Chris Moreno lost his job managing a print shop two years ago, just after his wife became pregnant and they’d started building a house on 40 acres near the shores of Caddo Lake.
He fretted he’d have to relinquish his humble piece of paradise, where he indulged his country boy’s passion for hunting raccoons and catching catfish.
But now fortune has smiled on Moreno: He’s poised to become a millionaire, all because of that 40 acres he bought eight years ago for $45,000.
Landowners here in the piney three-state junction known as Ark-La-Tex recently learned that in this energy-starved era, they may be sitting on the largest natural gas field ever found in the continental U.S. The discovery of the Haynesville Shale, which lies mainly beneath Louisiana but branches into Texas and Arkansas, was disclosed in March by energy companies, which had been quietly buying up drilling rights for months before telling the public.
The news has triggered a flurry of speculation as frantic as anything seen here since a gusher on a Texas hill named Spindletop in 1901 ushered in the modern oil industry. Hordes of landmen, leasing agents for the energy companies, have descended on Shreveport, the unofficial capital of Ark-La-Tex, dangling gaudy sums before landowners in hopes of getting permission to drill beneath their properties. Firms that earlier this year were leasing land for $200 an acre are now paying upward of $20,000 an acre, leaving thousands of homeowners dreaming of plasma TVs and sports cars.
The windfall is changing lives for people like Moreno, 38, whose big worry has become whether to take the money now or hold out in hopes of getting even more. Energy companies have offered him $750,000 upfront to drill his land, as well as 25% of whatever the wells yield, which could bring him an additional $900,000 a year. But the bids keep getting larger, so he’s waiting. Chesapeake Energy Corp., one of the major players in the Haynesville Shale, recently told investors that it thought the deposit was the world’s fourth-largest.
“They’re throwing so much money around, it’s easy to lose your mind,” Moreno said. “Where do I draw the line? I do feel like my luck has changed overnight.”
Never mind that only a few dozen wells have been drilled and the rest could come up dry. The mere promise of a big strike in natural gas, which has soared in price, has already brought hundreds of millions in investment dollars to Shreveport, a riverboat gambling hub. That’s turned Ark-La-Tex into a particularly vivid example of how America’s thirst for energy is creating wealth in a few lucky pockets of the country, even as high oil and gas prices drag the overall economy down.
Michael Long, a Shreveport councilman and third-generation veteran of booms and busts in this rollicking region, where fortune has often shifted with the price of oil, said now he knows how his Irish grandfather must have felt when he headed here with his four brothers a century ago in search of instant riches.
“This Haynesville fever has extended pretty far, pretty fast,” Long said. “A lot of landowners are sitting there thinking, OK, I’m ready to make my million dollars.”
The Haynesville Shale comes after the Barnett Shale, a similar natural gas find in the Dallas-Fort Worth area that has been extraordinarily productive and profitable. The Barnett Shale has spurred drilling in shopping mall parking lots and suburban subdivisions, and generated tens of thousands of jobs and more than a billion dollars a year in state and local taxes.
The Barnett and Haynesville formations are geologically similar, and companies have shown they can now extract gas from previously unreachable places, leading experts to predict that the Haynesville Shale will make fast fortunes in Shreveport and bring decades of lucrative royalty payments.
“This is already the biggest thing ever to happen to this area,” said Bill Pittman, a former landman who’s started a website, MyOilPro.com, to advise property owners. “It’s life-altering.”
Bank tellers share stories of customers walking in with wide smiles and $800,000 checks. Companies have complained of spies sneaking around their test wells at night, trying to glean how much gas they’re pulling up. An energy executive claimed rivals were hiring exotic dancers to go door to door to entice landowners. A popular rumor, knocked down by law enforcement but still spreading, was that Department of Homeland Security officials had warned that something fishy had to be happening because too much money was changing hands.
For the Shreveport-Bossier YMCA, the Haynesville Shale is the biggest stroke of luck since Elvis Presley sang a benefit concert before 10,000 screaming teenagers in 1956, raising enough money for a new swimming pool.
When Gary Lash took over as chief executive six years ago, he said the YMCA had $500 in the bank and $600,000 in debt. Now it’s flush after energy companies upped one another in competition for the rights to drill beneath its 47-acre recreation spot, Camp Forbing. Lash has hired a camp director and is planning to spend several hundred thousand dollars to construct a rope course. He’s thinking about building a new branch.
“It’s crazy money,” Lash said, though he declined to reveal how much the Y got. “But if they’re willing to pay it, we’re willing to take it.”
There is a dark side to the Haynesville Shale mania, however, and it is worrying politicians and activists. Like California during the Gold Rush, Shreveport, population 200,000, is suddenly awash in dubious characters taking advantage of the gullible.
Freelance landmen are coaxing naive landowners into signing away gas rights for small amounts and are then selling the contracts at huge profit. Long said he was outraged to hear the story of a man who turned to his preacher, a landman, for advice and ended up signing with him for $200 an acre when bonuses were going for thousands.
Anger is simmering among some landowners who signed early for a relative pittance -- only to learn later that energy firms had strong scientific evidence that the Haynesville Shale could be historic. But others shrug and admit they would have done the same if they were the energy companies.
Brent Rowell leased 60 acres in east Texas for $250 an acre and what he thought was an exceptional 20% cut of whatever the wells produced -- monthly royalty checks known in these parts as “mailbox money.”
“I hadn’t even gotten over patting myself on the back when I read in the paper, ‘Chesapeake Energy wants to drill the best Haynesville Shale wells on your land.’ That was news to everyone out this way. Of course the going royalty rate now is 25% and goes up by the day.”
Still, Rowell said he wasn’t bitter.
“Did Chesapeake know I was sitting on top of Haynesville Shale? Of course. That’s why it is called oil and gas business,” he said.
In Stonewall, a country town of 1,700 about 30 minutes south of Shreveport, Kassi Fitzgerald is doing her part to educate neighbors.
A registered nurse, Fitzgerald said she was spurred to activism after learning that her next-door neighbor, who speaks little English, signed a lease for $350 an acre at the same time she was offered $1,000. “That Hispanic man bought the worst lot on our block and he’s worked his tail off to fix it up,” said Fitzgerald, who was banding remaining neighbors together to command a higher price. “It killed me to see him get ripped off.”
Fitzgerald stepped into a hair salon inside a mobile home and chatted up owner Mary Ott and her customers, who appeared to be talking about little else but the Haynesville Shale.
“I was all ready to accept that first $250-an-acre deal,” said Ott, who owned a little over 4 acres that she wound up leasing for $53,000. “I had a stamp on it and everything. Fortunately, I am a procrastinator.”
Talk turned to a neighborhood where residents were offered $7,500 an acre, compared with $12,500 down the road. Why, asked a woman having her hair curled, was there such a disparity?
“It’s the difference between brick houses and trailers,” Fitzgerald replied. “They’re doing it based on socioeconomics.”
Thomas S. Price Jr., a Chesapeake vice president, said the company was thrilled about the gas field’s potential -- he talked of a future in which Louisianans would fuel cars with clean-burning natural gas instead of gasoline.
But he said that anyone who believed the Haynesville Shale was a lock must be a rube. He recalled that a similar frenzy over a gas deposit in central Louisiana called the Austin Chalk ended in failure for Chesapeake, though landowners walked away richer.
“We were buying leases like crazy, and it turned out to be a disaster,” he said. “And let me tell you, there wasn’t one person who came back and said, Sorry, fellas, here’s your bonus money back.”
For now, companies with stakes in the Haynesville Shale are riding high. Petrohawk Energy Corp. is a relatively minor gas player -- but its big holdings happened to be in northwestern Louisiana, a situation that allowed it to seize a share of the Haynesville splotch. Its stock has doubled in the last five months.
Moreno, who now works for a window company, and other landowners share information online on the best bonuses being paid out by energy companies, as well as which landmen are honest.
Moreno wants to do right for his boys, Lucas, 9, and Wyatt, 1. He would love to get enough money to coax his wife, Ginger, a respiratory therapist, into staying home with the kids. But he also wants assurances that his hunting ground won’t be sullied by drilling, because for a sportsman like him, some things are more precious than mailbox money.
“They’re not going to leave me with a big mudhole when they’re gone,” Moreno said before stepping out for a night of ‘coon hunting with an old pal.
“I’m going to make sure I do this right.”