Energy firm opens up Conway office, adds 150 new jobs

CECILY LONG
ARKANSAS DEMOCRAT-GAZETTE

   Southwestern Energy Co. moved into its $25 million regional offices in The Village at Hendrix on Monday, bringing with it 150 new jobs to go with the 170 existing jobs.
   When the Houston-based natural gas company announced in December 2008 plans to build the Conway facility, it said the average salary would be $60,000, and include geologists, petroleum engineers, information-technology workers and accountants.
   “We’re proud of this beautiful facility,” Conway Mayor Tab Townsell said.
   “Ten years ago, a company like Southwestern would want to go to Little Rock,” he said. “We have been able to build up the community in such a way that they’re wanting to come here, a signature sign of success for the city.”
   The new facility sits on more than 11 acres and can accommodate 500 employees, according to Southwestern Energy.
   “This company has certainly grown to be one of the largest employers in Faulkner County,” said Brad Lacy, president and chief executive officer for the Conway area Chamber of Commerce and the Conway Development Corp.
   Lacy said Tuesday that the office building puts a face on the thousands of Southwestern employees who work throughout the city. “It’s tangible evidence of the impact of natural gas on our community,” he said.
   The company will be the fourth business in the Village and is the first corporate office in the mixed-use complex.
   Hendrix College has been in discussion with Southwestern about creating programs for future Southwestern employees, though nothing has been finalized, according to the school.
   However, Hendrix students and faculty members, as well as Southwestern representatives, have been active in development of the 18-acre Hendrix Creek Watershed project currently under construction in The Village at Hendrix, according to a statement issued by the college Tuesday.
   Southwestern Energy will be in walking distance of Panera Bread Co., ZaZa Fine Salad and Wood Oven Pizza Co., and Village Books. Greg Nabholz, director of Sperry Van Ness, which manages the Village, said Southwestern Energy employees will be able to walk from their offices to restaurants and shops.
   “This is something you’re seeing all over the country,” Nabholz said about complexes such as the Village. “Being so close to restaurants and shops will help with gas and [promote] health, because people will walk instead of drive.”
   One Southwestern employee has already moved into the Village’s residential area, and others are showing interest, according to Beth Tyler, marketing director of sales and Realtor for J.C. Thornton and Co.

Panel bans new wells for disposal

Wants to study cause of quakes

ALISON SIDER
ARKANSAS DEMOCRAT-GAZETTE

   FORT SMITH — The Arkansas Oil and Gas Commission voted Tuesday to issue a six-month ban on new wells for disposal of natural-gas drilling fluids in a portion of the Fayetteville Shale formation out of concern that they may have contributed to hundreds of minor earthquakes in that area in recent months.
   Seven disposal wells are in operation in the 576-square-mile moratorium area around Guy in Faulkner County. Applications for two more wells will be revisited in July.
   Shane Khoury, deputy director of the commission and its chief counsel, said that preliminary studies show “circumstantial evidence” supporting the connection between earthquakes and the disposal wells. He noted that there have been clusters of temblors near the seven disposal wells.
   There are more than 3,000 production wells in the formation, which stretches from Fayetteville across northern Arkansas to the Mississippi River.
   The moratorium will give scientists time to gather more evidence as to whether the disposal wells are in fact related to earthquake activity. The commission will require the disposal wells already operating in the moratorium zone to submit biweekly reports of the amount of fluid injected each day, and the maximum pressure. Larry Bengal, commission director, said that companies are already complying with this request.
   The commission will join with the Arkansas Geological Survey, the U.S. Geological Survey, and the University of Memphis’ Center for Earthquake Research and Information to study whether the disposal wells are linked to the quakes.
   If a link is found, “we anticipate at that point some type of regulatory response will be put forward for consideration,” Bengal said. That response could include new rules addressing well pressures and rates, or an extension of the ban on new disposal wells.
   There have been more than 600 reported earthquakes in the moratorium area since September. This is not the first time the area has been rocked by earthquakes. A series of earthquakes around Enola, about 20 miles southeast of Guy, began in 1982 and continued periodically for a few years. That series included 540 reported earthquakes in its first six months, according to the Arkansas Geological Survey.
   Drilling for natural gas by using the hydraulic fracturing method in the Fayetteville Shale formation began in 2004.
   Khoury said it does not appear that production wells are responsible for the quakes. But studies do not rule out disposal wells, he said.
   The Enola series was a natural phenomenon that could have been caused by “fluid migration” underground said Scott Ausbrooks, a geohazards supervisor with the Arkansas Geological Survey. That could be happening again, he said, but it is also possible that pressure from the disposal wells are causing fluid migration this time.
   Fluid-disposal wells are typically deeper and under pressure for longer periods than production wells, which could explain a link to the earthquakes, he said.
   At its meeting in December, the commission approved a one-month temporary ban on new disposal wells to give opponents and interested parties a chance to prepare a response.
   But the measure was not disputed by representatives of well owners attending the meeting. Charles Morgan, a Texarkana attorney representing Poseidon Energy LLC, at first objected to the commission approving the moratorium without presenting evidence linking the disposal wells to the quakes.
   “I just think entering the order without evidence of a causal connection is not the way to handle it,” Morgan said at the meeting.
   But Morgan later withdrew his request, saying he was not in a position to present evidence that the disposal wells are not causing earthquakes. Poseidon Energy holds a permit for a well it has not yet drilled in the moratorium zone, but is seeking a permit to drill a deeper well than originally planned. That will now have to wait until at least July.
   Morgan said he will wait and see what the commission decides to do in six months.
   Bob Costello, an attorney for Chesapeake Energy, came to the meeting with information to present but also did not challenge the moratorium.
   “We’ll let the government entities have time to study the issue,” he said after the meeting.
   When asked about any evidence the company had that commercial disposal wells are not contributing to earthquakes, Costello would not get into specifics.
   “I would live in the Guy area, knowing what I know,” he said. “There’s nothing to be afraid of.”

State lightens load on shale-area roads

New truck-weight restrictions placed on 133 miles in six counties

NOEL E. OMAN
ARKANSAS DEMOCRAT-GAZETTE

 
   New weight restrictions will be imposed next month on 133 miles of state highways in six counties in the Fayetteville Shale area because of the damage caused by gas drilling industry vehicles, the Arkansas Highway and Transportation Department announced Tuesday.
   The restrictions, which are to take effect Feb. 14, are focused on 13 sections of highways in Cleburne, Conway, Faulkner, Independence, Van Buren and White counties. Eight sections will go from the standard 80,000-pound weight limit to a 73,280-pound weight limit. The other five will drop to 64,000 pounds.
   “Wow,” marveled Faulkner County Judge Preston Scroggin, who said Tuesday that he had heard rumors of the impending restrictions. “A hundred something miles in six counties? That’s a big deal.”
   The action is the latest the Highway and Transportation Department has taken to try to mitigate damage on the once quiet back roads in one of the biggest natural-gas areas in the United States, where a frenzy of drilling activity has popped up over the past few years.
   The Fayetteville Shale formation, which runs from Fayetteville to the Mississippi River, covers about 2,500 square miles in a narrow band across the northern part of the state.
   The exploration for natural gas in the Fayetteville Shale began in 2004 and ramped up through the balance of the decade. Unlike traditional drilling, which was used for natural-gas wells in west Arkansas, the technique in the Fayetteville Shale requires drilling down and then sideways to fracture the shale and extract the gas.
   Such drilling can require more than 2,000 truckloads of water, sand and other material per well.
   The highways and other roads in the drilling area were generally lightly traveled by lightweight vehicles before gas exploration moved in and weren’t built to withstand the weight and the increased traffic. Some highways in the region have seen their traffic counts more than double, according to a Highway and Transportation Department analysis released last year.
   That analysis tallied damage totaling $450 million on state primary and secondary roads in a 10-county region.
   The department has tried to tackle the problem from several angles.
   In 2008, the department began assessing fees on natural-gas drilling companies for road damage. That policy applied only to state highways that restrict the weight a vehicle may carry over them. Weight-restricted highways account for just 1,100 miles of the state’s 16,000-mile highway system, or about 6 percent of the total.
   Under the policy, the agency assessed $18,000 in damage fees from energy companies for every gas well for which heavy vehicles are used on weight-restricted highways. The $18,000 figure was based on an engineering calculation that includes how many loads are carried to and from each well, how much they weigh and how far they travel.
   In 2009, the state Highway Commission adopted an order putting in place a process for establishing weight restrictions on nonweight-restricted highways to “evaluate and assign weight restrictions on certain highways as may be necessary.” Tuesday’s announcement was a result of such an evaluation, said Glenn Bolick, an agency spokesman.
   Last year, the department began steering money to highway improvement projects in the Fayetteville Shale area. The Arkansas Highway Commission has awarded contracts on 11 projects totaling about $18 million in the region.
   Also last year, the department struck a deal with a Southwestern Energy subsidiary in which the department agreed to drop a weight restriction on a section of Arkansas 124 in exchange for the company paying for a 4-inch asphalt overlay.
   But given the amount of damage gas industry vehicles have caused, the Highway and Transportation Department does not have the money to address it all, said Randy Ort, an agency spokesman.
   “One thing we can do to slow down some of the damage is to limit some of the weights along more roads,” he said.
   The highways with the lowest weight restrictions are either “more severely damaged or don’t have the base to support it,” Ort added. “The structure of those roads have been jeopardized or compromised more than others.”
   Tuesday’s announcement constituted a 10-day notice the department is required to issue for weight restrictions and its impact extends well beyond the drilling industry.
   “This affects all vehicles,” Ort said. “We’re required to give proper notice. This is what this is about.”
   Trucks carrying nondivisible loads will be able to travel on the weight-restricted roads if they obtain an overweight permit. Trucks carrying divisible loads, such as water, groceries or timber, will have to carry reduced weight.
   The natural-gas industry has been made aware of the coming restrictions, according to Ort. Representatives reached Tuesday reacted cautiously.
   A spokesman for Southwestern Energy said its operations in the Fayetteville Shale will be able to work within the new rules.
   “However, these increased fees [from overweight permits] will impact our cost of developing the Fayetteville Shale and reduce the capital available for drilling wells,” Susan Richardson said.
   As to whether the company agrees with the decision, Richardson said Southwestern Energy “respects the expertise” of the department “regarding highways and transportation.”
   The company also has tried to be limit its impact in the region. “We have established an innovative logistics operations center to manage and minimize our truck movement in the region and we work closely with our vendors to further reduce impacts,” she said.
   Jeff Neu, a spokesman for XTO Energy, called the Highway and Transportation Department announcement an “industry issue” and referred questions to the Arkansas Independent Producers and Royalty Owners Association and the Arkansas Petroleum Council. Representatives of the latter two organizations did not return telephone calls left at their offices late Tuesday afternoon.
   The state Highway and Transportation Department’s law enforcement arm, the Arkansas Highway Police, will “strictly enforce” the new posted limits. The agency won’t necessarily increase its patrols but will make the new restrictions a priority, Bolick said.
   Scroggin hopes the new restriction will result in lighter trucks on county roads, but he has concerns that the trucks might keep their 80,000-pound loads and use county roads to drive around the restricted state highways.
   Like the state, the counties in the Fayetteville Shale region have had to cope with road damage. Over 15 days last fall, Faulkner County laid down a little more than $1 million worth of asphalt, paid for by the drilling companies.
   “I can feel the state’s pain,” Scroggin said.