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March 11, 2013

Gas drillers turn to Georgia

(Continued)

Bounty unclaimed

In Alabama, the Conasauga shale field contains 625 trillion cubic feet of gas, according to Bill Thomas, a geologist who taught at the University of Kentucky and Georgia State. A similar amount could be underground in Northwest Georgia, he added.

Wildcatters have poked around the state since the 1950s. Georgia officials in 1958 were so determined to create an oil industry that they offered a $1 million reward for the first gusher. The bounty, since reduced to $250,000, remains unclaimed.

Most drilling took place on the Coastal Plain, below the so-called Gnat Line that runs from Columbus to Augusta. Between 1903 and 1979, according to the Bureau of Land Management, 163 wells had been drilled in Georgia.

“All wells have been dry,” the BLM said in 2008. “No oil and gas wells are forecast to be drilled in Georgia in the next 10 years.”

Spalvieri received Permit Nos. 166 and 167 for his test wells outside Dalton in March 2010. Alabama, with on- and off-shore gas and oil wells, has issued 16,700 permits since 1945, according to the state’s oil and gas board.

Drawn by the geologic similarities embedded in the Conasauga formation, Spalvieri investigated Georgia in 2007. Within two years Buckeye and a partner had leased 7,500 acres of mineral rights from 130 landowners. Hundreds of acres remain under contract. The leases allow unlimited drilling on the property.

“Nobody was very optimistic about it, including the state. It was like I was being a bother to them,” said Spalvieri. “But it just staggers me that the largest land area in the East had never had a producing oil or gas well.”

Buckeye narrowed its search to two properties about seven miles northeast of Dalton. They began drilling in the Good Hope community in late 2010, but stopped after a few hundred feet once rivers of water intervened.

Buckeye drilled 5,065 feet at the other well a few miles away. They needed to go deeper. Salvieri will soon bring in another rig to reach 9,000 feet. He’ll also re-engineer his first well and dig another test well.

“It’s rank wildcat. There’s very little known about the gas in the area,” said Spalvieri, a petroleum geologist whose company has dug more than 250 wells — and hit the jackpot a half-dozen times — across Oklahoma and Tennessee. “But I’m really encouraged by the structure and some of the things we’ve encountered.”

At least three other companies are interested. Forestar, a publicly traded Texas real estate, timber, oil and gas company, controls mineral rights for 67,000 acres in Floyd and Chattooga counties. In all, Forestar owns nearly 600,000 acres of oil and gas mineral rights in Texas, Louisiana, Alabama and Georgia, its website says.

The company expects to start drilling in Cave Spring in May, according to a state permit. The planned well even has a name: John Wayne-Mudcreek No. 1. At 14,000 feet, it would be one of the deepest ever in Georgia. Forestar declined comment.

Jim Kennedy, the state’s geologist, says another company is considering the shale gas fields of the Mesozoic Basin that covers 60 percent of the Coastal Plain in South Georgia.

Georgia’s neighbors to the north aren’t wasting time either. Regulators in Tennessee and North Carolina are updating drilling and fracking rules. The Chattanooga Free Press reported earlier this month that a half-dozen drilling companies are considering mineral rights leases in Hamilton County bordering Georgia.

A natural gas industry in Georgia could bring the state jobs and tax revenue.

“It would change the whole dynamics of the state economy, but it all depends on the scale of production,” UGA economist Jeff Humphreys said. “Georgia has always been an energy consumer, not a producer. This could prove a counter-weight to the damage done to the state economy whenever energy prices rise.”

Northwest Georgia, whose flooring industry was hit hard by the recession, could use a new industry. Dalton’s unemployment rate remains stubbornly high at 11.3 percent.

A few Georgians already benefit from mineral lease payments. The big bucks come if Buckeye or Forestar hits a gas gusher. Property owners would receive royalty payments equivalent to one-eighth of the market price of gasoline.

Fred Mayfield, a Dalton CPA and gentleman farmer with cows, horses and 175 acres of forests and pastures, doesn’t really need the riches that one day could flow from his Buckeye well. “I’m pretty comfortable now,” he said. “But I suspect if they strike gas or oil it might affect my children’s lives.”

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