ENERGY REPORT

June. 18, 2009

DICK LOWE
HUNTER ENIS
2009 LEGENDS
LUNCHEON
HONOREES
 Inside
4 The Lone Energy Star State
Texas supplies the nation with more than just oil and natural gas

6 Hunter Enis and Dick Lowe

The Texas Alliance of Energy Producers honors two veteran oil
and gas men

8 Natural gas for transportation

Ed Ireland argues that compressed natural gas is the only alternative
fuel choice
What will tomorrow bring?
When we ventured forth with the Barnett Shale Symposium in the summer of 10 Mineral right debates continue in the courts
2008, things still looked moderately positive for the energy industry. At the time, no
one knew what tomorrow would bring. A case in Sansom Park illustrates continuing tension between surface
It wasn’t long after last summer’s meeting adjourned, however, that the U.S. and mineral owners
economy began to unravel, oil and natural gas prices began a precipitous drop —
and we all know the rest. 12 Texas loses jobs as energy prices retreat
Still, there were signs the industry could prevail. After all, the Haynesville,
Marcellus and Fayetteville shales were all waiting to apply the magic formula first Employment dropping in oil, gas industry in state
perfected in the Barnett Shale.
Now, a year later, there are more stones — and maybe a few boulders — in the
industry’s pathway.
14 German euros drilling some Texas wells
But the energy industry — up or down — requires good, solid data. And we have Overseas investors look to shale
plenty of that to offer:
How Texas offers other energy options beyond oil and natural gas
A look at ongoing mineral rights debates in the courts 16 Obama’s energy paradox
New markets for natural gas.
Robert J. Samuelson tackles the president’s energy plans
An analysis of the Marcellus Shale by one of the field’s top geologists.
Public opinion research on urban gas drilling.
Maximizing oil and gas leases. 19 Shale Energy Symposium Speakers
How mineral owners should handle unleased assets.
You’ll find this and more between this pages. We’ll offer this and more — Ken Morgan – TCU Energy Institute
because who knows what tomorrow will bring Gene Theodori – Sam Houston State University
Robert Francis Lisa Vaughn – Shannonm Gracey, Ratliff & Miller LLP
Editor
Fort Worth Business Press Kelly Mcbeth – Texas Energy Lobby
Energy Report
John Taylor – PlainsCapital Bank

Publisher
Banks Dishmon
Reporters
Elizabeth Bassett, Betty Dillard
Advertising Executives 25 Tim Raetz
Mary Schlegel, Elizabeth Northern
Aleshia Howe, John-Laurent Tronche
Editor Leslie Wimmer
Andrea Benford, Annie Warren, Finding stability in today’s volatile oil and gas industry
Bob Collins, Ann Alexander
Robert Francis
Lists
Associate Editor Mary Kennan Receptionist
Michael H. Price Maggie Calhoun 26 Charts
Production
Brent Latimer Photographers How the industry measures up
Managing Editor Clayton Gardner
Crystal Forester Glen E. Ellman
Jon P. Uzzel
30 Legends and Legacies of Texas Oil
3509 Hulen, No. 201 • Fort Worth, TX 76107 Michael H. Price profiles Don Harrington, a Panhandle legend
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ASSOCIATION AWARD WINNER
Cover photo by Jon P. Uzzel

June 18, 2009 Energy Report ✦ 3

 The Lone Energy Star
Texas remains energy resource giant even in new era
By John-Laurent Tronche on the receiving end of much criticism by natural gas advocates
(McClendon again with his “Coal is Filthy” campaign) who say natural

T
exas was built on competition and innovation in industry. gas can produce more energy with less of an environmental impact.
Nowhere is that more evident than in the energy industry, (Even the Academy Award-winning Coen brothers, no strangers to
according to industry officials. Texas, have hopped on that bandwagon by directing an advertisement
“We have as many natural resources as any state, and in addition in February criticizing clean coal, though not on behalf of natural gas.)
we are much more advanced in planning for transmission upgrades as Nuclear power once again is gaining favorability for electrical gener-
opposed to other states,” said Stephen Wiley, president of ation, and six of 30 proposed nuclear plants are planned for Texas.
GreenHunter Renewable Power, a subsidiary of Grapevine-based Coming into the fray is wind, too, Mills said.
GreenHunter Energy Inc. “There is lots of competition on the utilities side between natural
Texas has as diverse an arsenal of energy resources as one can find gas and coal,” Mills said. “Wind has come on because of tax incen-
anywhere in the world. tives that the federal and state govern-
The Barnett Shale in North Texas is the lead- ments have given them, but it’s still got
ing example of natural gas production for
unconventional gas plays in other states and
We had plenty of natural gas some problems on the delivery side. The
wind-energy situation is very similar to
other countries. Head west, and there are oil but we had no infrastructure what natural gas was in the ‘50s and
wells that have produced for more than a cen- ‘60s. We had plenty of natural gas, but
tury. In that same area, huge tracts of land to get it to consumers. It has we had no infrastructure to get it to con-
now boast significant investment for wind sumers. It has taken us 40 to 50 years to
taken us 40 to 50 years to
farms and solar power farms. Travel southeast build that infrastructure, and it’s going to
to find the nation’s largest biodiesel refinery build that infrastructure and take wind a long time for it to develop
plant located just outside of Houston. More oil the infrastructure to compete on the
production sits off the coast in the Gulf of it’s going to take wind a scale that’s needed for it to become a
Mexico. Return to North Texas – passing a few long time for it to develop viable energy source.”
coal-fired power plants along the way – and The state of Texas also is investing in
about 40 miles southwest of Fort Worth is the the infrastructure to com- itself to give wind energy a chance to
Comanche Peak nuclear power plant, one of gain a foothold. The state’s utility regula-
four plants in the state.
pete on the scale that’s tors will spend $5 billion to build as
Do other states compete with Texas on the needed for it to become a much as 2,900 miles of new power lines
energy front? to move electricity from West Texas to
“Not really,” said Alex Mills, president of the viable energy sources. Texas cities.
Texas Alliance of Energy Producers, which has “We have one of the largest load cen-
Alex Mills, Texas Alliance of Energy Producers
offices in Austin, Houston and Wichita Falls. ters in the United States,” Wiley said.
“Alaska comes pretty close on the oil side, “Naturally, that guides companies to
Louisiana on the natural gas side, and California once was the largest want to do business here.”
wind producer. If we’re not No. 1 in all three of those things, we’re While Barnett Shale producers are betting on natural gas being used
damn close to it.” more and more in the near future, other companies are looking even
In fact, Texas is No. 1 in natural gas, oil and wind energy produc- beyond the next decade, including Grapevine’s GreenHunter Energy,
tion. (On that last note: if Texas were a country, it would rank sixth in which specializes in wind-energy projects and biofuels.
the world in total wind capacity, behind Germany, the rest of the U.S., “It’s clear, if you look at some of the proposed legislation coming
Spain, China, and India, according to recently issued 2008 data and out of Washington, that renewables are going to gain a larger and
rankings from the American Wind Energy Association.) larger share of the generation being created,” Wiley said.
In addition to competing with other states, Texas’ energy industry “Right now we are serving different purposes for the areas that we
competes within itself, too. serve,” Wiley said. “Right now, we aren’t competing with traditional
“Everything begins with energy, so having it in your own backyard resources, but one would guess over time, as we become more cost
makes it competitive,” Mills said. “We have plenty of energy in Texas effective and more renewable resources are created, we will ultimately
for all types of consumers: residential, industrial, transportation and compete with the traditional resources.”
utilities.” Ultimately, it will come down to price.
Oil is the driving force behind transportation, but natural gas propo- “The cost for renewables has fallen over time, and it continues to
nents – T. Boone Pickens and Chesapeake Energy Corp. CEO Aubrey move in that direction,” said Wiley, adding the line at which conven-
K. McClendon being two of the most vocal – want to change that by tional resources are economical remains below the cost line of renew-
encouraging tax incentives to fleet owners who transition to natural able resources. “There probably will be a time when those two lines
gas-powered vehicles. Additionally, coal-fired power plants have been cross.”

4 ✦ Energy Report Fort Worth Business Press

 Texas shows muscle in clean-energy economy
Texas is one of the leading players in the rapidly expanding clean-energy economy, according to a study
released June 10 by the Pew Charitable Trusts.
Texas ranked second to California in both number of jobs and clean-energy businesses, fourth in patents and
third in venture capital tied to clean-energy, according to the survey. The report says Texas has 55,646 jobs and
4,802 businesses in the clean-energy sector. The state received 414 patents tied to that sector between 1999
and 2008 and venture capital funds invested $716.9 million in the sector from 2006 to 2008.
Wind energy was a big factor in the state’s rankings. According to the report, if Texas were a nation, it
would rank sixth in the world for annual wind energy production, behind Germany, the U.S., Spain, China and
India.
Pew reported that U.S. clean-energy jobs grew by 9.1 percent between 1998 and 2007 compared with over-
all job growth of 3.7 percent in the same period.
“The clean-energy economy is poised for explosive growth,” said Lori Grange, interim deputy director of the
Pew Center on the States, in a press release. “These jobs are driving economic growth and environmental sus-
tainability at a time when America needs both. There is a potential competitive advantage for federal and
state policy leaders who act now to spur jobs, businesses and investments in the clean energy sector.”
– Robert Francis

For more information: www.pewtrusts.org

Mills agrees price is the ultimate factor in

which energy resources become crowd favorites.
“It’s good for consumers, competition is good,” he
said. “Even competition between companies operating
in the Barnett Shale is good, competing for leases, access
to pipelines, to keep their costs down so they can be prof-
itable in the tough times like we’re having in natural gas on
the price.
“We have a lot of resources available in Texas that most states
don’t have,” he said. “That creates competition and an atmos-
phere of costs down for consumers.” ER

jtronche@bizpress.net

June 18, 2009 Energy Report ✦ 5

 Four Sevens duo honored with
Texas Alliance ‘Legends’ award
By John-Laurent Tronche
G ood friends make good business partners, at least in the case of
Dick Lowe and Hunter Enis.
The two men behind Four Sevens Resources Co. have a long and
illustrious career pursuing oil and gas plays, but big success in the
Barnett Shale over the past several years has afforded them the luxury
of being able to slow down after having worked solid since the
1950s.
“It’s the greatest relationship,” Lowe said of his partnership with
Enis. “We’ve been in business together for more than 20 years and it
started with a handshake to be 50-50
partners.”
During the explosive growth of the
Barnett Shale over the past several years,
Four Sevens thrice played its cards right
We’ve sold out twice
with a series of deals that netted the com- for a total of about
pany about $1 billion, Lowe said.
In 2004, Lowe and Enis sold their $1 billion. I guess we
Barnett Shale holdings of 26,000 acres to
XTO Energy Inc. for $155 million. must be doing some-
In the summer of 2007, the duo –
along with partner Sinclair Oil Corp., out thing right.
of Salt Lake City, Utah – sold 39,000 acres
in the Barnett Shale for $845 million in
cash to Chesapeake Energy Corp., out of
Oklahoma City. Four Sevens and Sinclair
Oil split the bounty 50-50. Of that total acreage, about 26,000 acres
were in Johnson and Tarrant counties, while another 13,000 acres are
outside the core area of the Barnett Shale. The divested assets had a
gross production of 37 million cubic feet per day at the time and mid-
stream pipeline transportation assets.
“We’ve sold out twice for a total of about $1 billion,” Lowe said at
the time. “I guess we must be doing something right.”
Since that time, the two have been biding their time.
“We haven’t been doing a whole lot,” Lowe says bluntly. “We’ve
got some production in north-central Texas in a couple of wells and
we’ve got a non-working interest in some things in the Barnett Shale
that Denbury (Resources Inc.) is the operator of.”
They might not be as active as they once were, but that doesn’t
mean they haven’t kept a sharp eye out for a deal.
“We’ve been looking around for a few places,” Lowe said. When
asked if he has found some exciting prospects close to home, which
is Fort Worth, Lowe replies laughing, “Yea, but none I want talk
about.
“I’m looking for something geographically desirable,” he adds. “I
6 ✦ Energy Report
don’t want to do something way out there. I don’t want Hunter and I
to have to travel. We’re looking for something not too expensive,
shallow – it’s hard to find something like that but we’re looking.”
The two have a good friendship, and Lowe credits Enis for helping
him get off his feet. Lowe jokes he’s been rich four times and broke
three times. (“That isn’t going to happen again,” he says of going
bust.)
“The last time I went broke, and I mean I was really broke, I had
no car, no house, no income and I had $20,000 in cash dedicated to
the bankruptcy attorneys,” he said. “Hunter called me up and said,
‘Why don’t we be partners?’”
“I said, ‘I’m sorry, but I don’t have any-
thing.’”
“He said ‘That’s ok, I’ve got some money.
When you get some you can pay me
back.’”
Those honest relationships, agreement
made between two honest individuals
increasingly are a thing of the past,” he
said.
“They are increasingly rare, and that’s
too bad,” he said.
Another credit to their success is a resist-
ance to bite off more than they can chew.
– Dick Lowe
Many companies these days load up on
debt to grow by leaps and bounds, he said,
but that can often lead to a difficult situa-
tion during trying times.
“One of the things about this business is you have to watch how
much money you borrow because the price of the product can fluctu-
ate so much, and you don’t want to get caught with a bunch of debt
in a downturn,” he said. “I can testify that.”
In addition to a love for the energy industry, Lowe and Enis can
trace their similarities to Texas Christian University’s football program.
Lowe is a former TCU linebacker who played on national champi-
onship football teams coached by the legendary Dutch Meyer in the
1940s. Meanwhile Enis, a Polytechnic High School graduate, played
as quarterback during TCU’s appearance at the Southwest
Conference championship in 1958.
On retirement – official retirement, that is – Lowe, 81, said it’s not
likely to happen.
“I feel like I’m retired now,” he said. He’s a morning person, and
works out and plays golf several times a week. “I’m not working very
hard. I’ll probably keep on doing this until the final curtain call.” ER
jtronche@bizpress.net
Fort Worth Business Press
 PHOTOS BY JON P. UZZEL
Dick Lowe, left, and Hunter Enis will receive the Fort Worth Legends Award.

Texas Alliance of Energy Producers Fort Worth Legends Award

The Texas Alliance of Energy Producers 2002 Amon G. Carter and family 2004 H. E. (Eddie) Chiles 2007 Bob R. Simpson
implemented its Legends Merit Award pro- Kay Kimbell and family Frank Darden Jr.
gram to honor members that had made a E.A. and W. A. Landreth Edgar Sperry Hill 2008 Ben Fortson
long-time contribution to the betterment of and family James Houston Hill, Marvin Gearhart
the industry, community and country. W.A. “Monty” Moncrief George Pat Hill
and family 2009 Hunter Enis
Sid Richardson and family 2005 B. J. Kellenberger Dick Lowe
Arch Rowan
2003 S.B. (Burk) Burnett Charles Rowan
Dixon (Dick) Thomas
Harbison 2006 William L. Adams
Charles Anthony Fischer Charles W. Seely

June 18, 2009 Energy Report ✦ 7

 Clear choice for alternative
fuel vehicles: Natural gas
petroleum fuels. Natural gas is mostly methane, which has only one carbon

T
he Texas Legislature has mandated that more
state vehicles be powered by alternative fuels. The
bill emphasizes compressed natural gas as the
preferred alternative.
This condition is spelled out in a legislative analysis of
House Bill 432, where compressed natural gas (CNG) is
cited as the first option, followed by liquefied natural
gas. Only at the bottom of the list is there a brief men-
tion about electricity for plug-in hybrids.
The bill will amend the state code to require agencies ED IRELAND
to purchase or lease vehicles only if they use these alter-
Barnett Shale Energy
natives: “compressed natural gas, liquefied natural gas Education Council
(propane), liquefied petroleum gas, methanol or
methanol/gasoline blends of 85 percent or greater,
ethanol or ethanol/gasoline blends of 85 percent (E85)
or greater, biodiesel or biodiesel/diesel blends of 20 Natural gas generates
percent or greater, or electricity, including electricity to
power a plug-in hybrid motor vehicle.” less NOx, soot, and
In response to the bill’s passage, the Barnett Shale
Energy Education Council and the Energy Institute of greenhouse
Texas Christian University presented “Green Fleets:
The Future Is Now,” a conference focused on natural- other petroleum fuels.
gas vehicles. The June 17 meeting had co-hosts in the
City of Fort Worth, the Fort Worth Chamber of
Commerce and the North Central Texas Council of Governments. In atten-
dance were fleet operators, transportation directors and business leaders from
across the region.
Participants learned that fleet vehicles lend themselves perfectly to CNG
because they return at the end of each day to a central fueling station.
Another asset is the regional advantage: Fleets in North Texas travel atop of
one of the largest deposits of natural gas in the United States – the Barnett
Shale.
Another compelling argument from the conference is that natural gas is
the cleanest-burning alternative fuel. Because of its chemical makeup, natural
gas generates less nitrogen oxides, soot and greenhouse gases than other
atom and four hydrogen atoms. Gasoline has eight carbon atoms and 18
hydrogen atoms; diesel, 14 carbon atoms and 30 hydrogen atoms.
And natural-gas vehicles (NGVs) make little if any noise and therefore
reduce noise pollution, the participants learned. In fact, the decibel level of
NGVs is 80 to 90 percent lower than that of their diesel counterparts. (If
you’ve ever been behind a Fort Worth city bus, you might have wondered if
the engine is even running.) Finally, life-cycle costs are lower for NGVs than for
gasoline and diesel vehicles. Not only does fuel cost less, but maintenance
costs less, as well.
Like all alternative-fuel vehicles, CNG vehicles are more expensive than reg-
ular cars and trucks. Fortunately, numerous federal and state tax credits and
subsidies pay the entire premium, in most cases. Representatives from the
North Central Texas Council of Governments
shared news about these funding options at the
TCU conference. Several federal programs, to
help offset the initial purchase price of CNG
vehicles, are administered by the Department of
Energy, the Federal Highway Administration and
gases than the Department of Agriculture. The Internal
Revenue Service even offers a 50-cents-per-gal-
lon tax deduction for CNG, as well as a 50-per-
cent tax credit for up to $50,000 to cover the
cost of installing CNG fueling equipment.
The Texas General Land Office, the Texas Railroad Commission and the
Texas Emissions Reduction Program also offer various grants and other incen-
tives to encourage the use of CNG vehicles.
The bottom line is that there is a compelling case for operating fleets that
run on CNG. Natural gas is plentiful, readily available and clean-burning. And
subsidies are available to cover much of the cost of the switch. The situation is
good for our region’s economy and good for the environment – and that is a
winning proposition for us all. ER
Ed Ireland is executive director of the Barnett Shale Energy Education Council. For
more information: www.bseec.org.

Natural • There are over 120,000 natural gas vehicles on U.S. roads today and over 10 million worldwide.
• There are over 1,100 NGV fueling stations in the U.S. – over half are available for public use.
gas • Natural gas costs, on average, one-third less than conventional gasoline at the pump.
vehicle • Over 50 different manufacturers produce 150 models of light, medium and heavy-duty vehicles and
engines.
facts
• Roughly 22 percent of all new transit bus orders are for natural gas.
• Natural gas is sold in GGEs or gasoline gallon equivalents. A GGE has the same energy content
(124,800 BTUs) as a gallon of gasoline.

Source: Natural Gas Vehicles for America (www.ngvc.org)

8 ✦ Energy Report Fort Worth Business Press

 Surface owners prevail in Sansom Park case
Case marks rare court victory over mineral rights in Texas

By John-Laurent Tronche Five days later, however, Western Production filed a gas drilling per-
mit with the well located on Northside’s land; the permit was rejected

A
court case pitting the developer of a once-planned community in due to the gas company’s misrepresentation of the well’s location, the
Sansom Park against a local natural gas exploration and produc- suit alleged, because Western Production officials knew the well could-
tion company resulted in punitive damages of about $4.8 million n’t comply with city and Railroad Commission of Texas setback require-
awarded to the developer and represents one of the few instances in ments.
which surface rights have been given greater importance than mineral “Western showed up and I just really got an uncomfortable feeling
rights. with the way they were trying to do business,” said Cottongame, who
In the case, Northside Land & Development LLC sued Western had invested $1.2 million in the project by this time. “I have confidence
Production Co. in August 2007 for interfering in a 274-home, master- we tried everything in good faith to bargain with them and they did not
planned community the developer had been assembling since early want to listen.”
2005. Western Production leased the mineral Northside sued Western Production in
rights under the 44-acre property and intend- August 2007, claiming tortuous interference.
ed to drill on Northside’s land but could not Three months later, Western Production
move forward with a drilling permit due to the Invoking the accommoda- sold the Sansom Park leases to Chesapeake
well’s proximity to other properties, a violation
of the 500-foot setback in Sansom Park’s
tion doctrine is the best way Energy Corp. in November 2007.
Chesapeake Energy bought the undeveloped
drilling ordinance. Negotiations between the surface owners can protect acres and more land, totaling about 2,000
two parties to allow for the community’s cre- acres, for an undisclosed amount; however,
ation as well as the realization of minerals their rights in a dispute with a court briefing estimates the transaction at
failed, leading to the dispute’s appearance in a party seeking subsurface more than $40 million.
the 153rd District Court. “My guys worked two and a half years
Generally speaking, mineral rights trump use, some attorneys said. with the city to get this project off the
surface rights in Texas, according to several ground. The city council unanimously
area energy attorneys. In other words, an approved our deal,” said Hugh G. Connor II,
exploration and production company’s rights supersede those of the a partner with Kelly Hart & Hallman LLP in the firm’s Fort Worth office,
property owner whose home or land may sit above the oil or natural who represented Northside in the suit. “And at the last minute Western
gas below ground. came in and filed the application for a drill permit even though they
In this case, however, the jury found May 5 that Western Production knew they couldn’t comply with the various rules and regulations.
purposefully interfered with Northside’s planned community and award- “We say they did it solely so they could stop the city from signing our
ed the company and its owner, Wes Cottongame, about $4.8 million in agreement and it worked,” he said. “After that, they continued to
past lost profits, future lost profits and disgorgement, or repayment of interfere by still filing amended drilling permits that still violated our
money gained in ill-gotten manners. rules, all the way up until they flipped their leases to Chesapeake.”
A representative at Western Production said the individual who could
The facts speak to the matter wouldn’t be available to comment until after the
Cottongame, a former Haltom City community development coordi- Business Press’ production deadline.
nator, said his Northside Land & Development acquired the land in Western Production was represented by Shayne Moses, an attorney
January 2005 and immediately set out to create a 274-home, master- with Moses, Palmer & Howell LLP, a Fort Worth law firm whose clients
planned community with room for a strip center as well. Sansom Park also include Quicksilver Resources Inc. and Anadarko Petroleum Co.
was supportive of the deal, he said, as was Fort Worth City Council Calls to Moses were not returned.
member Sal Espino, whose District 2 is adjacent to Sansom Park.
Sansom Park is in the northwest section of Tarrant County. The impacts
“This probably would have been another good housing stock for resi- The Northside master-planned community now is on an indefinite
dents to look at,” said Espino, adding he worked out an agreement hold, Cottongame said. He wants to pursue the project but insists it’s
between Fort Worth, Sansom Park and Tarrant County to improve near- not that simple, due to city council changes and, separately, a pipeline
by McCandless Street for the development. condemnation that removed about 60 possible homes, he said.
Western Production leased the minerals to the property in June 2006 “It was profitable at 274 homes and I don’t know if it would prof-
and was told by Sansom Park officials that the city did not want oil and itable with less lots,” Cottongame said.
gas development at the expense of the planned residential develop- Connor said this case represents a victory for the little guys.
ment, according to court documents. The Sansom Park City Council “The big point is that typically oil and gas companies can get away
unanimously approved the Northside development June 7, 2007; a with things because you’re typically talking about a small landowner
Western Production representative present at that meeting raised no who doesn’t have the resources to fight back,” Connor said. “My
objection. clients did fight back and ultimately prevailed and convinced the jury

10 ✦ Energy Report Fort Worth Business Press

 Drilling activity in the Barnett Shale
Drilling permits issues for Newark, East Field (Barnett Shale) 4,145

3,643

2,503

1,629
1,112

2004 2005 2006 2007 2008

Source: Railroad Commission of Texas

Railroad Commission of Texas Leases by county

on surface vs. mineral rights in the Barnett Shale
From Oil & Gas Exploration and Surface Ownership: Bosque – 30 Hood – 548

The general rules regarding free use of the surface to benefit the mineral Cooke – 20 Jack – 154
estate may be changed by the specific terms of the mineral lease covering
the property or of the deed that severed the mineral estate from the sur-
Comanche – 5 Johnson – 2,013
face estate. In addition, many cities have municipal ordinances restricting
Dallas – 8 Montague – 3
oil and gas activities on property within city jurisdiction. The rights of the
lessee may also be limited by the “accommodation doctrine.” This legal Denton – 2,447 Palo Pinto – 50
doctrine applies in limited circumstances to require the lessee to modify its
operations to accommodate an existing surface use when reasonable Eastland – 12 Parker – 951
alternatives are available. In specific circumstances in counties in or near
large metropolitan areas developers can impose restrictions on drilling and
Ellis – 22 Somerville – 57
operations sites by creation of a qualified subdivision as provided by
Erath – 124 Tarrant – 1,925
Chapter 92 of the Texas Natural Resources Code.
Hamilton – 5 Wise – 2,003
For more information:
www.rrc.state.tx.us/about/faqs/SurfaceOwnerInfo.pdf Hill – 150 Source: The Perryman Group

that what the oil and gas company did was wrong.”
Despite mineral rights’ importance in Texas, oil and gas companies
still must make concessions to surface owners, according to the
Accommodation Doctrine, first expressed in the 1971 Texas Supreme
Court case Getty Oil Co. v. Jones. The accommodation doctrine seeks
to determine whether the mineral lessee’s proposed use of the surface
is unreasonable.
Invoking the accommodation doctrine is the best way surface own-
ers can protect their rights in a dispute with a party seeking subsurface
use, some attorneys said.
Chesapeake Energy’s Julie Wilson said it was too early gauge the
court decision’s impact on the company’s drilling efforts. The company
is “exploring all options in the area,” said Wilson, vice president for
corporate development in the Barnett Shale. ER
jtronche@bizpress.net

June 18, 2009 Energy Report ✦ 11

 Crude rallies,
but natural gas weak
Texas loses jobs as energy industry in retreat
By Karr Ingham

D
rilling activity in Texas continued declining steadily through April, reflect-
ing weak natural gas markets and defying a crude oil price rally.
Employment in the state’s exploration and production (E&P) industry has
dropped to its lowest ebb since January 2008, according to the latest Texas
Petro Index (TPI).
“The Texas oil and gas industry remains in cost-cutting mode, idling rigs,
reducing capital spending, and laying off employees as economic contraction
continues,” said Karr Ingham, the economist who created the TPI for the Texas
Alliance of Energy Producers. “The oil-price recovery that has occurred since
the first of the year is benefitting producers in some regions of the state.
“But make no mistake about it. Texas is a natural gas state, in terms of the
primary E&P focus, with 80 percent of the rigs still actively drilling for natural
gas. As long as natural gas prices remain at current levels, producers in a lot
of Texas gas plays will be unable to turn a profit on new gas wells.
“If wellhead prices would double from the current range of $3 to $4 per
thousand cubic feet ($/Mcf), gas producers across Texas would be able to
recover their finding and development costs.
“Sustained gas prices of $6/Mcf or more would drive a turnaround of
gas-related E&P activity in the state.”
A composite index based upon a comprehensive group of upstream eco-
nomic indicators, the Texas Petro Index in April dropped more than 5 per-
cent to 249, marking the sixth consecutive monthly decline since the indi-
cator of the Texas oil and gas industry’s health peaked in September and
October 2008 at 285.4. Among leading March indicators:

• Natural gas prices in Texas during April averaged $3.28/Mcf, 63.4 per-
cent less than the same month of 2008. As a result of low prices, the
value of Texas gas production during April was $1.9 billion, down from
$5.5 billion in April 2008, despite a volumetric decline of only 2.6 per-
cent.

• The Baker Hughes count of active drilling rigs in Texas dipped

to monthly average of 393 in April, nearly 500 fewer rigs than
the April 2008 monthly average.

• The number of Texans employed in the state’s oil and

gas industry declined to 219,500 during April, according
to the Texas Workforce Commission, from 240,000 in
December last year, effectively wiping out job growth
last year since 219,500 Texans were working in the
industry in January 2008 ER

Karr Ingham is an economist with the Texas Alliance of

Energy Producers.
The Texas Petro Index is a service of the Texas
Alliance of Energy Producers, an association of inde-
pendent oil and gas producers.

12 ✦ Energy Report Fort Worth Business Press

 Barnett Shale-bred technology making leap overseas
Foreign investment becoming big player in U.S. shale plays
By John-Laurent Tronche cent of Chesapeake’s 67.5 percent share of drilling and completion
expenditures until the $2.125 billion obligation has been funded,”

J
ust as domestic energy producers invested in Middle Eastern oil and according to the Nov. 11 statement.
gas plays over the past several decades, it appears European energy While Chesapeake Energy has yet to comment on the possibility of
companies currently see benefits in acquiring stakes in U.S.-based overseas exploration, a StatoilHydro executive said during a May inter-
shale plays for application back home. view with Bloomberg that the two companies had identified 14 differ-
Over the past several months, at least four European energy compa- ent unconventional natural gas projects worldwide and currently were
nies – from Britain, France, Italy and Norway – have bought stakes in whittling down their selections. The companies were looking at plays
domestic shale plays producing oil and gas. Most recently, Rome-based in Hungary, Poland, India, Australia and China.
energy giant Eni purchased a portion of Quicksilver Resources Inc.’s It appears the question isn’t whether Europeans will experience the
leasehold interests in north Fort Worth for $280 million. Per the agree- same explosion of natural gas development that North Texas’ Barnett
ment, Fort Worth-based Quicksilver Resources sold Eni 27.5 percent of Shale ignited in the U.S., but rather when they will experience it.
its 270,000 acres surrounding its Alliance properties in north Fort
Worth. German euros run through some Texan oil, gas wells
Eni said the deal gives it a good foothold in the U.S., and the com- The Barnett Shale turned the average homeowner into a partner in
pany will gain “experience to support the exploration of high potential natural gas wells across North Texas, and one Fort Worth company is
unconventional gas opportunities worldwide,” according to a state- giving that same opportunity to invest in wells to people more than
ment. 5,000 miles away.
The Eni-Quicksilver Resources deal is just TEXXOL Inc. and its German equivalent
one of many that illustrate European interest in TEXXOL Mineralöl Ag pair German
U.S. shales. Over the past year several other investors with Texan oil and gas assets
energy companies with roots across the
Over the past several through an investment system whereby
Atlantic have invested in domestic producers. months, at least four someone with as little as 50 euros a
In March, Paris-based Total purchased a 50- month, or about $70, can secure a stake
percent interest in American Shale Oil LLC to European energy companies in properties they might never see,
cooperate on a western Colorado shale oil according to the companies’ two chief
lease that, over time, could be expanded to
– from Britain, France, Italy executives.
more than 5,000 acres of federal land, accord- and Norway – have bought “The nice thing is by these install-
ing to the deal. ments we have two advantages: first to
Similarly, during the past several years, stakes in domestic shale the investors, usually they can participate
Netherlands-based Royal Dutch Shell quietly
plays producing oil and gas. with that amount and it’s only possible
has been working on shale oil developments in because we have computerization.
northwest Colorado and Wyoming, not far Without computers it wouldn’t be possi-
from Total and AMSO. ble,” said Sönke Harrsen, president and CEO of the German arm,
Above all others, however, Chesapeake Energy Corp. has been which is based outside of Hamburg, Germany. “And the other thing is
instrumental in helping Europeans gain insight into U.S. technology for it has a great advantage to the investors because they are participating
application elsewhere. now in a commodity that is not usually available to them.”
In July 2008, the Houston-based arm of BP Plc, based in London, In other words, middle-class investors have the opportunity to invest
purchased Chesapeake Energy’s interest in Oklahoma’s Woodford in an industry that is likely out of financial reach if they were to act
Shale – about 90,000 acres producing about 50 million cubic feet of alone. Strength in numbers is the key, however, and currently the com-
natural gas per day – for $1.75 billion. In September 2008, BP America panies own stakes in more than 150 oil and gas wells in more than 20
Inc. agreed to purchase a 25-percent interest in Chesapeake Energy’s locations across the state and into southern Oklahoma. Other compa-
Fayetteville Shale assets in Arkansas for $1.9 billion. As a result, the nies act as the operators on the wells.
companies would cooperate on the Oklahoma City-based energy pro- Harrsen, who previously worked for German oil company DEMINEX
ducer’s 540,000 acres of lease producing about 180 MMcfe per day, among other energy firms, met Kevin Grubbs in the late 1980s, when
with BP owning about 135,000 acres of the total. the latter was working as an accountant for the Ray Richey &
Chesapeake Energy followed up with a third transaction – the Company Inc., a startup oil and gas exploration company. Throughout
largest, to date – for its Marcellus Shale holdings. that decade, Harrsen had been securing German investors for domes-
Norwegian state-controlled energy company StatoilHydro would pay tic gas wells in west central Texas and north Texas and investing that
$3.375 billion for a 32.5-percent stake in the former’s 1.8 million net money with Grubbs’ employer, but eventually the two agreed “to just
acres of Marcellus Shale assets, according to a November 2008 agree- roll those partnerships up into a corporation because it was just too
ment. StatoilHydro paid $1.25 billion in cash at closing, and the hard to do all the individual tax returns for all those Germans,” said
remaining $2.125 billion over the next three years “by funding 75 per- Grubbs, who was named president of the new company, IEP Inc., in

14 ✦ Energy Report Fort Worth Business Press


Sönke Harrson, president and CEO of TEXXOL Mineralöl AG, and Kevin Grubbs, president and CEO of TEXXOL Inc., allow German investors a chance to
own shares in oil and gas wells across Texas.
1993.
“[Barnett Shale pioneer Mitchell Energy & Development Corp.] was really
big and Ray Richey & Co. was really small and we were just going around
picking up the leases Mitchell let fall through the cracks,” Grubbs said of
their investment strategy at the time.
The two kept in touch, and Grubbs continued to serve as an adviser
when needed. In 1999, Harrsen acquired ownership in TEXXOL Mineralöl
Ag. Grubbs continued to advise Harrsen and company until he went to
work full-time for TEXXOL in January of this year.
How it works
TEXXOL is financed by German investors known as “silent partners,”
Harrsen said, who participate in one of two ways: monthly installments
with a minimum of 50 euros for up to 15 years or with a single payment
with a minimum of 1,000 euros.
In the same way that President Barack Obama raised more than $235
million during his presidential campaign by attracting a large number of
donations in small amounts, such as $5, $10 or $20, Harrsen raises funds
by attracting the small- to mid-sized donors in addition to the large dona-
tions.
Currently, Harrsen has about 2,000 accounts of these smaller-sized
donors, each of which contributes at least 50 euros per month with a mini-
mum commitment of eight years.
June 18, 2009
PHOTO BY GLEN E. ELLMAN
Additionally, TEXXOL has 50 partners who have invested at least
$20,000; the largest investment received has been $150,000, Harrsen said.
“There are basically two categories: middle-income and high-income,”
Harrsen said.
At the end of 2008, total capital subscriptions amounted to more that
$32 million, Harrsen said. The system works because of Harrsen’s relation-
ship with Grubbs, they said.
“In this respect we are the only company in Germany offering this. I
don’t know why but nobody is competing with us up to now. It might be
because the advantage from our side is knowing Kevin for such a long time
– and a lot of other people but Kevin is the key – we have solid connec-
tions over here,” Harrsen said. “Other companies arrive at the airport and
say, ‘We have a lot of money, please let us find someone who invests it.’”
Grubbs adds, “Sönke and I have been friends a long time,” he said. “I’ve
been a CPA for a long time and it was just very easy to do. It was easy to
go to work for my client.”
And it works.
Since 2002, the company has doubled its investment, and all the original
investors still remain.
“Even for standards over here, it’s not bad,” Harrsen said. “Track record
we can show.” ER
jtronche@bizpress.net
Energy Report ✦ 15
 Obama’s policies push domestic
oil and gas industry aside
generates electricity. Expanding wind and solar won't displace much oil;

C
onsidering the brutal recession, you'd
expect the Obama administration to be someday, electric cars may change this.
obsessed with creating jobs. And so it is, For now, reducing oil imports requires using less or producing more.
say the president and his supporters. The trouble Obama has attended to the first with higher fuel-efficiency standards
is that there's one glaring exception to their for vehicles. But his administration is undermining the second. At the
claims: the oil and natural gas industries. The Department of Interior, which oversees public lands and the OCS,
administration is biased against them – a bias that Secretary Ken Salazar has taken steps that dampen development: can-
makes no sense on either economic or energy celled 77 leases in Utah, because they were too close to national parks;
grounds. Almost everyone loves to hate the extended a comment period for OCS exploration to evaluate possible
world's Exxons, but promoting domestic drilling is ROBERT J. environmental effects; and signaled more caution toward shale for similar
simply common sense. SAMUELSON reasons.
Contrary to popular wisdom, the United States Guest Column Any one of these alone might seem a reasonable review of inherited
still has huge oil and natural gas resources. The policies, and it's true that Salazar has maintained a regular schedule of oil
outer continental shelf (OCS), including parts that have been off-limits to and gas leases Still, the anti-oil bias seems unmistakable.
drilling since the early 1980s, may contain much natural gas and 86 bil- Conceivably, Salazar may reinstate administratively many restrictions
lion barrels of oil, about four times today's "proven" U.S. reserves. The on OCS drilling that Congress lifted last year. Meanwhile, he's promoting
U.S. Geological Survey recently estimated that the Bakken Formation in wind and solar by announcing new procedures for locating them on pub-
North Dakota and Montana may hold 3.65 billion barrels, more than 20 lic lands, including the OCS. "We are," he says, "setting the Department
times a 1995 estimate. And there's upward of on a new path" – emphasizing renewables.
2 trillion barrels of oil shale, concentrated in It may disappoint. In 2007, wind and
Colorado. If only 800 billion barrels were Almost everyone loves to solar generated less than 1 percent of U.S.
recoverable, that's triple Saudi Arabia's proven electricity. Even a tenfold expansion will leave
reserves. hate the world's Exxons, but their contribution small. By contrast, oil and
None of these sources, of course, will natural gas now provide two-thirds of
quickly provide oil or natural gas. Projects can promoting domestic drilling Americans' energy. They will dominate con-
take 10 to 15 years. The OCS estimates are sumption for decades. Any added oil produced
just that. Oil and gas must still be located – a is simply common sense. here will mostly reduce imports; extra natural
costly and chancy process. Extracting oil from gas will mostly displace coal in electricity gen-
shale (in effect, a rock) requires heating the eration. Neither threatens any anti-global
shale and poses major environmental problems. Its economic viability warming program that Congress might adopt.
remains uncertain. But any added oil could ultimately diminish depend- Encouraging more U.S. production also aids economic recovery,
ence on imports, now almost 60 percent of U.S. consumption, while because the promise of "green jobs" is wildly exaggerated. Consider. In
exploration and development would immediately boost high-wage jobs 2008, the oil and gas industries employed 1.8 million people. Jobs in the
(geologists, petroleum engineers, roustabouts). solar and wind industries are reckoned (by their trade associations) to be
Though straightforward, this logic mostly eludes the Obama adminis- 35,000 and 85,000, respectively. Now do the arithmetic: A 5 percent rise
tration, which is fixated on "green jobs" and wind and solar in oil jobs (90,000) approaches a doubling for wind and solar (120,000).
energy. Modest movements, up or down, in oil will swamp "green" jobs.
Championing "clean" fuels has become a political set piece. On Earth Improved production techniques (example: drilling in deeper waters)
Day (April 22), the president visited an Iowa factory that builds towers for have increased America's recoverable oil and natural gas. The resistance
wind turbines. "We can remain the world's leading importer of oil, or we to tapping these resources is mostly political. To many environmentalists,
can become the world's leading exporter of clean energy," he said. expanding fossil fuel production is a cardinal sin. The Obama administra-
The president is lauded as a great educator; in this case, he provided tion often echoes this reflexive hostility. The resulting policies aim more to
much miseducation. He implied that there's a choice between satisfy popular prejudice -- through photo ops and sound bites – than
promoting renewables and relying on oil. Actually, the two are mostly dis- national needs. ER
connected.
Wind and solar mainly produce electricity. Most of our oil goes for Samuelson’s column is published by the Washington Post Writers Group.
transportation (cars, trucks, planes); almost none – about 1.5 percent --

16 ✦ Energy Report Fort Worth Business Press


Shale success means new markets needed for natural gas
H
ow quickly things
can change in this
industry. Just last
summer, shale gas explo-
ration was running at full
speed led by the success of
the Barnett Shale and the
promise of yet more great
opportunities in the
Haynesville, the Fayetteville KEN MORGAN
and the even larger
TCU Energy Institute
Marcellus Shale play. But
even a year ago, many were starting to wonder if
the frantic pace of drilling, production and elevat-
ed prices could be maintained, given that over-
production inevitably leads to lower prices.
Independent U.S. exploration and production
companies lead the world in developing new
technologies for shale gas extraction. As a matter
of fact, they are all so good at finding and supply-
ing this resource that the Department of Energy
reports gas storage has continued to climb to a
new five-year high of 2.2 trillion cubic feet (tcf) as
of May 2009.
With a mild spring in the U.S. and ample sup-
plies, natural gas prices continue to struggle to
stay near $4 per million btu (MMbtu). Along with
the stalled economy and lower industry demand,
the pace of drilling has slowed and the U.S. rig
count is about half of what it was last year. Throw
in the darkening political clouds boiling up in
Washington, D.C., associated with cap and trade,
drilling incentive reductions and proposed tax
increases, the outlook can look a bit unsure and
gloomy for the domestic oil and gas business.
One thing we know for sure … thanks to
Mitchell Energy, Devon Energy and a host of other
local independents, we now have the ability to
develop lots and lots of domestic natural gas. But
with the likelihood of chronic oversupplies, fluctu-
ating prices and uncertain government actions,
the question remains as to how to maintain sta-
bility for the approximately 5,000 independent
operators that currently supply 82 percent of U.S.
yearly natural gas production (source:
www.ipaa.org).
Thanks to these companies, we are now a
nation with a vast amount of newly discovered
natural gas that makes up only about 24 percent
of our nation’s energy use. It appears that the
much anticipated and needed recovery in the nat-
ural gas business will only emerge when demand
June 18, 2009
SYMPOSIUM SPEAKER
for natural gas goes up. Clearly, a more aggres-
sive approach is needed to develop expanded
markets for all this abundant natural gas. The
challenge is for independent producers to venture
into the business of helping to stimulate poten-
tially large markets for their natural gas.
More demand needed
Some anticipated growth in demand will even-
tually come from the development of a more
diversified electrical “smart grid,” especially if nat-
ural gas is used instead of coal at generating sta-
tions. Natural gas will almost certainly be the
domestic “backup and base fuel” for all the pro-
posed wind and solar initiatives over the next few
years. Things will also get better as the economy
improves and industrial demand recovers from the
drop off at the end of 2008. All of this will help,
but another potential growth area for natural gas
could and should be in transportation uses.
The challenge is for
independent producers to
venture into the business
of helping to stimulate
potentially large markets
for their natural gas. Clearly,
a more aggressive approach
is needed to develop
expanded markets for all
this abundant natural gas.
Currently, natural gas makes up a very small
percentage of transportation uses in the U.S.
(mostly buses), yet the technology exists for all
types of vehicle conversion to “cleaner burning”
compressed natural gas (CNG). In a recent study
of CNG versus diesel fuel use in United Parcel
Service (UPS) delivery trucks, their CNG trucks
produced 75 percent lower carbon monoxide
(CO) emissions, 49 percent lower nitrogen oxides
(NOx) emissions, and 95 percent lower particulate
matter emissions than diesel trucks of similar age.
(Source:
www.ctts.nrel.gov/heavy_vehicle/pdfs/31227.pdf)
Similar results are reported when NGVs are com-
pared to gasoline emissions. Carbon monoxide is
reduced by 70 percent, nitrogen oxides by 87 per-
cent and carbon dioxide by 20 percent (source:
www.ngvc.org/mktplace/fact.html).
So what can we do locally? Well, let’s see, we
have the Barnett Shale right here beneath us,
local companies know how to tap into this abun-
dant and clean-burning resource, and an equiva-
lent gallon of natural gas is cheaper by 30 to 50
percent than either diesel or gasoline. All of this
abundant domestic natural gas also comes at a
time when the public is rethinking what Detroit
(and other manufacturers) should be offering for
public and private transportation. Some questions
to ponder:
Wouldn’t it be great to have a dozen or more
different low emission natural gas cars and trucks
to choose from at dealerships?
How about developing “refueling locations” at
the many scattered compressor stations through-
out the Metroplex?
Our city buses have already successfully-
switched to natural gas, so what about area wide
fleet vehicle conversion as a next step?
To help stimulate the transportation use of
natural gas in the Metroplex, the TCU Energy
Institute has teamed up with the Barnett Shale
Energy Education Council (BSEEC) to organize a
Natural Gas Vehicle Symposium “Green Fleets:
The Future is Now” (www.energyinstitute.tcu.edu
or www.bseec.com). This is the first in a series of
“Creating New Markets” symposia that will focus
on “fleet owners” in the Metroplex as we
become more educated on the possibility of fol-
lowing the city’s lead of converting all of their
buses over to natural gas.
As hoped, the local energy companies are
stepping forward by providing the leadership and
financial commitment needed to host this timely
symposium. This is an important major step to
help promote the education and development of
this potential growth market for one of our
most abundant and clean fuel resources … natu-
ral gas. ER
Ken Morgan is director of the TCU Energy Institute.
Energy Report ✦ 19
 SYMPOSIUM SPEAKER

The paradox of public opinion

on the energy industry
E
very year, numerous national and international
polling entities produce extensive macro-level
survey results on perceptual issues associated
with the oil and gas industry. These findings are then
widely disseminated through the mass media.
One example that I often use when discussing per-
ceptual issues with energy-industry personnel is the
Gallup Organization’s poll on the images of various
business and industry sectors in the United States. For
the past eight years, Gallup has polled Americans on
their views of more than 20 sectors of business and
GENE L. THEODORI
industry. The survey asks respondents to rate each Sam Houston
business and industry sector in the United States on a State University
five-point scale ranging from “very positive” to “very negative.”
Between 2001 and 2008, the industries ranking near the top and bottom
of the list have remained fairly consistent. Either the computer industry or the
restaurant industry has topped the list as the most favorably viewed sector
each year. (The computer industry rated most favorably in 2001, 2002, 2003,
2004 and 2008. The restaurant industry rated most favorably in 2005, 2006
and 2007.) Can you guess which industry has constantly ranked as the least
favorably viewed industry? If you guessed the oil and gas industry, then you
are spot-on.
In 2001, the year of Gallup’s initial such poll, slightly more than half the
respondents (54 percent) viewed the oil and gas industry in a negative man-
ner (“somewhat negative” or “very negative”). One year later, that percent-
age dropped to 44, and in 2003 it dropped to 43.
From 2004 through 2008, however, the slightly improving pattern reversed
itself. The percentages of respondents who rated the oil and gas industry neg-
atively in 2004, 2005, and 2006 were 58, 62, and 77, respectively. In 2007,
this figure dropped to 67 percent. According to the most recent Gallup data
(August 2008), approximately three of every four respondents (76 percent)
regarded the oil and gas industry in a negative light. This perception is inter-
esting and, to some extent, predictable – but I wonder how beneficial such
data are to the oil and gas industry in its decision-making processes.
Several of my students and colleagues and I have engaged in a recent
series of research projects that may not only be of interest but also of value to
energy producers, as well as to state and federal regulatory agencies, environ-
mental organizations, private landowners and the general population. Two
topics of substantial interest are the popular perceptions of the industry, and of
potentially problematic issues associated with natural gas development.

Recent and current studies

In three Barnett Shale counties – Johnson County and Wise County, in
2006; and Tarrant County, in 2009 – we asked members of the general popu-
lation to give their impressions of the energy industry. By-and-large, we found
that the public has a mixed view. Overall, almost nine in ten individuals (88
percent) said they believe that natural gas operators must adopt and use
more environmentally-friendly drilling practices. Roughly three of every four
individuals (77 percent) said that natural gas companies will do only what is
required by law. That same 77 percent agreed that not enough information
concerning the development of natural gas is being made available to the
general public.
Approximately two of every three individuals (67 percent) said they believe
that natural gas operators are drilling and producing too close to homes and
businesses, while 65 percent said that too little attention is being paid to the
social costs of natural gas development. Sixty-three percent agreed that natu-
ral gas operators in their local areas are too politically powerful. Fifty-five per-
cent said that, even when carefully controlled, natural gas development is
likely to upset the quality of life in a local area. And 50 percent agreed that
the natural gas companies have no compassion for the natural environment.
At the same time, however, 61 percent agreed that the benefits of natural
gas development for their local areas are greater than the costs. Moreover, 75

20 ✦ Energy Report Fort Worth Business Press

percent agreed that, in the long run, the people in
their local areas will be better off if their natural gas
resources are developed.
Furthermore, when asked about potentially
problematic issues associated with natural gas
development, respondents viewed social and envi-
ronmental issues as “getting worse” as a result of
development. Such issues included the amount of
freshwater used, depletion of aquifers, noise pollu-
tion, air pollution, environmental quality and dis-
agreements among local residents, among other
concerns. Conversely, economic and service-related
issues such as local police protection, medical and
health-care services, quality of local schools, fire
protection services, and availability of good jobs
were all viewed as “getting better” because of the
development of natural gas.
ing and costly.
Finally, the energy industry must recognize that
it cannot change its negative (mis)perceptions
alone. Oil and natural gas producers and service
companies must develop working partnerships with
universities, governmental and regulatory agencies,
environmental organizations and other stakeholders
if they are to gain the trust of the general public.
In short, my take-away message is this: Oil and
natural gas producers and service companies must
initiate the process that will build trust, promote
their environmentally-friendly measures, and reme-
dy the misconceptions the public holds toward their
industry. By doing so, the companies will likely see
fewer objections to increased development.
And a substantial amount of new gas resources
from unconventional reservoirs can then be real-
ized. ER
Gene L. Theodori is associate professor and director
at the Center for Rural Studies: Research & Outreach
in the Department of Sociology at Sam Houston
State University in Huntsville. He can be reached at
gtheodori@shsu.edu.

A paradox
Herein lies the paradox: On the one hand, the
general public distrusts the intrusion of the gas
industry and dislikes certain problematic issues per-
ceived to accompany it. On the other hand, the
majority of citizens appreciate and welcome the
economic and service-related benefits that accom-
pany the industry.
So what can industry do to change the negative
(mis)perceptions? A paramount concern involves
the funding and promotion of informational and
educational programs at the local level. Take, for
example, the popular notion that natural gas opera-
tors must adopt and use more environmentally
friendly drilling practices. Almost nine in 10 individ-
uals in our study agreed with that statement.
The reality is that an increasing number of
industry operators are striving to satisfy energy
demands while safeguarding the natural environ-
ment. These operators are producing hydrocarbons,
using an environmentally-friendly approach to ener-
gy development, which includes advances in areas
such as these: rig technology (smaller and lighter-
weight drilling rigs); drilling technology (directional,
multilateral, extended-reach drilling and pad
drilling); waste management (reduction, reuse and
safe disposal of drilling wastes); low-impact access
and transport (artificial or temporary road technolo-
gies to eliminate or reduce negative ecosystem
impacts); and pollution control (reduced rig noise
and air emissions). The fact that the majority of the
public does not know about these environmentally-
friendly measures indicates that the industry must
do a better job of promoting its accomplishments.
Second, energy operators must make a more
concerted effort to communicate openly with the
public and enhance involvement at the community
level. Residents need to be informed about local
energy developments. Open communication –
including full and honest disclosure about the
potentially positive aspects and negative conse-
quences of energy development – is likely to reduce
the chances of rumors and inaccuracies about cur-
rent activities and proposed developments.
Moreover, efforts to find ways to work with and
give back to communities will contribute to the
connection between local residents and the energy
industry and, in turn, may decrease community dis-
satisfaction and increase support of industry opera-
tions. As I often say, such efforts will surely mean
investments in time and money; failure to do so,
however, may prove to be even more time-consum-

June 18, 2009 Energy Report ✦ 21


Use of pooling act changes as drilling goes urban
W
ith the wide-
spread leasing in
the Barnett Shale,
many now understand that
small tracts of land are usu-
ally “pooled” – that is, they
are grouped together to
form a drilling and produc-
tion unit for a well. In Texas,
pooling is usually established LISA VAUGHN
by voluntary agreement. Shannon Gracey
However, to protect smaller Ratliff & Miller LLP
landowners who might be
unfairly excluded from leasing pools, the Texas
Legislature enacted the Mineral Interest Pooling Act
(“MIPA”), which authorizes the Railroad
Commission of Texas to force interests into a pool
in certain circumstances.
Economic reasons to pool
To exploit their mineral interests, most small
landowners will need to pool because their land is
too small or houses are too close together to sup-
port drilling. Operators also need to pool because it
allows them to hold many leases by drilling a single
well, and allows the well to be placed far from
where the reservoir will actually be tapped in order
to comply with various spacing and municipal regu-
lations.
Pooling also allows operators to insulate them-
selves against potentially expensive applications to
obtain exceptions to RRC rules governing well
placement, or having to defend against expensive
lawsuits alleging underground horizontal drilling
trespassed their land or breached other operator
duties. Economic reasons notwithstanding, howev-
er, sometimes interest owners simply cannot reach
an agreement on pooling.
Economic operation of the MIPA
Although MIPA was originally designed to bene-
fit small tract owners, it has proved too expensive
to efficiently protect those interests and the majori-
ty of MIPA applications are simply abandoned.
However, MIPA contains no boundaries on the size
of the applicant’s interest and so – to the surprise
of many – is easily accessible to operators or large
interest owners. Although there are numerous
technical requirements of a MIPA application, the
most significant restriction is that a party can apply
only after “fair and reasonable” offers to voluntari-
ly pool are rejected.
The MIPA statute provides that an offer to pool
“on the same yardstick basis” as those owners that
are already included within the pool is “fair and
reasonable.” That yardstick basis must take into
account what are called “reasonable risk penal-
ties.” A “risk penalty” is essentially a surcharge on
later occurring profits if a party does not pay his
proportionate share of the costs before the out-
come of the well is known. In the Barnett Shale,
because “dry holes” are nearly unheard of, any-
22 ✦ Energy Report
SYMPOSIUM SPEAKER
Accepting Finley’s argu-
ments, the RRC found that
forcing all leased and
unleased parties into the
proposed pool would bene-
fit them all and so ordered
the forced pooling.
thing more than a nominal risk penalty will surely
put the offer outside the “fair and reasonable”
standard.
In addition, MIPA dictates that a pooling offer
cannot be fair and reasonable if it gives the opera-
tor a right to unfair advantages, such as granting
preferential rights to purchase mineral interests,
charging other than reasonable overhead, or pre-
cluding disputes over operation. If the hurdle of a
failed “fair and reasonable offer” is met and the
RRC is persuaded to grant an application to force
pool, the RRC has several options for apportioning
ownership of production, distribution of royalties,
and responsibility for drilling and completion costs.
In all cases, however, the RRC’s mandate is to
reach a fair result for all parties and prevent the
drilling of unnecessary wells, prevent waste, or pro-
tect correlative rights. There are several other tech-
nical requirements, but none precludes an operator
from attempting to use MIPA, although most had
never considered it until recently.
In late 2008, Finley Resources, Inc. became the
first operator to successfully use MIPA after leasing
efforts obtained leases for only 83 acres in a 96-
acre area near Fort Worth, and those unleased
acres were scattered in small quarter-acre lots
throughout the interior of the 96-acre unit. In its
application, Finley argued that if the unleased inter-
ests were not forcepooled, neither the leased nor
the unleased interest owners would be able to
develop their minerals and the entire project would
remain dormant. Finley supported this argument
by showing that the sizes and locations of the non-
pooled interests precluded efficient drillpipe place-
ment and made it too likely that underground drill
pipe would unintentionally trespass one or more of
the unleased interests.
Accepting Finley’s arguments, the RRC found
that forcing all leased and unleased parties into the
proposed pool would benefit them all and so
ordered the forced pooling. The RRC did not grant
the involuntarily pooled owners a signing bonus,
but did grant them the same royalty percentage as
those who had last voluntarily joined the pool. In
addition, the unleased owners were granted a per-
centage of the profits to be generated after gas
sales, enough for Finley to recover its drilling
expenses. Thus, if actual production is large
enough, it is possible that the involuntarily pooled
owners may eventually receive more cash than
those who voluntarily joined the pool before the
MIPA application; until that point happens, howev-
er, those who voluntarily joined received the most
lucrative deal simply by virtue of their signing
bonuses.
In light of Finley’s successful use of MIPA, sever-
al operators have already filed or are planning to
file similar applications. The RRC, however, has
made it clear that MIPA can be used in this novel
way only when it is proved to be necessary to pre-
vent the drilling of unnecessary wells, prevent
waste, or protect correlative rights. In a similar
operator-filed MIPA application filed by XTO within
months after Finley’s result was announced, the
RRC stated that although Finley’s result is precedent
for this type of use, the RRC will hold strictly to its
mandates. Thus, finding that XTO’s proposed plan
was not necessary to protect correlative rights, the
RRC denied XTO’s application after XTO admitted
its proposed well and its underground pipe would
not drain the minerals under the unleased tracts.
At the time of this writing, it is unclear whether
that decision has become final or whether it has
been appealed.
Either way, Finley’s success has made it clear
that MIPA has the potential to be a cost-effective
method for operators to complete development in
urban areas when it fails to obtain leases for all of
the lots under which, or very close to which, hori-
zontal drill pipe must pass. Thus, in the most diffi-
cult of circumstances, MIPA’s forced pooling may
be an old dog that has learned a new trick. ER
Lisa Vaughn is an attorney at Shannon Gracey Ratliff
& Miller LLP.
Fort Worth Business Press

The 81st Texas Legislature: Few bills pass, many die
E
very other year, a cer-
tain sound that can
be heard in Austin.
You must be close to the
Capitol to pick it up, and
usually only a trained ear
can identify it. In fact, it
goes unnoticed by most citi-
zens. But it is an important
sound. It is a critical sound. KELLY MCBETH
It greatly disappoints some
Texas Energy Lobby
and causes others to
become jubilant. It is the sound that keeps exciting
things from happening. It is the sound that stifles
change.
It is the sound of bills dying.
Legislators eagerly meet every other January to
begin a five-month session to bring change to our
state and take something special home to their dis-
tricts. Sometimes, their proposals are ideas from
constituents. Often, the bills are the product of
interim studies, carefully crafted to strike a delicate
balance among industrial stakeholders. Many have
gone through endless hours of rewriting by staff.
Some are repetitions from earlier sessions that
failed to make a deadline.
This session, over 7,000 bills were filed – a
record. Can you even imagine that 7,000 things
needed to be changed in our state?
What does a dying bill sound like,
you ask? Mostly, it sounds like some-
one talking –talking too much and too
long. Most bills are strangled by mem-
bers who talk them to death. The
minute a bill gets filed, the talking
begins. Lobbyists start talking.
Legislators start talking. Voters start
talking. They talk about how to make
it better, how to delay it, how to kill it,
how to pass it. The problem is that, all
the time they are talking, the clock is
ticking.
If you are in the Capitol during a
legislative session and you hear expla-
nations and then debate for a pro-
longed period of time, you might be
hearing a worthwhile exchange of
ideas and vetting of a proposal. But
you are also probably hearing the
sound of some bills dying.
It reminds one of a wise pastor’s
proverbial admonition: “You should
talk less and pray more.” The adage
could easily adapt to advice for suc-
cessful bill passage: “Talk less and pass
more.”
What greater example than our
recent 81st Legislative session? Near
the end, it became clear that House
Democrats planned to kill the Voter ID
bill by questioning whether each bill
scheduled before it had been on the
June 18, 2009
SYMPOSIUM SPEAKER
calendar for the maximum allowed time. In an
unprecedented manner, the talking allowed a
Democratic minority House to own a Republican-
controlled House for five days and nights.
While they managed to keep Voter ID from
coming to the House floor, that intentional talking
did a lot of collateral damage. For five days, you
heard the sound of bills dying. By the time the talk-
ing had stopped, the deadline for bills to be heard
in the House was barely a day away.
All that talking resulted in the passage of only
about 1,400 of the 7,000 bills filed. Granted, some
good proposals fell short of passage. But the talk-
ing also did away with a lot of impractical ideas.
What talking killed in the 81st
Voter ID – Its death brought down over 200
bills with it. It would have required a photo ID or
two forms of identification at the polling place.
Eminent domain reform – Established a subjec-
tive standard that must be satisfied before a con-
demnation may occur, and included new protec-
tions for landowners.
Statewide smoking ban – A second-session
attempt to make Texas a smoke-free workplace
state.
Guns on college campuses – A proposal to
allow students with concealed handgun licenses to
This session, over 7,000
bills were filed. It was
a record. Can you even
imagine that 7,000
things needed to
be changed in
our state?
take their guns to school and store them in their
dormitories.
Restrictions on college tuition increases – A
bipartisan effort to freeze college tuition rates.
Notice requirement for drilling permits issued –
Would have required the Railroad Commission to
notify local elected officials each time a drilling per-
mit is issued.
CHIP expansion – Increased qualification to chil-
dren who are 300 percent over the poverty level.
Unemployment insurance – Would have applied
$500 million in stimulus funds to unemployment
benefits for the next two years.
Medicaid reform – This bill would have
increased the quality of and access to health care,
making Medicaid more efficient and focused on
preventative health.
Local option transportation funding – Would
have allowed counties to call a local election to
raise a number of fees and taxes, including the
gasoline tax, to pay for regional transportation
projects.
Needle exchange program – A second session
in a row attempt to allow intravenous drug users
access to sterile needles (which exists in nearly
every other state).
Electricity consumer protections – The bill creat-
ed a market monitor with discipline power for bad
actors in the retail market and gave
companies limited ability to disconnect
customers during the summer months.
Construction indemnification
reform – In construction contracts, this
bill would make each party responsible
for their own liability and would pre-
vent the transference of that liability to
another party.
Agency sunset bills – The $17 bil-
lion Texas Department of
Transportation sunset bill was not
approved and neither was the review
of the powerful Texas Department of
Insurance Workers’ Compensation
Division. The possibility of a special ses-
sion to address these agencies is possi-
ble.
There is only one master of the uni-
verse in a legislative session. It isn’t the
leadership, it isn’t the prevailing politi-
cal party. It is the clock.
The clock is sometimes subject to
manipulation. It happened once in the
Senate this session when the Sergeant
At Arms was asked to unplug the
clock just before the midnight deadline
so the Senate could continue working.
In the end, the clock wins – it is the
only trump to the talking. ER
Kelly Mcbeth is an energy lobbyist in
Austin.
Energy Report ✦ 23

Maximizing income from oil and gas royalty payments
W
ith oil and gas
prices significant-
ly lower than just
a year ago, mineral owners
must closely monitor their
oil and gas assets in order to
maximize their opportunities
to earn royalty income. As a
property owner, your work
doesn’t end when you JOHN TAYLOR
receive your bonus payment. PlainsCapital Bank
You are essentially starting a
business and entering a long-term relationship with
the operator.
Organize your oil & gas business
You’ll need at least three files to keep all your
oil and gas assets organized: a property file, a lease
file, and a well file.
The property file contains deeds and estate
records which prove your ownership of the mineral
assets. These documents show how you acquired
ownership in the minerals and what percentage of
those minerals you own. If you do not have these
documents, you can ask the lessee to provide any
documentation they may have.
Next, set up a lease file for each lease you have
signed. Develop a summary sheet showing the
effective date of the lease, the operator name and
contact information, the primary term, the expira-
tion date of the lease and the number of acres
included in the lease. If you have a map of the
lease, include it in this file.
Finally, create a well file for each well drilled.
This file contains the plat and permit filed with the
Railroad Commission of Texas (RRC), which shows
the size and shape of the unit and which lands it
encompasses, among other things.
Confirm that drilling has begun
The operator must begin a well within the pri-
mary term of the lease, which is usually two or
three years. If the operator does not drill a well
within this period, the lease lapses and reverts back
to the owner, unless the lease allows for an exten-
sion.
There are several ways you can monitor the
operator’s progress. You can check with the opera-
tor regarding the drilling schedule and any
updates. You can also check with the RRC to learn
the status of wells on your property, as operators
are required to report wells to the RRC. If drilling
has begun on your land, the RRC will know about
it.
If you have an information clause in the lease,
you can request the operator send you a copy of
the drilling permit and other documents they file
24 ✦ Energy Report
SYMPOSIUM SPEAKER
with the RRC.
You can always drive out to the lease and look
for drilling activity. Operators are required to post
signs when activity begins. Be sure to write down
the information on the signs such as the name of
the operator, the RRC well number and the name
of the well. This will help you when looking up
data on the RRC site.
Confirm that the entire well site is on your lease
In some cases, an operator may combine or
pool the acreage from two or more leases into a
single well spacing unit. Pooling is more economi-
cal for the operator but it can reduce your royalties.
That’s why it’s important to confirm that the entire
well is on your land (provided you have enough
acreage). Check with the operator to confirm the
entire spacing unit is on your lease.
As a property owner, your
work doesn’t end when you
receive your bonus pay-
ment. You are essentially
starting a business and
entering a long-term rela-
tionship with the operator.
If this is not the case, review the pooling provi-
sions in your lease. If your lease requires the lessee
to obtain your permission prior to pooling, then
you are in a much stronger position. Essentially,
your lease should not be pooled without your con-
sent.
You can also review the drilling permit or the
plat filed with the RRC to determine if the entire
well site is on your land.
Review the division order before signing
If the well is successful, division orders will be
prepared and sent to you for signature.
Review the division order carefully to verify the
royalty amount and to determine if the division
order comes from the first purchaser or the opera-
tor.
Verifying the royalty amount is a simple mathe-
matical calculation. Multiply the royalty in your
lease times your ownership interest of the minerals.
For example, if your lease called for a ¼ royalty,
and you owned a 1/5 of the minerals under the
tract, your royalty would be .25x.20=.05 or 5 per-
cent of the total production generated by the well.
If your tract is pooled, multiply your royalty by
your lease’s share in the overall unit. In the above
example, if your lease was 40 percent of the well
unit, your share of the royalties would be .05x .4=
.02 or 2 percent.
If you suspect the royalty amounts are incorrect,
you need to contact either the operator or the pur-
chaser issuing the division order. Once you have
verified the royalty amount, look to see who the
payor is on the division order. Typically, the payor is
the first purchaser that buys the oil and gas prod-
uct from your well. Occasionally, the payor is the
operator. In this instance, the first purchaser pays
the operator who in turn pays you.
Being paid by the first purchaser is the preferred
scenario. The first purchaser is typically a larger,
more credit-worthy company—you don’t have to
worry about slow payments or bankruptcy. If you
get paid by the first purchaser, you typically receive
your royalty payments 20 to 30 days sooner than if
you get paid by the operator.
If you are paid by the operator, the payment
process is generally slower because the operator is
the middle man. Once the operator receives the
funds, it takes time to process and cut checks to
royalty owners. Your lease may have a clause
allowing you to take production in kind, which in
most cases will provide the leverage to be paid by
the first purchaser instead of the operator.
However, in many cases, gas may still be paid by
the operator as it involves more complexities, such
as contracts.
Finally, you need to make sure the division order
complies with the Texas Natural Resources Code. In
the past, some division orders have included claus-
es extending, ratifying or modifying the lease. You
can either strike any language that contradicts the
Texas Natural Resources Code (TNRC), or you can
sign and attach an executed rider in which you
state that you are only signing the division order to
the extent it conforms to the TNRC. If you have
doubts, have an attorney or knowledgeable oil and
gas professional review the division order.
When it comes to managing oil and gas assets,
there are several opportunities for mistakes to hap-
pen and royalties to be affected. Understanding
the details of your lease is imperative as is careful
monitoring of the drilling process and the payment
of royalties. Remember to carefully review all the
documents you receive before signing them. Most
importantly, keep the lines of communication open
with your operator and enlist the help of profes-
sionals when you need it. ER
John Taylor is PlainsCapital Bank Wealth and
Investment Management Group president. Contact
at 214-252-4162 or jtaylor@plainscapital.com
Fort Worth Business Press
 Finding stability in today’s
volatile oil and gas industry
Many of the national banks that once courted the Barnett Shale miner-

T
he volatility of the oil and gas industry over
the last year has proven that such investing al owners are moving on, too. Because of the drop in prices, the banks
is not for the faint of heart. While many have experienced significant drops in their oil and gas portfolios. Barnett
mineral owners have tried to go it alone without Shale mineral owners are not as wealthy as they once were, so the nation-
enlisting the help of financial experts, it is more al banks have re-focused their attention on other segments of the market.
important than ever to protect oil and gas assets in The good news for mineral owners is that many of the local and
these challenging times. regional banks remain committed to their Barnett Shale clients. Mineral
owners can choose to do business with a local wealth manager who has
Overnight sensation extensive knowledge of the Barnett Shale and the local oil and gas indus-
Five years ago, no one expected oil and gas TIM RAETZ try.
leases in Denton and Wise counties to go for $500 PlainsCapital Bank
an acre. Then, almost overnight, lease prices Stability in the midst of volatility
jumped to $2,500 an acre and leasing activity expanded into Tarrant For mineral owners who have tried navigating the oil and gas industry
County and Johnson County. Bonus payouts skyrocketed from $5,000 an on their own during these turbulent times, some order and stability can
acre to $30,000 an acre, depending on the size of the tract of land. come from working with a wealth management team that has experi-
Hundreds of landmen descended upon county courthouses, running enced oil and gas property dealings. An experienced oil and gas property
title checks on neighborhood tracts. Neighborhood associations, munici- manager has the time, expertise and resources to monitor closely a client’s
palities, school districts and country clubs formed mineral holdings while at the same time positioning the client for future
committees to explore ways to lease their land gains.
for oil and gas exploration. Mineral owners are often busy professionals
The good news for mineral who do not have the time to manage their oil
Nearly all the surface and mineral rights
associated with neighborhoods in Tarrant and owners is that many of the and gas assets. An oil and gas property manager
Johnson counties were attractive to prospective monitors pricing, production and reporting on a
lessees. local and regional banks regular and consistent basis to ensure the client
While drilling opportunities abounded in the is receiving the right amount in royalties.
remain committed to their While oil and gas property managers can rep-
Barnett Shale, the rapid expansion of oil and
gas exploration in urban areas caused pipeline Barnett Shale clients. resent a valuable resource to mineral owners
issues and increased drilling costs. But oil and when they are negotiating a lease, many times
gas operators continued to lease and drill as such managers are not brought on board until
quickly as they could. after the deal is done. When looking for an oil and gas property manager,
On Wall Street, energy stocks continued to rise in value. By 2008, oil a mineral owner should consider the experience and qualifications of the
and gas prices had hit all time highs of $140 per barrel and $13 per MCF. individual as well as that person’s accessibility to clients and — equally
People in the industry began to ask: How long can this boom last? important — the overall experience of the wealth management team. The
mineral owner also should inquire about the financial institution’s stability,
Everything changes its commitment to this area and its ability to process and react to oil and
When the economic downturn began last fall, oil and gas prices began gas issues in a timely manner.
to plunge on rumors of an oversupply of gas. By December 2008, oil and Last year, when oil was selling at $140 a barrel, everyone knew the
gas leasing in the Barnett Shale had all but stopped. Oil marketers were price was inflated and that eventually there would be a correction. I do
left holding large contracts of undelivered oil. Leasing bonuses had not believe anyone anticipated the dramatic decrease we have experi-
dropped dramatically, and drilling costs remained high. Operators, fearing enced. However, I am seeing signs that oil and gas activity is picking up.
the worst, hoped at least to break even. While prices probably will not return to their previous levels, mineral own-
Now in the second quarter of 2009, drilling costs have begun to drop ers can still profit from their holdings. How well they profit depends on
while oil and gas prices are rising. In addition, leasing activity in the their ability to preserve and protect their oil and gas assets. ER
Barnett Shale is growing, and bonus payouts are averaging about $2,500
per acre. Tim Raetz is senior vice president and senior oil and gas manager for
However, drilling activity in the Barnett Shale has not returned to previ- PlainsCapital Bank’s Wealth Management & Trust Group. Raetz may be con-
tacted at 817-258-3764 or tim.raetz@plainscapital.com.
ous levels, and many of the major players have shifted their focus to other
shale plays across the U.S. In fact, some are beginning to sell their Barnett
holdings to other companies in the hopes of raising capital.

June 18, 2009 Energy Report ✦ 25

 Number of Producing Barnett Shale Wells Over Time as of Jan. 1, 2009
All Counties/Fields in the Fort Worth Basin

Historical Performance by County of Barnett Shale Producers

to January 1, 2009

26 ✦ Energy Report Fort Worth Business Press

 Number of New Vertical and Horizontal Producer Wells by Year as of Jan. 1, 2009
All Counties/Fields in the Fort Worth Basin

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

Relevant. Reliable. Responsible.

www.fwbusinesspress.com

June 18, 2009 Energy Report ✦ 27

 Barnett Shale Gas Proved Reserves* and Proved Ultimate Recovery**

Barnett Shale Monthly Natural Gas Production and Total Producing Wells

28 ✦ Energy Report Fort Worth Business Press

 Barnett Shale Monthly Liquid Production and Total Producing Wells

Barnet Shale Liquids Proved Reserves* and Proved Ultimate Recovery*

June 18, 2009 Energy Report ✦ 29

 Legends and Legacies of Texas Oil
Don Harrington: A Panhandle humanitarian of nationwide influence
By Michael H. Price
T
hirty-five years have passed since the
death of Donald De Coursey
Harrington, an Amarillo-based force in
the petroleum industry and its conjoined-
twin field of philanthropy – and still the
name carries a news-making impact.
Coupled with the arts-patron identity of his
wife, Sybil Harrington, the influence persists
in arenas ranging from university-based
research programs to Scouting to the
Metropolitan Opera of New York.
Keystone dates to which their social bear-
ing can be traced – apart from the standard
birth-and-death milestones – would include
Illinois-born Don Harrington’s arrival in 1926
at Amarillo in pursuit of a career amidst a
regional oil-and-gas boom; his marriage in
1935 to Sybil Buckingham; and their gift in
1945 of 640 acres in Palo Duro Canyon to
the Llano Estacado Council of the Boy
Scouts of America. Camp Don Harrington
remains a busy incubator of merit-badge
projects, with its 12 permanent campsites
and an array of athletic amenities.
From that first step toward a legacy of
grand-scale philanthropy, the Harringtons
developed a history of bequests that have
ranged into the hundreds of millions of dol-
lars. In 1964, the Harringtons donated their
entire collection of 19th century European
art – the likes of Monet and Renoir – to the Phoenix Art Museum, along
with funding for expansion, endowments and art conservation.
Each spring, the Donald D. Harrington Fellows Program of the
University of Texas presents a symposium at Amarillo College. In a recent
article for the local newspaper, lawyer and Harrington-circle friend Wales
Madden Jr. used the occasion to impart some revealing background
about the founders:
“The Panhandle oil boom of the 1920s attracted a variety of adventur-
ers, harboring an entrepreneurial spirit mixed with a willingness to gam-
ble on long odds,” wrote Madden. “Into this environment sauntered
Don Harrington, a man generously endowed with the intellectual, physi-
cal and competitive qualities to succeed … Thirty years later, Don
Harrington and his partners [notably, patriarchs of the influential Hagy
and Marsh families] had amassed an impressive portfolio of oil-and-gas
properties and had sold a portion of these for more than $100 million.”
Madden recalls that, in 1984, Sybil Harrington told him: “I want to
create a scholarship program that will appeal to leading academicians
around the world and would be comparable with a Rhodes Scholarship.”
Hence the Don Harrington Fellows Program.
“Ultimately,” as Madden tells it, “it was Mrs. Harrington’s wish that
the program should have no limitations on academic disciplines… Mrs.
Harrington insisted that there be no publicity until after her death.” (Sybil
Harrington died in 1998.)
“I concluded I would make one final effort to convince Sybil that she
30 ✦ Energy Report
should be recognized for her benefaction
while she was alive… Her comments give a
real insight to one of the most remarkable
women the Panhandle has ever produced:
Madden: “Now hold on, Sybil, don’t say,
‘No,’ until I finish.”
Mrs. Harrington: “You’re finished,
Willie.”
Madden: “The university would like to
bring you to Austin to host a dinner, recep-
tion and attendant press events.”
Mrs. Harrington: “Ghastly.”
Madden: “How about a trip to Austin
with a scaled-down social function?”
Mrs. Harrington: “Never.”
Next paragraph: “We can skip every-
thing, Sybil, other than an announcement
from Austin?”
Mrs. Harrington: “We can skip every-
thing … My name will be used only as the
donor – in memory of Don. Comprende
vous?”
“Since its inception,” adds Madden, “the
Don Harrington Fellows Program has made
awards to 21 faculty fellows and 68 graduate
fellows from virtually all corners of the
earth.”
At the beginning of Don Harrington’s
career in a boom-town environment, his Yale
training as an engineer provided an edge in
acquiring oil-and-gas leases – a coherent big-
picture grasp of an industry that had begun
in lucrative chaos. Few rivals or colleagues perceived the industry in such
deep-focus perspective. His development of the historic Cargray Plant –
named after its home-counties of Carson and Gray – established lasting
standards for petroleum production. In affiliation with Lawrence Hagy
and Stanley Marsh Jr. since the late 1920s, Harrington nailed oil-and-gas
rights on thousands of acres in the crucial Panhandle and Hugoton fields,
along with ranching interests, while sustaining a citizen-of-the-world out-
look that ranged from the Amarillo Country Club to the Brooks Club of
London.
Sybil Harrington, an accomplished pianist, relished the opportunity
that such wealth allowed her to become a patron of the arts. The
Harrington Foundation’s gifts to the Amarillo Symphony Orchestra and
West Texas State University led to ever-greater bequests on an ever-
broadening scale. In 1979, Mrs. Harrington began a campaign of support
for New York’s Metropolitan Opera, which in 1987 christened its main
hall as the Sybil Harrington Auditorium.
In a late-in-life interview with the Amarillo Globe-News, Lawrence
Hagy remembered his business partner from the long-gone wildcatter
days in emphatic terms: “Work was a way of life for Don. He worked
harder and longer hours than anyone I have ever known. He never quit
working until the day he died. Some of us slowed down, but not Don.
What he made, he earned.” ER
mprice@bizpress.net
Fort Worth Business Press