The New Boom
Cherokee County riding the tide of the latest petroleum surge
BY ROBIN D. BEST SPECIAL CONTRIBUTOR

PHOTO: TARA CROSBY

Beneath the lofty boughs of East Texas pine, the Cherokee County soil sighs with the secret of untapped natural resources.

The legendary Texas oil industry surged into East Texas eight decades ago when oil was discovered near Kilgore.

Many fortunes were made as crude seeped from the Texas soil, including East Texas.

The oil boom surged again nearing the end of the 20th Century, as natural gas wells became commonplace in areas around East Texas.

But as many shallow wells went dry, the industry suffered when politicians discovered an oil and gas industry could operate off of Middle Eastern countries, rich in oil and gas.

New technologies have made it more economical and more practical to dig wells deeper and pull oil and gas from deep under Cherokee County and East Texas.

"Right now, it's not necessarily oil, but natural gas," said Wayne Morgan, with Affiliated Surveyors Incorporated in Rusk. "I have worked all over East Texas and beyond. My work now is primarily in Panola County.

"We call them oil wells, but they're not necessarily oil wells," Mr. Morgan added. "The majority of what you are looking at now is gas production."

The new boom has sent the natural gas business surging.

According to figures released at the end of March by the

Texas Railroad Commission, which has regulatory oversight over the oil and gas industry, "The Texas average rig count as of March 16 was 818, representing about 50 percent of all active land rigs in the United States. In the last 12 months, total Texas reported production was 342 million barrels of oil and 6.1 trillion cubic feet of natural gas."

Texas natural gas production represents approximately 29 percent of the total U.S. natural gas demand.

With recent increases in pricing, oil and gas companies are finding it profitable to seek out new gas resources - very profitable.

"The price is the driving force of the rig count, and of course right now, that count is up," said Andy Mills with Mustang Drilling. Headquartered in Henderson, Mustang operates and drills for oil and gas across East Texas.

"It has been a big benefit to the community, besides folks getting a royalty check," Mr. Mills said. "It's huge. It is a very positive thing for our local economy. If you think about it, as high as the cost is, the benefits are a lot better than if you were living in a region where there wasn't any benefit of drilling."

Mills knows what he is talking about. According to Baker Hughes, an oil and gas tracking system, the rig count in East Texas has increased by more than 40 rigs in the last five years. By some accounts, the increase is even higher. And all of that activity has occurred while, at the same time, rigs in the Deep South and offshore areas have shown a steady decline.

Even old faithful reserves such as West Texas around Midland have shown losses in rig counts.

As the activity increases in Cherokee County and East Texas, oil and gas-related employees have increased also. While many are temporary and transient, filling motel rooms and temporary housing, some have moved to East Texas with long-term aspirations.

With the resurgence of wells producing gas, the need to transport the gas to production points has been growing as well. During the last year, three large gas pipelines have been under construction across Cherokee County.

Energy Transfer, a company specializing in the transportation of gas, constructed a 264- mile pipeline which extends across Cherokee and several other East Texas counties. The production of the $538 million gas pipeline has increased the value of the property on which the line sits. The line extends from Fort Worth to Carthage.

A similar pipeline and increased property valuation in northern Cherokee County has increased Troup Independent School District property valuation from $200 million in 2004 to almost $300 million in 2005.

Energy Transfer is also building a $27 million, eight-compressor gas pumping station a few miles southwest of Lake Striker, near Reklaw. The company plans to add another 42-inch line soon.

New well permits are continuing to surge for East Texas and Cherokee County is doing its part.

Cherokee County is located in the Texas Railroad Commission 6. The most recently released figures for permits issued by RRC to drill new oil/gas wells in Region 6 included 164 in February, with 11 oil completions and 139 gas completions.

Drilling permits in Cherokee County since October were secured by: Windsor Energy Group L.L.C., Chesapeake Operating Inc., Petroquest Energy L.L.C., XTO Energy Inc., C.W. Resources, Inc., Southwestern Energy Production Co., Barrow-Shaver Resources Co., Goodrich Petroleum Co., Lime Rock Resources, Endeavor Natural Gas L.P., Cordillera Texas L.P., and Wagner Oil Co.

"They are getting gas now that they used to get rid of," Mr. Morgan said. "Back in the 1930s-50s, they 'flared' (burned as waste) what we are producing now. They didn't know how to refine the gas like they do today and get all of those byproducts out."

Many oil experts like Baker Hughes, believed early on that the new gas surge was going to be short-lived. But the deepening and widening of the initial surge has changed a lot of people's minds.

A wildcatter spirit that has not been seen in the area for more than 60 years is moving into the forefront of the East Texas economy.

While oil and gas companies benefit, counties, schools and local governments are benefitting from severance taxes and increased property values as well.

"I don't think it is as radical as it was back in 1982 or '83," Mr. Mills said. "But if the prices could hold for two or three years, I think it could get back there."