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Haynesville Shale Stars Again in Louisiana Lease Sale

Louisiana's Mineral Board (LMB) raked in $93.8 million at its August lease sale last Wednesday, nearly double the $48.7 million collected in July's sale (see NGI, July 21), overwhelmingly thanks to the shale gas play they call the Haynesville.

The majority of the August sale dealt with state-owned land, meaning a windfall for the state. Department of Natural Resources Secretary Scott Angelle said the August sale was the second biggest the LMB has handled since 1969. The highest recorded sale was $157.7 million in May of 1980. The August 2008 sale handily outstripped what had been the second highest lease sale -- $57.1 million in April 1978.

According to LMB Secretary Marjorie McKeithen, $92.2 million of the bonus money was generated from leases granted within the Haynesville Shale play. The Haynesville leases covered approximately 4,070 acres in Caddo, Bossier, DeSoto, Bienville and Red River parishes. Royalty percentages on the Haynesville leases ranged from 25% to 30%, according to McKeithen.

Gov. Bobby Jindal last week said the lease sale pays dividends not only in the direct dollars to state and local government in lease bonuses and possible future royalty and tax dollars, but by continuing to draw interest to the state and boosting economic development.

Last week Louisiana utility regulators urged the state to spend some of its energy windfall on aid for elderly, low-income and disabled energy consumers, who are suffering from high energy prices, and to promote energy efficiency (see related story).

Producers are moving into the prospective shale play in Louisiana and across parts of East Texas' Cotton Valley formation in the Bossier Sands and many are forming joint ventures to share costs and discoveries. Energy consultant Wood Mackenzie, among others, suggested recently that the Haynesville Shale could become the fastest growing shale play to date in the Lower 48, based on initial results from operators.

Angelle said his department's next task is to ensure that the mineral leases are used to return the most value to the state in the most environmentally responsible way. "We are excited about the opportunities the new interest in North Louisiana has brought and will bring and are preparing to help oil and gas companies begin their development work as quickly as possible while holding them accountable to do it the right way," he said.

Angelle said that the state Department of Wildlife and Fisheries benefited directly from the lease sale, netting about $11.7 million in bonus money for the mineral leases on land under its control. "It's a case of our nonrenewable resources benefiting the state's renewable resources," he said.

State Wildlife and Fisheries Secretary Robert Barham said the lease sale included restrictions on exploration companies that will mean Wildlife and Fisheries lands will not allow surface drilling, while still getting the benefit of lease sale money to help protect the state's wildlife. "We haven't allowed them to change the habitat in terms of areas to harbor game or promote hunting," he said.

Because almost all of the Haynesville leases granted last week are on state-owned land and water bottoms, all of the bonus money collected on the state leases and 90% of any future royalty payments will go into state coffers, said McKeithen. However, the parishes in which the leases are located will receive 10% of the royalty generated on the leases once production begins.

The total collected by the LMB in the first two months of the current fiscal year is $142.6 million from 78 leases on 13,909 acres.

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