'Fracking' starts to tap Central Louisiana's shale-wrapped oil and gas

A newly drilled well in northwest Rapides Parish that's producing hundreds of barrels of oil and liquid natural gas a day could be the first of many in Louisiana's central parish that uses horizontal drilling and hydraulic fracturing, or "fracking."

That is a controversial technique that some environmentalists say pollutes underground water supplies.

The well -- named Bentley Lumber 34H #1 and operated by Indigo Minerals -- bores thousands of feet down in land owned by third-generation forester Roy O. Martin III and his family, who own hundreds of thousands acres of Louisiana forestland. Most of the Martin land is pristine timber acreage, which supplies the family's many wood-products businesses.

But about two miles under much of that land, trapped in dense shale rock, rests rich deposits of oil and other fuels that America runs on. A swath of oil-rich land, which cuts across Central Louisiana, through some of Mississippi and includes fields north of Baton Rouge, is called the Tuscaloosa Marine Shale.

Martin, whose family owns half of Indigo Minerals, and other owners of the company that drilled the Bentley well call it Louisiana Eagle Ford, a continuation of the oil- and natural gas-rich Texas Eagle Ford to the southwest.

"We're excited about (the drilling)," Martin said. "We're also creating jobs."

Martin in 2006 formed Indigo Minerals with Yorktown Investors and longtime friend Bill Pritchard, who heads Indigo out of the company's downtown Houston office. The business marriage wedded the Martin family's abundant acreage and mineral rights with Yorktown's money and Indigo management's expertise.

To buy into Indigo, the Martin Cos. put up the mineral rights on a few hundred thousand acres for half of the oil company, which has since bought natural gas and oil fields in other parts of the state. Bentley Lumber 34 was the first the company has drilled in Rapides Parish.

Martin said about 200,000 acres of Martin family land from Vernon Parish to Rapides Parish is in Indigo's portfolio of drilling acreage, part of the company's more than 460,000 acres it has the rights to drill on in Central Louisiana.

Geologists have known about the deposits in the Tuscaloosa Shale for decades, but only in the last few years have drillers figured out how to unleash it through horizontal drilling and hydraulic fracturing, a controversial method of cracking the shale.

The practice -- high-pressure injection of millions of gallons of water with chemicals and sand into a well -- puts a gold gleam in the eyes of oilmen while environmentalists warn of ecological disasters.

Much of Louisiana drinks from the Chico Aquifer, an underground water table that sits thousands of feet above the oil deposits. Aquifers with other names provide water in other parts of the state, including the northeast where the famous Haynesville Shale play is.

"I truly believe that everything we're doing is environmentally sound," said Martin, who runs RoyOMartin Co., which was started by his grandfather. "We're a forest company. We're not going to knowingly go out and do something that will pollute the groundwater. This is proven technology."

He said the Bentley Lumber well cost just over $11 million to drill and complete.

"We really don't know the limits of the field," Martin said.

Moving fast

Drillers and the billions of dollars that drive exploration move at the speed of capitalism, fast and lean. Government, which regulates industry, moves not so fast, said Wilma Subra, a New Iberia chemist who consults for the Louisiana Environmental Action Network and sits on U.S. Environmental Protection Agency panels studying the effects of fracking in New York, Montana, Texas and elsewhere.

"That's the issue," Subra said, "government's not keeping up with the shale (developers)."

According to Louisiana's Department of Natural Resources, whose Office of Conservation regulates drilling in the state, there were three permits to drill issued in 2011 in Rapides Parish. In other Central Louisiana parishes, such as LaSalle where there were 118 OKs to drill, permit approval is more robust though drilling remains slow.

Indigo and other companies in the Tuscaloosa Shale are trying to figure out how best to get the fuel to the surface. Geological variances make extraction an art, and every well is in unique. Companies such as Indigo use data from other successful -- and unsuccessful -- wells as they proceed, taking notes on what works and what does not as they explore new geologic territory.

"As more wells are drilled, exploration companies will learn more about formation and better understand how to most economically develop the play and maximize their production, potentially creating greater interest in investing there and expanding exploration," DNR Secretary Scott Angelle said in December after Indigo tested the Bentley Lumber well.

Martin said Indigo this year will continue to drill in oil and gas formations here and in North Louisiana, where the company is extracting natural gas and other, rarer fuels such as butane and propane.

Pritchard in Houston recently said the company, like many others, is seeking investment partners for cash to drill the many properties Indigo has.

Other companies have inked deals with foreign companies. Chinese state companies are investing in U.S. shale developments with Chesapeake Energy Corp., which has a heavy presence in the Haynesville Shale, and Devon Energy Corp., an Oklahoma company whose properties include sites in East Feliciana Parish on the east end of the Tuscaloosa Shale, according to Bloomberg News.

French oil giant Total also is making investments in the U.S., and BHP Billiton Ltd., based in Melbourne, Australia, last year bought U.S producer Petrohawk Energy Corp. for $12.1 billion.

The companies are investing partly to gain expertise in how to develop extensive shale formations in their own countries.

Martin said Indigo has not been offered money from foreign companies "that I know of."

U.S. energy companies have jumped to oil shale plays because their natural gas holdings are fetching low prices. On Wednesday, gas traded at $2.77 a thousand cubic feet, the lowest in years as shale production has produced a glut of natural gas.

Oil, on the other hand, is trading at around $100 a barrel.

EPA

Though states regulate drilling, the U.S. Environmental Protection Agency is taking a long -- years long -- look at hydraulic fracturing. Initial reports of the study are due this year. A comprehensive report is scheduled to be released in 2014.

Don Briggs, president of the Louisiana Oil & Gas Association, fears the EPA will grab control of drilling in states.

"If EPA would get control of hydraulic fracturing ... and some guy somewhere does something stupid in Wyoming or Montana, you would see exactly what happened in the Gulf of Mexico happen across the country and literally shut down the oil and gas industry," Briggs said.

The BP deepwater spill in 2010 killed 11 rig workers and released millions of gallons of crude oil. President Barrack Obama and the federal government, which regulates oil and gas activity in federal waters, just about shut down Gulf of Mexico activity by ordering a moratorium on drilling. Almost two years later, oil and gas companies operating in the Gulf are still having a hard time getting permits of all stripes -- drilling, pipeline construction, platform maintenance -- even in shallow waters.

"Until you have a different culture (in Washington), that's not going to change, no matter what you do," Briggs said.

Subra, the New Iberia environmentalist, said that fracking operations in Louisiana have polluted water sources and affected people's health, and that federal oversight is needed. State regulators, she said, cannot keep up. She said she's conducted surveys of residents living near drilling operations and found that many got sick after drilling started.

Water

Subra said it takes 3 million to 8 million gallons of water to drill one well using the hydraulic fracturing technique. She also said the wastewater that comes back to the surface is trucked to Texas and deposited in injection wells there.

Louisiana drillers using the fracking method have siphoned water from aquifers to supply their needs. But low water tables due to drought prompted DNR Secretary Angelle in August to issue a recommendation that companies drilling in the Tuscaloosa Shale "choose their water sources wisely" by using surface water from rivers or lakes.

If that's not possible, Angelle said, then it's preferable that water from the Red River and Mississippi River alluvial systems be tapped "in lieu of the Chicot, Evangeline, Jasper, Catahoula and Southern Hills aquifer systems."

"Most of the wells we're (operating) use surface water," Martin said, adding that Indigo drew water from a nearby lake when it drilled the well in northwest Rapides.

Economic development

In arguing for less government regulations, oil men like LOGA's Briggs tout the technology that has freed up minerals trapped in once-impervious shale rock and point to America's need for and reliance on foreign oil when there is plenty here.

Briggs said free-market principles don't align with government-backed renewable fuel initiatives, and that the current administration could use the EPA to halt drilling on land.

"The thing that is driving the Obama administration, and really the renewable fuels people -- wind, solar, ethanol -- is the fact that all this drilling is producing such cheap natural gas and oil that none of the renewables can begin to compete," Briggs said.

Martin said Indigo's successes are putting people in Central and North Louisiana to work. He pointed to wells that Indigo has in northern DeSoto and southern Caddo parishes, where gas liquids such as butane and propane are being captured.

"What's overlooked is the natural gas liquids," Martin said. "Those chemicals can produce a lot of jobs in Louisiana because our chemical industry uses that and imports that from other areas.

"If we can produce that in Louisiana, then a lot of spinoff jobs can occur," he said.

Subra, the environmentalist, said more study and oversight are needed.

"We've demonstrated these huge health impacts and these huge environmental damages as a result of (drilling), and we're just trying to get that reduced as much as possible," Subra said.