charlie and Kit Moncrief.
June 19, 2008
The museum also has recognized these key advisers:
Bonnie F. Jacobs, director of Environmental Science Program at
Southern Methodist University; Eric C. Potter, associate director of
Bureau of Economic Geology, Jackson School of Geosciences at the
University of Texas at Austin; Ken M. Morgan, associate dean of the
College of Science & Engineering at Texas Christian University; Andrée
Griffin, manager of geology, Fort Worth Basin, at XTO Energy; and Bill
Voss, curator emeritus at the Fort Worth Museum of Science and
History.
Representing the museum staff in connection with the project are
Aaron Pan, curator of science; Cathy Barthelemy, director of school
services; Leishawn Spotted Bear, assistant curator of science; Miki
Gabbard, assistant director of education; and Charlie Walter, chief
operating officer.
Energy Report ✦ 25
 lions of years ago from organic deposits. But recovery posed a chal-
lenge. Technological leaps of recent years have enabled the cracking
of the shale to release its gas.
“The backbone of the exhibit is the Barnett Shale,” says Moncrief.
“But we’re going to take people back in time to the big bang of 330
million years ago — to the formation of the universe itself, through
the formation of our own planet, homing in upon our North Texas
region, the Fort Worth Basin, as things took shape through the ages
of continental drift, through the inland seas, through the primitive
life-forms whose remains formed the fossil fuels on which we all
depend.
“The aim,” adds Moncrief, “is to send the youngsters away with
an awareness of science and mathematics — and of what they can
do to help this great Earth of ours.”
The museum enlisted Chick Russell, creative director of Pasadena-
based Chick Russell Communications, to transform Moncrief’s con-
cept of a prehistory-to-now travelogue into virtual-environment set-
tings. The displays will place visitors amid a persuasive replica of the
Mississippian Seas that once covered the now-arid Southwest; con-
front them with walk-through, three- and four-dimensional depic-
tions of a steadily exploding universe; and place them in lifelike
drilling-site situations, with hands-on interaction. A centerpiece will
be a massive seismic acquisition truck, contributed by Midland’s
Dawson Geophysical Inc.,
to demonstrate the seismic-reading processes essential to energy
exploration.
“I’m just the writer, here,” Russell says. “Charlie Moncrief is the
storyteller. “The stories Charlie has told us [have] enabled us to create
26 ✦ Energy Report
a set of environments that will equip their visitors with a real under-
standing, not only of where our energy sources come from and how
they are reached, but also of what challenges are emerging for the
future.
“During the next 25 years,” Russell adds, “We’ll need 45 percent
more energy. This requirement means continued exploration, of
course, but it also means conservation and the development of such
alternative sources as nuclear energy, coal, wind, solar and hydroelec-
tric power. All sources will be portrayed.
“The objective is to cause people to think about energy in a new
way.”
The energy project has involved contingents of academic and
industrial consultants in addition to the phalanx of donors, said
museum executives Charlie Walter, chief operating officer, and Carl
G. Hamm, senior vice president for fund development and marketing.
The new museum fund-raising campaign has completed 80 per-
cent of its $75 million objective, Romans said. Fort Worth philanthro-
pists Stacie and David McDavid are in charge of the general capital
campaign, with such participants as attorney Dee J. Kelly Jr. and real
estate broker Martha Williams in addition to Moncrief. The campaign
includes a $5 million cash reserve to sustain operating costs during
the transition and the first few years in the new facility.
The Museum of Science & History, which has grown from World
War II-era beginnings to attract hundreds of thousands of school-
children a year, has settled for the duration of construction into tem-
porary outbuildings and guest-exhibitor space in the neighboring
National Cowgirl Museum & Hall of Fame. ER
Contact Price at mprice@bizpress.net
Fort Worth Business Press

C.W. “Dub” Stocker III started Fort Worth Energy Co. in 2006.
Local firm competes, cooperates with larger players
By Tonie Auer
Special to the Business Press
B
arnett Shale. Drilling rights. Leases. All terms becoming more com-
mon in Tarrant County and surrounding areas as the energy industry
continues to find ways to access the pockets of natural gas.
Working to capitalize on the natural gas drilling interest, in 2006 Fort
Worth attorney C.W. “Dub” Stocker III started Fort Worth Energy Co. LLC,
which is primarily engaged in the acquisition of oil and gas properties in
Tarrant County and the surrounding areas.
“I was looking out our law firm conference room window up the railroad
track and decided that the only way I could compete with the very large com-
panies was to go into a highly congested urban area and buy the well sites;
deal fairly with the neighborhoods and build my reputation that way,” he
explained. “I fleshed the vision (of the firm) out with a friend in the oil busi-
ness; a well respected petroleum engineer named Ray Walker, who had start-
ed Stroud. Ray and I had talked about doing other deals outside the Barnett,
but they always were sold before we could present them to investors. From
this experience, I knew starting my own company was the right thing to do.”
The company is currently focused on securing drilling leases in urban
areas, principally from Lancaster in downtown Fort Worth going south along
Interstate 35W toward Interstate 20 to Felix to its western boundary at
University Drive.
Origins of the company
A Fort Worth native, Stocker was both practicing law and running Fort
Worth Energy until Oct. 19, 2007, when he decided it best to focus on one
career before it took a toll on his health. While his law career was highly suc-
June 19, 2008
PHOTO BY JON P. UZZEL
cessful, he knew he couldn’t continue practicing law and trying to run his
new business.
As a former oil company attorney, and owner of his own oil and gas com-
pany in the early 1980s, Stocker saw the opportunity to take advantage of
the local Barnett Shale interest for natural gas drilling and decided to jump
right into it. Stocker worked for the locally based Snyder Oil Co. as an in-
house lawyer in the early 1980s before starting his own company with
Snyder’s head landman (and his law school buddy) Kyle Miller, who remains
in the energy business today in Denver. When oil prices plunged, he sold his
assets and paid his bankers.
Owning 11 acres at the site of an old cottonseed mill on Biddison and
Hemphill streets on the city’s near southside, Stocker was looking for some
way to make some money there. Originally, he planned to make it into a flea
market. Stocker had been one the original investors in Stroud, another local
energy company that eventually sold to Fort Worth-based Range Resources
Corp. Seeing Stroud and others huge successes in the Barnett Shale, “I want-
ed to get back into the oil business,” he says.
The first Fort Worth Energy lease was signed in September 2006. It was
the historic Texas Steel property, the state’s first steel mill, on Hemphill Street.
Fort Worth Energy is more than just Stocker, he says. Helping put up the
seed capital for the venture was longtime friend and fellow Southwest
Christian School board member Bob Benda with Westwood Contractors.
“He believed in my vision,” Stocker says, “and Bob gave me seed money
on my vision until I could raise some more. We have had great legal work pro-
vided for us by my old law firm Whitaker Chalk Swindle & Sawyer and from
the Reardon firm and excellent land work from Penn & Associates.”
Energy Report ✦ 27
 Competing with the big boys
“I wondered, ‘How can I compete with XTO,
Chesapeake and other large companies?’” says
Stocker. “They all had track records and significant
histories; they were already out there taking the low-
hanging fruit; and could outbid me anytime they
wanted. So, I went out into the highly congested
urban area just south of Fort Worth.”
The trick has been doing the necessary legwork.
Fort Worth Energy entered into an agreement in
August 2007 to sell its well sites and leases in a
defined area of mutual interest to XTO Energy Inc.
for an undisclosed price, Stocker says.
It hasn’t all been smooth sailing. After selling
leases to XTO, Fort Worth Energy was sued
by another suitor, Chesapeake Energy Corp., that
claimed it had an agreement to purchase the assets
from Fort Worth Energy. The litigation is still
ongoing.
Stocker remains pleased with the results and
plans to continue the work in other areas. Each
home site has to get an individual lease for the prop-
erty; some of these neighborhoods have hundreds
of homes in their areas.
“Imagine the plots of land that had to be
researched. It is a logistical nightmare to put it
together,” Stocker says. “We are compiling thou-
sands of leases that we have to file and do the leg-
work on. We were willing to do it because we could
do it and knew we could compete. While selling its
well sites to XTO, Fort Worth Energy has reserved
what it hopes to be valuable interest in all leases and
28 ✦ Energy Report
well sites. It’s the ‘if you can’t beat ‘em, join ‘em’ phi-
losophy.”
Working with the residents
“We initially identified well sites and targeted all
the neighborhoods our drill bit could reach.
Eventually homeowners associations began bargain-
ing for neighborhood leases and it became apparent
that for many, quality of life was more important
than the bonus checks,” Stocker says. “Potential
well sites were near a hospital and Mistletoe Heights,
so we worked hard with them to find another well
site and we did find one on 15th Street behind the
Hangman’s House of Horrors. They wanted us north
of the freeway and we accommodated them.”
Stocker also worked to develop relationships
with the various neighborhood associations.
“We went to the neighborhood associations and
made friends with them,” Stocker says. “We made
financial gifts to projects like the Worth Heights
Elementary School PTA for playground equipment.”
That effort paid off.
“We liked the fact that they were presenting
what they were trying to do before they started
approaching people, on the front end,” says Bill
Conley, Ryan Place Improvement Association’s
appointed chairman of the gas and oil task force
committee. “They were upfront about their inten-
tions and their understanding of our concerns about
the noise and traffic.”
Conley says the response of the Fort Worth
Energy executives regarding what they planned to
do to proactively address those concerns made a big
impact on the residents.
“They reached out to the group rather than try to
go door to door, which was the tactic of other leas-
ing agents … so the neighborhood was not bom-
barded by landmen was a major plus,” he added.
At one point, nine different companies were
approaching residents, leading to confusion about
who was offering what, Conley says.
“Fort Worth Energy was clear to their goals and
how they would work with us and our committee
and that was the most important distinction that we
found,” he says. “As we started to craft leasing doc-
uments, many concerns were anticipated and
addressed in a draft document … there are always
sticking points, but we had made it clear as a neigh-
borhood association that safety and security and
environmental issues were important. The very
things we talked, they were very accommodating on
and it was clearly a very collaborative effort with
XTO.”
Working with XTO Energy, Stocker says he antic-
ipates the first well from the land on which Fort
Worth Energy has secured leases will be started
within a year.
“When you see and understand the monumen-
tal task to get all the leases secured and wells per-
mitted, it is unbelievable,” Stocker says, “but we
love what we are doing.” ER
Contact Auer at bizpress@bizpress.net
Fort Worth Business Press
SEC moving to change reserve disclosure rules
Patrick Reardon
Special to the Business Press
In December 2007, the Securities and Exchange Commission
took the first regulatory steps toward updating its rules on dis-
closure of oil and gas reserves by public energy companies. The
SEC released a “concept release” that invited public comment
on a number of questions relating to these disclosures.
Traditionally, the SEC has used these comments to propose
changes to the existing rules.
The annual reports sent to investors by public energy com-
panies must include estimates of the companies’ proved oil
and gas reserves and the estimated present value in dollars of
those reserves. These estimates are also included or incorporat-
ed in prospectuses for energy company offerings.
Given the prominence of oil and gas reserve disclosure in the
valuation of energy stocks, changes to the SEC disclosure rules
may affect the valuations given these stocks, as well as possibly
affecting ratings given to energy companies’ traded debt
Oil and gas securities.
reserves Deficiencies in current system
Definition: Oil and gas In its concept release, the SEC acknowledges that there have
reserves are the estimat- been significant changes in the energy industry as well as
ed quantities of crude marked advances in recovery technology since the SEC adopt-
oil and natural gas that ed the current reserve disclosure rules in 1978 and 1982.
are reasonably believed Echoing recent calls for change from the industry, the SEC
to be recoverable under notes that its rules may be “not fully aligned with current
current economic and industry practice.” In fact, the SEC’s current rules do not
operating conditions. reflect the many changes in recovery technology that have
developed since 1978.
In addition, the SEC observes that the Society of Petroleum
Engineers, after two years of collaboration with a number of
other professional organizations, issued the most recent
updates to the profession’s standards for computing oil and
gas energy reserves in February 2007. Known as the
“Petroleum Resources Management System,” the SPE reserve
standards are widely used in the United States when the use of
the SEC rules is not mandated, as well as internationally. The
SEC bars public energy companies from disclosing reserve esti-
mates in SEC filings using methodology other than its own.
Unlike the SPE rules, SEC rules permit disclosure of only
“proved” reserves, using its relatively narrow definition of this
category. Information about “probable” or “possible” revenues
cannot now be given. Also, SEC rules do not permit disclosure
of reserves in unconventional formations, such as oil shale, tar
sands and coal.
Rodney Waller, senior vice president/chief compliance officer
of Fort Worth-based Range Resources Corp. agrees the present
information is not optimum.
“The SEC has historically imposed regulations governing
reserve disclosures that stressed comparability across compa-
nies,” he says. “In reality, even though a company's oil and gas
reserves are its most important assets, we have little real [infor-
mation] as to the quality of those reserves.”
Noting the limited scope of the current reserve disclosures,
investment banker Adam Connors, associate director of corpo-
rate finance at C. K. Cooper & Co., comments that public
energy companies “can be difficult to pick apart and then
piece together for a full, complete picture.”
June 19, 2008
SEC asks questions
Because the SEC intends the concept release as a starting
point to possible changes to these rules, the release asks inter-
ested members of the public to comment on questions on a
number of topics. Among the questions posed were:
• Should the SEC permit disclosure of categories of reserves
in addition to proved reserves?
• Should reserves from unconventional formations (oil shale,
tar sands and coal) also be disclosed?
• What would be the standards for stating that production
from reserves is reasonably certain and that the production will
be economically viable?
• Should the SEC adopt all or part of the SPE’s Petroleum
Resources Management System as a replacement for the SEC’s
separate rules?
• Can reserve-estimating rules be adopted that are flexible
enough to accommodate future technology improvements?
• Should reserve estimates be reviewed by independent,
outside petroleum engineers? (The current rules allow public
companies to make their own reserves estimates.)
In asking its questions, the SEC does not distinguish U.S.
onshore reserves from offshore reserves or reserves located
abroad.
Ideas for broader disclosure
Waller calls for the disclosure of more information to help
investors.
“The calculation of reserves incorporates a significant num-
ber of professional assumptions,” he says. “None of these spe-
cific assumptions is disclosed to help the investor to compare
companies. The disclosure of estimated ultimate recoveries, the
aggregate average production curves and relative production
and drilling costs used in determining reserves for significant
fields would be a major step toward improving the mix of
information available to investors.”
Adding specific disclosures regarding less than proved
reserves and unconventional formations could paint a more
complete picture of energy companies, says Connors. The lack
of information about these other reserves invites investor spec-
ulation as to their value. More complete estimates and infor-
mation, he predicts, will reduce uncertainty.
SEC appoints petroleum engineer professor
In anticipation of possible changes in the reserve disclosure
rules, the SEC announced in October 2007 that it had appoint-
ed Texas A&M University petroleum engineering professor W.
John Lee as an Academic Engineering Fellow through August
2008. Lee will provide the needed engineering expertise for
the SEC’s rule making in this area.
Timing
During the comment period, the SEC received more than 80
letters offering opinions in response to the concept release. A
senior SEC staffer recently offered a personal opinion that new
rules may be first published by the end of 2008. ER
A version of this article first appeared in Oil & Gas Investor magazine.
Patrick Reardon practices securities, M&A and corporate law with
The Reardon Firm in Fort Worth.
Energy Report ✦ 29
Energy programs on tap at community colleges
As a large portion
of our workforce
nears retirement,
it is incumbent
upon industry,
schools and com-
munities to collab-
orate and work
together to create
ways to bolster
our workforce and
provide a career
path to young
adults in a boom-
ing industry.
– Deb West,
EnCana Oil & Gas
For more information:
Navarro College
www.pe.tamunavarrocollege.edu
North Central Texas College
www.NCTC.edu
30 ✦ Energy Report
By Will Brackett
Special to the Business Press
To fill a growing education gap between the need
for workers in the oil and gas field and the programs
being offered, several energy companies are now
partnering with area community colleges.
Two North Texas community colleges are already or
soon will be offering oil and gas programs through
partnerships with some of the largest Barnett Shale
players.
Navarro College in Corsicana started its program in
January, while North Central Texas College will be
launching its program this fall at its campus in Bowie.
The programs came about after both schools were
approached by energy companies, led by Denver-
based EnCana Oil & Gas (USA) Inc.
Fort Worth-based XTO Energy Inc. joined EnCana
to co-sponsor Navarro’s program, while NCTC’s pro-
gram is also being sponsored by Houston-based EOG
Resources Inc., along with several service companies
including Bowie-based Energy Service Co., Allied
Production Solutions and Complete Production
Services.
Emily Klement, dean of NCTC’s Bowie Campus,
says EnCana approached the school with a plan,
which was quickly embraced by the college.
“They [EnCana] came to the Bowie Campus with
the vision...the rest is history,” she says.
Deb West, community relations adviser with
EnCana, says the company considers such programs
important to maintaining well-trained employees.
“As a large portion of our workforce nears retire-
ment, it is incumbent upon industry, schools and
communities to collaborate and work together to cre-
ate ways to bolster our workforce and provide a
career path to young adults in a booming industry,”
she says. “Our hat goes off to both schools for what
they have accomplished so far and the life-changing
opportunities they are providing to the students
enrolled in the oil and gas programs.”
The two colleges have established a partnership
and will work together to develop the programs.
Navarro’s program covers three semesters and con-
fers an oil and gas production technology certificate.
Navarro is also working toward the program confer-
ring an Associate of Applied Science degree, which
will require an additional semester, by sometime in
2009
The inaugural class started in January and is led by
Don Capone II, who serves as the program’s coordina-
tor and as an instructor. XTO has provided two
instructors to teach classes along with Capone. In
addition, XTO and EnCana have provided employees,
as well as those from the service companies with
which they do business, to serve as guest lecturers.
The students spend their third semester in the field
as an intern with EnCana or XTO serving in one of
three positions: lease operator, environmental safety
and health technician, and gas plant operator.
“They [EnCana and XTO] need a pipeline for [new]
employees,” Capone says.
Another benefit of the partnership with EnCana
and XTO is that Navarro has established a live data
link to EnCana and XTO wells, Capone says. Students
will analyze daily production reports over the final
two semesters of the program and will provide
Capone with weekly reports, noting any problems or
what they see as abnormalities. So far, Capone says
he has a data link to 441 wells in what he calls his
“adopt a well program,” which also has the goal of
teaching students strong computer skills, something
he says both companies say they desperately need
new hires to possess.
“The program is industry driven,” Capone says.
NCTC’s program
Meanwhile, in Bowie NCTC plans to begin its pro-
gram in the fall semester. The school has broken
ground on a new 6,560-square-foot expansion to the
present building, which will house the oil and gas
program.
“This program is a response to the tremendous
increase in job opportunities created by the explo-
ration and increasing significance of the Barnett Shale
natural gas reserve — now believed to be the largest
onshore natural gas field in the entire United States,”
says Emily Klement, dean of NCTC’s Bowie campus.
NCTC received approval from the Texas Higher
Education Coordinating Board in January to offer the
oil and gas program. Billy Giles, who came to NCTC
from another community college where he was
involved in technology programs for many years, will
serve as the program’s coordinator. The school plans
to have 24 to 30 students in the associate program
and hopes to offer 15 to 18 scholarships. The pro-
gram will include a one-year certificate, which covers
30 hours while the two-year (four semesters) oil and
gas technology program will confer an associate
degree with a minimum of 63 hours. The goal is for
graduates of the program to be prepared for entry-
level careers in the oil and gas industry.
Just as with Navarro, NCTC’s sponsors are taking an
active role in developing the program. Allied
Production Solutions is designing, building and donat-
ing training equipment just for NCTC’s program,
while Energy Service Company of Bowie has designed
its training center with NCTC’s program in mind, pro-
viding state-of-the-art training opportunities for the
program’s students. ER
Will Brackett is the managing editor of the Powell
Barnett Shale Newsletter.
Fort Worth Business Press
Leases not always what they seem on the surface
By James Frederick Korth
Special to the Business Press
The Barnett Shale has made almost everyone living
in Fort Worth bona fide Texas oilmen. Most landown-
ers in Tarrant and surrounding “shale” counties have
signed or are in the process of signing oil and gas
leases. Problem is, most people don’t realize the
implications of what they are signing.
In Texas, when you as the property owner, the les-
sor, execute an oil and gas lease you are creating two
separate estates: the surface estate and the mineral
In Texas, when estate. Under Texas law, the mineral estate is the
you as the dominant estate. This basically means the surface
estate is burdened with a servitude. Put another way,
property owner, it grants the company leasing the property, the les-
see, the right to use of your property, in this case the
the Lessor, execute surface.
The lessee’s rights include the right to come and
an oil and gas go as necessary and to use as much of the surface as
is reasonably necessary to produce the minerals,
lease you are including seismic testing, geophysical exploration,
drilling, building roads and electric power lines,
creating two installing gathering pipelines, removing trees,
installing machinery and storage tanks, and using
separate estates: any water that is necessary to develop the minerals.
Because the lessee’s mineral estate is dominant,
the surface estate the lessee is not required to pay for use of or dam-
age to the surface. The lessee also is not compelled
and the mineral to maintain or restore the surface in the absence of
lease provisions requiring its restoration. As a general
estate. matter, if activities are reasonable, the surface owner
will not be entitled to compensation for use and
occupancy of the property. The lessee may only be
required to compensate the surface owner when the
use of the surface is in excess of an amount reason-
ably necessary or if the lessee operates in a negligent
manner.
What is reasonably necessary to develop the min-
erals? Over time, the “rule of reasonable use” has
evolved. The doctrine requires the lessee use only so
much of the surface and in such a manner as is “rea-
sonably necessary” to effectuate the purpose of the
lease. Further, a lessee must also have “due regard”
for the rights of surface owners.
This concept of “due regard,” known as the
“Accommodation Doctrine,” was first articulated by
the Texas Supreme Court in Getty Oil v. Jones. In
Getty Oil, the lessee installed a pump jack to produce
oil from a well drilled on Jones’ surface. The pump
jack extended to a height of approximately 17 feet
on the upstroke. The height of the pump prevented
the full rotation of the center pivot irrigation system,
which Jones had used for many years to irrigate his
land.
Jones asked the oil company to install shorter
pumps or dig pits to lower the height of the pumps.
June 19, 2008
Getty refused, claiming the pumps were reasonably
necessary to produce oil and gas. When the two liti-
gated the matter, the court applied the
Accommodation Doctrine and ordered Getty to sink
the pump jack below the surface of the ground to
avoid interference with Jones’ irrigation system.
The doctrine is not limitless in its application, but it
does balance the rights of the surface owner and the
mineral owner in the use of the surface. The doctrine
holds that if the proposed use of the surface by the
lessee will substantially impair existing surface uses
and the lessee has a reasonable alternative available,
the mineral owner must accommodate the surface
owner.
While the concept may sound simple in its applica-
tion, the surface owner has a large burden to carry in
order to prevail. If the surface owner desires to
invoke the doctrine, he must show that the lessee
has other means of access and production that
would not interfere with the surface owner’s existing
use, the other means of access and production are
reasonable (both in cost and feasibility), and any
alternative use of the surface is impracticable and
unreasonable under all the circumstances. This is not
an insignificant burden of proof.
That burden is why invoking the Accommodation
Doctrine is not really the best option for surface
owners. It should generally be used as a last resort.
While some municipal drilling ordinance will provide
a good deal of protection for landowners living with-
in the municipalities’ jurisdiction, they may not ade-
quately cover the landowner’s special concerns. A
landowner can and should therefore negotiate sur-
face use restrictions and surface damages with the
lessee before signing a lease. Properly incorporated
damage clauses can protect the surface owner for
what could be decades to come. However, negotiat-
ing damages isn’t always an option.
Damages clauses can’t be negotiated by the sur-
face owner if the property was purchased subject to
an existing oil and gas lease. Damages also can’t be
negotiated when only the surface is purchased. In
either of these cases, absent a clause in a lease, the
lessee is not obligated to pay for damages so long as
the use is reasonable. Although some local compa-
nies will pay surface owners damages out of good
will, they are by no means required to. You should
avoid the risk altogether and put yourself in a posi-
tion where you will not have to invoke the
Accommodation Doctrine. When signing a lease,
make sure that the lease you sign has adequately
addressed surface damage and usage; if you are buy-
ing property subject to an existing lease, make sure
that the lease adequately protects your surface. ER
James Frederick Korth is an attorney with the Cantey
Hanger law firm in Fort Worth. He can be reached at
817-877-2897 or by e-mail at jkorth@canteyhanger.com
Energy Report ✦ 31
The oil and gas gamble is fraught with peril
Alex Mills
Special to the Business Press
Many large independent oil and gas producers ventured
outside the shores of the U.S. in the 1990s in search of
larger and more lucrative production. However, many have
given up on their international adventures and are return-
ing to the U.S., according to an article in the May issue of
Oil and Gas Investor magazine.
“International exploration beckoned independent North
American E&P’s a decade or so ago,” wrote author Steve
Even though Loon. “Margins at home were slim as commodity prices
dipped as low as $10 per barrel in 1999, and many produc-
95 percent of ers viewed U.S. assets as mature and depleting. The next
big discovery awaited afar.”
Pioneer’s focus is The strategy also included the possibility of finding an
elephant (an industry term for large reserves), or an acquisi-
within the U.S., tion strategy to purchase proven properties at bargain
prices.
Pioneer is not However, political risks in many countries became a huge
negative. For example, Pioneer Natural Resource Co. in
opposed to the Dallas ventured into projects in Australia, Argentina,
Canada, and offshore in South and West Africa. Argentina
right venture. devalued the peso and implemented a 20 percent tax on oil
exports. That was enough for CEO Scott Sheffield and he
ordered the sale of Pioneer’s assets.
Now Available!
32 ✦ Energy Report
Changes
Conditions were changing, too, after the bust of 1998
and 1999. Prices of crude oil and natural gas increased,
equipment and leases were plentiful and cheap, and tech-
nological improvements made unconventional properties
profitable. Pioneer reallocated funds for expanded projects
in Texas’ Permian Basin and the Fort Worth Basin Barnett
Shale, and is the first independent to venture into the high-
stakes play at Alaska’s North Slope.
“Meanwhile, Pioneer determined not to develop Olowi
Field offshore Gabon and sold it to Canadian National
Resources in 2005,” Loon wrote. “Interests in Nigeria and
the Ivory Coast were allowed to expire.”
Even though 95 percent of Pioneer’s focus is within the
U.S., Pioneer is not opposed to the right venture.
The report outlined problems many companies encoun-
tered in foreign countries, such as Russia, New Zealand,
Venezuela, Ecuador and Azerbaijan.
Ironically, U.S. politicians ripped U.S. major oil company
executives in hearings in the U.S. House and Senate recent-
ly over high gasoline prices. ER
Alex Mills is president of the Texas Alliance of Energy
Producers. The opinions expressed are of the author and do
not necessarily represent the opinions and/or policies of the
Texas Alliance of Energy Producers.
$
29.95
To order, call
(817) 336-8300
Fort Worth Business Press
Research continues on water use
For information about water use in the Barnett
Shale and recycling visit:
Texas A&M’s Global Petroleum Institute
www.pe.tamu.edu
Argon National Laboratories
www.anl.gov
Railroad Commission of Texas
www.rrc.state.tx.us
Barnett Shale Energy Education Council
www.bseec.org
June 19, 2008
By ED IRELAND
Special to the Business Press
While the positive economic impact of the
Barnett Shale on North Texas is becoming clear –
thousands of new jobs and billions of dollars
injected into the economy, insulating North Texas
from the national economic downturn – there
are also many questions. One is the use of water
for drilling in the Barnett Shale.
Know this: Best practices in the energy indus-
try promote the economical use of fresh water –
not only because it is a precious natural resource,
but also because it is costly. There is no question
that gas drilling requires what appears to be sig-
nificant amounts of water. However, the Tarrant
Regional Water District has reported that use of
water by the natural gas drilling industry has
been running less than 2 percent of total water
used in the region.
The Barnett Shale formation is so dense and
impermeable that hydraulic fracturing (or fracing)
is the only economic means of developing the
reserves. Hydraulic fracing means pumping large
amounts of fresh water into a well with enough
pressure to create artificial fractures in the dense
rock, thereby liberating the natural gas trapped
inside.
You may wonder: why use fresh water for this
purpose? Why not re-use water, or use the saline
water that is so abundant deep underground?
The reason is because saltwater corrodes wells
and drilling equipment and it isn’t compatible
with the additives that are used in the drilling
and fracturing operations. It is also less environ-
mentally friendly when storing and handling on
the surface.
Recycling research
The energy industry and Texas A&M University
researchers are studying techniques for recycling
wastewater for use in frac operations as well as
other applications. There are two stages to recy-
cling wastewater: the first and easiest stage is to
filter out shale cuttings and other suspended
materials. The second, more difficult stage,
where research and development are under way,
involves getting rid of dissolved materials in the
water, such as salt and leftover chemicals,
through a distillation or membrane treatment.
According to David Burnett, a professor at
Texas A&M’s Global Petroleum Research Institute,
industry has an incentive to recycle more water
used because of the expense and impact of haul-
ing it to off-site disposal locations.
Devon Energy Corp. is a forerunner in this
area, and is using distillation technology to recy-
cle water produced at several drilling sites in its
Barnett operations. Each of its four recycling sites
treats 200,000 gallons of water per day. The typi-
cal gas well operated by any company can
require between 3 million to 4 million gallons of
water for fracturing operations, so recycling tech-
nology currently makes a modest dent in the
overall amount of freshwater being used.
According to Burnett, in the near future it will
be possible for companies to recycle about a
third of the water used in natural gas operations.
In another two or three years, he believes, about
50 percent of the wastewater will be recyclable
due to advances in the technology. But even
then, he says, we will be left with the challenge
of getting rid of roughly half of the hyper-saline
wastewater.
Injection wells
In the meantime, the typical method for get-
ting rid of wastewater is to pump it back into the
earth from which it came by using high-pressure
injection wells. Currently, the city of Fort Worth is
studying whether to lift its moratorium on such
injection wells, but in rural areas within the
Barnett Shale, saltwater injection wells are the
most common method for disposing of produc-
tion water.
According to Burnett, the environmental risks
of such saltwater injection wells are “more per-
ceived, than real.” The Railroad Commission of
Texas and energy companies are designing such
disposal wells to be dug so deep that they are far
beneath the fresh groundwater supplies used by
the public for drinking and other uses.
“Disposal well operations are inherently safe”
when they are monitored and operated accord-
ing to permit, Burnett says. A small risk exists
where there may be an old, improperly aban-
doned well deep underground and no public
record to reveal its location. In these rare
instances it is possible for wastewater to leak
into the fresh groundwater supply until the situa-
tion is quickly discovered and corrected.
“Industry is aware of the adverse impact and is
working to cut down on it, but it’s going to take
a while,” he says.
The best solution is for localities to centralize
their injection well disposal operations in industri-
al areas so that the operations can run 24 hours
a day with minimum disruption to nearby com-
munities. ER
Ed Ireland is executive director of the Barnett Shale
Energy Education Council. On the Web:
www.bseec.org.
Energy Report ✦ 33
 SMALL BUSINESS OF THE YEAR

CELEBRATING 25 YEARS OF BUSINESS

“People Helping People”

POLYETHYLENE PIPE. LEAK FREE.

Polyethylene pipe when properly heat fused creates a leak free system. The fusion joint
done correctly is as strong or stronger than the pipe itself. Having a leak free system when
dealing with salt water brine, produced water, gas gathering, gas distribution or potable
water is critical. In addition to providing a leak free system, polyethylene pipe does not
rust, rot or corrode. Polyethylene pipe is the right choice for multiple applications.
It is secure, reliable, dependable and cost effective. The service life of polyethylene is
conservatively 50-100 years, that is cost savings and safety for generations to come.
Polyethylene safeguards the environment and protects the landowner/taxpayer making
polyethylene pipe the right choice.

COOPER SUPPLY INC. POLYETHYLENE PIPE.

Strong. Secure. Reliable. Dependable. Cost Effective.
Polyethylene Pipe~Fittings~McEloy Fusion Equipment.

sales@coopersupply.com

Cooper Supply Inc. Cooper Supply Inc. Cooper Supply Inc.

2524 Minnis Dr 216 Santa Anna Ave 1637 N. Lexington
Ft Worth, Texas 76117 Coleman, Texas 76117 Corpus Christi, Texas 78409
817-222-9055 phone 325-625-3543 phone 361-289-6611 phone
817-222-9053 fax 325-625-3092 fax 361-289-6617 fax
Don Woodard’s ‘Black Diamonds! Black Gold!’
Rediscovering a classic examination of Texas’ volatile energy history
By MICHAEL H. PRICE tories content themselves with a narrative brass, but also of the hardscrabble miners
Fort Worth Business Press laundry-list of happenings – founded in such- and oilfield workers – and of the tense and
and-such year, promoted so-and-so to the often combative symbiosis between factions.

P
erhaps the most steadfast reciprocal presidency, dealt with X-millions of dollars in Woodard’s observational and descriptive pow-
voice in the Fort Worth Business Press’ profit and loss – Woodard provides a big-pic- ers are at a peak in his discussion of the
20-year relationship with the communi- ture perspective. A context of global history chronic labor disputes. These began during
ty has been that of Don Woodard – frequent anchors the TPC&O story against events of the early coal-company days when the influ-
correspondent and occasional columnist,
accomplished full-time business-
man and perceptive historian and
social-political critic.
Woodard’s book bears rediscov-
ering in its own right as a vivid
account of a crucial period in
Texas’ development as an energy-
producing state – essential read-
ing, for anyone with a stake in
the business and a desire to
understand its historical under-
pinnings.
The book is Black Diamonds!
Black Gold!: The Saga of Texas
Pacific Coal & Oil Company (Texas
Tech University Press, 1998;
$29.95). Woodard employs those
exclamation points for more than
facile dramatic effect – they serve
to suggest an epic telling that the
author comes fully prepared to
provide. More than a corporate
Photo of Thurber, Texas, courtesy of Texas State Archives

history, Black Diamonds! Black

Gold! lives up to its Homeric title
with an enthrallingly lifelike
account of the volatile economic
climate in which Texas Pacific
Coal & Oil evolved from a mod-
estly positioned mining outfit
with a brick-making sideline into
a predominant corporate pres-
ence.
Woodard draws upon company real-world recognizability, such as Charles A. ential Knights of Labor, flush with organiza-
archives, newspaper coverage and old-timers’ Lindbergh’s ocean-crossing flight of 1927 and tional successes elsewhere during the 1880s,
first-hand testimony to trace the beginnings the bombing in 1941 of Pearl Harbor, without landed in right-to-work Texas without much
from the late 19th century. He offers sharp missing a beat of the closer-to-home pace. heed of the established corporate policies. A
insights into the struggles between manage- Nor is Woodard hesitant to offer some tan- Laborite strike might pose a challenge with
ment and the dawning of organized labor, talizing suggestions. Might a ceremonial visit an idled mine, but Texas Pacific had legions of
and into the tremendous influence that Big to Fort Worth from ace aviator Lindbergh, strike-breakers ready and willing to step in –
Industry, and its captains, exerted upon Texas’ later in 1927, have inspired TPC&O honcho and legions of Texas Rangers poised to put
political scene. The examination of economic Edgar J. Marston to take a plunge into the down any uprisings.
growth at a time of upheaval – the state’s gasoline market? Certainly, the once-preva- TP persisted as an anti-union outpost until
transformation from an agricultural economy lent TP Aero petrol franchise began spreading the arrival in 1903 of the United Mine
to an industrial power – is most revealing. soon thereafter through North-by-Northwest Workers, which infiltrated the workingmen’s
The style is conversational, generously sprin- Texas and into Oklahoma. ranks, staged a massed shut-down, and then
kled with anecdotes and digressions. Where One derives from Black Gold!, too, a sense
many authors of institutional or corporate his- of understanding of not only the executive

June 19, 2008 Energy Report ✦ 35

deployed the membership to discourage scab
labor from accepting the company’s invitation
to take up the slack. The UMW’s actions
proved sufficiently persuasive to convert TP to a
union shop. Woodard tells the story with not
only a passionate interest in these freewheeling
and hard-bitten times, but also a dedication to
a fair balance between the clashing interests.
Woodard’s account of the rise and fall of
Thurber, Texas, a Texas Pacific company town,
36 ✦ Energy Report
is just as engrossing. A prototype, in a sense,
for the later but similarly extinct Panhandle-
area burg of Phillips, Texas (as in Phillips
Petroleum Co.). Thurber was a pure-bred com-
pany town of some 10,000 souls, heavy on the
immigrant population.
A famous line from the Southern songwriter
Merle Travis, “… I owe my soul to the compa-
ny store…” (from the ballad “Sixteen Tons”),
owes its own soul to such townsites as
Thurber, which Texas Pacific equipped with
housing, schools, churches, a library and a con-
cert hall – and comprehensive electrical wiring,
at a time when many “real” municipalities
were not yet thoroughly electrified.
TP also made it inconvenient, if not necessari-
ly forbidden, for the denizens of Thurber to
transact household business outside the com-
pany stores – a policy that the locals resisted, in
part, through the mail-order catalogues of
Sears & Roebuck and Montgomery Ward.
The mysterious lapse of Thurber to ghost-
town status is amply well explained by a simple
fact of economic reality: The company’s aban-
donment of its coal-mining operations left no
further need for a townsite strictly for mining
families.
Oil represented the larger future, heralded by
a gusher in 1917 at TPC&O’s Ranger Field –
which helped to transform Fort Worth to an
oil-boom outpost, linked by the Texas & Pacific
Railroad (a customer in whose honor the coal
company had christened itself) to the TP oil-
fields. The assertion of the automobile industry
as an economic force in its own right, though
dependent upon oil, cinched the company’s
profitability, assuring survival through the Great
Depression of the 1930s.
Threats of consolidation were staved off
apace during the post-World War II years, but
by the 1960s Texas Pacific had become a sta-
tionary target for an eventual mega-corporate
absorption. The defiant old-line company
found itself gobbled up in 1963 by Frankfort
Oil, a branch of the liquor-distilling firm of
Joseph E. Seagram & Sons. Woodard devotes a
revealing coda of Black Diamonds! Black Gold!
to a concise biography of TP’s Last Man
Standing, H.B. Fuqua, and his political manipu-
lations during the period following that
takeover of Big Oil by Big Booze.
Woodard excels at placing the vital econom-
ic-social-political role of TPC&O in a historical
perspective. He illustrates in particular the com-
pany’s influence upon Texas-wide multicultural-
ism – immigrant labor is a big factor – even in
full view of the company’s preference that the
multicultural masses be kept decisively “in their
place.”
Woodard also demonstrates TPC&O’s
immense capitalization of both industry and
general commerce, as a class, and the
statewide tax base. As a bustling component
of a larger engine that generated vast social
and economic progress, TPC&O also helped
to dictate a statewide political course – leaning
naturally toward economic and social conser-
vatism. Woodard’s book, in this sense,
proves as provocative and ironic in tone as
it is informative. ER
Contact Price at mprice@bizpress.net
Fort Worth Business Press
June 19, 2008 Energy Report ✦ 37
 Analysis of 20 Barnett Shale
Counties by Tier

Charts courtesy of Powell Barnett Shale Newsletter. www.barnettshalenews.com

38 ✦ Energy Report Fort Worth Business Press