06/14/2014 03:03 pm ET Updated Aug 15, 2014

Oil Companies Eye Fracking Potential in St. Tammany Parish

Within a few months, New Orleans-based Helis Oil & Gas Co. hopes to explore a deep part of the Tuscaloosa Marine Shale play by drilling down 13,000 feet near Mandeville, La. Other companies are fracking shallower parts of the TMS deposit to the northwest. Texas-based Goodrich Petroleum and EnCana Corp. in Canada say they're mainly pursuing an area from southwest Mississippi to parishes bordering the "shoelaces" of Louisiana's boot, while ignoring St. Tammany to the south. These operators could broaden their horizons, however, if Helis succeeds with its well test, experts say.

Texas-based Comstock Resources plans to drill three wells in the TMS this year, and will "spud" or start on the first one in Wilkinson County, Miss. in July. That will likely be followed by another well in Mississippi. "And we may drill one in the very northern part of East Feliciana Parish or St. Helena Parish," Gary Guyton, Comstock's investor relations director, said last week. "But we have no plans to drill in St. Tammany Parish," he said. "Generally, the TMS is too deep in St. Tammany to be economic. It doesn't look as if drilling will work there." The deposit gets deeper in parts of the parish closer to the Gulf, he noted.

TMS depths range from 11,000 feet on the deposit's north end to more than 15,000 feet, or nearly three miles down, further south, according to Louisiana's Dept. of Natural Resources.

Baton Rouge landman and minerals consultant Dan S. Collins disagrees with Guyton, and predicts that if Helis is successful near Mandeville, other frackers will follow. "Drilling deep into the TMS may prove to be quite economical," he said last week. "With modern techniques, drilling deeper isn't necessarily more complicated. It's simply a matter of more pipe and possibly a few days more to drill." TMS drilling has been mainly in shallow parts of the play as operators master their techniques before going deeper, Collins said.

"Out of 40-plus drilling units in Louisiana's TMS, roughly 20 are actively producing now," Collins said. More units are added to the play each week.

"A number of companies feel that if they drill a little deeper in the TMS, the GOR or gas-to-oil ratio will be higher, and gas within the formation may help lift the oil out," Collins said. Production in untapped deeper areas someday could exceed current output from East and West Feliciana, St. Helena and Tangipahoa Parishes and southwest Mississippi. "Pioneering companies like Helis may prove to be the smartest of them all," he said.

EnCana clearly believes in the possibilities of the play's deeper areas, Collins said. EnCana controls acreage on both sides of the state line, particularly in Amite County, Miss. "But EnCana has also leased a large parcel of land from Weyerhaeuser in Livingston Parish much deeper than those held by companies staying close to the state border," Collins said. Weyerhaeuser Co., based in Washington state, owns tracts of timber in Louisiana.

EnCana has held acreage in Livingston Parish for a couple of years, company spokesman Doug Hock in Colorado said last week. "The closest town of any size to that parcel is Denham Springs," he said. "But our current focus is in Amite County."

In addition to EnCana, other operators are acquiring acres in the deeper TMS. "Companies have leased all the way down to the southern portions of West and East Feliciana," Collins said. A deep section in the upper end of East Baton Rouge Parish has been leased. "The higher gas-to-oil ratios in these areas may be the key to higher flow rates," he said.

Beyond the promises of the deeper TMS, companies are interested in the Austin Chalk, a limestone formation that sits on top of the TMS. "The Austin Chalk crosses the state, follows the same geographic area as the TMS, and is present in the St. Tammany site that Helis plans to drill," Collins said. If Helis drills, it will reach the Austin Chalk before it penetrates the TMS.

Fracking of the Austin Chalk has proved productive in some fields along the Louisiana-Texas border, where flow rates have exceeded 10,000 of barrels of oil daily, Collins said. In Southeast Louisiana, oil and gas deposits in the deep Austin Chalk and deep Tuscaloosa Marine Shale, including St. Tammany, could be big and extractable but their potential won't be known until a few test wells are drilled. "These areas are fertile ground for available leases, with more exploration expected," Collins said. "If a well is discovered that proves up the Austin Chalk and/or the Tuscaloosa Marine Shale at deeper depths, a stampede of companies will try to get into the deeper play," he predicted.

Except for Helis, oil operators aren't acknowledging any interest in St. Tammany. In 2014, Goodrich Petroleum will spend $225 million to $300 million in the TMS and will conduct drilling on 24 to 32 gross wells, corporate planning director Daniel Edwards Jenkins said last week. A gross well is one in which the company has a working interest. "We have no acreage leased in St. Tammany Parish and no plans to lease there either," Jenkins said. Goodrich, meanwhile, has a data-sharing agreement with EnCana. "We have participated in wells that they have drilled and vice versa," he said. Based on well numbers, EnCana and Goodrich appear to be the top producers in the TMS basin, he also said.

EnCana plans to drill 9 to 12 wells in the TMS this year and will spend $125 million to $150 million in the play, Hock said. "We're currently operating two rigs in Amite County," he said. "Our 2014 drilling program has been largely successful to date. Our efforts are focused on Amite County and will be for the foreseeable future. We currently have 19 wells on production; 14 in Mississippi and 5 in Louisiana."

As for Helis, the state's Office of Conservation will hold a June 17 unitization hearing, outlining the boundaries of the company's 960-acre drilling site near Mandeville. That session's agenda, which includes several other firms, starts at 9 a.m. in the LaSalle Building in Baton Rouge and is open to the public, according to Dept. of Natural Resources spokesman Patrick Courreges. The original hearing was postponed a month ago.

In a May 25 report, the Lake Pontchartrain Basin Foundation said that according to statements by Helis, a number of wells could be drilled on its site. "Based on the likely well spacing and their proposed 960-acre unit size to the Office of Conservation, the total TMS project on their lease alone could include 284 additional lateral well bores, with approximately 71 surface locations," the LPBF said. "If each well had the same wetland impact, 710 acres would be lost." The company would drill through the Southern Hills Aquifer, the only potable water source in the parish. Each well drilled through the aquifer raises the risk of unforeseen consequences in years to come, the LPBF said.

In what sounds like a worst-case scenario, the LPBF warned that if other companies follow Helis' lead, nearly 2,000 lateral wells could be drilled in St. Tammany. Wetlands, stream banks, pine habitat and already threatened birds and animals would be affected. Under federal standards, the Red Cockaded Woodpecker and Dusky Gopher Frog are endangered species in St. Tammany, and the Gopher Tortoise and Ringed Map Turtle are threatened.

Fracking has run into stiff resistance in St. Tammany since Helis unveiled its plans this spring. On June 5, the Parish Council decided to hire attorneys to seek a court judgment blocking the state from issuing drilling permits in St. Tammany. Last week, Parish Councilman Jacob Groby said he's concerned about many related issues, including a June 2 report from Louisiana legislative auditor Daryl Purpera citing the Office of Conservation's weak record in monitoring oil and gas wells.

Groby said a recent letter that he and other local officials received from Helis president David Kerstein raised new questions. In his May 30 letter, Kerstein said Helis will proceed in a respectful manner in the parish. Kerstein also said his firm plans to establish a truck staging area near Interstate 12 and Louisiana 1088. Groby said estimates are the Helis drill site could create 500 to 600 jobs. But residents aren't enthused about that employment potential. "We're watching Helis like a hawk," Groby said. The proposed well is in his District 7.

This post was originally featured in The Louisiana Weekly in the June 9, 2014 issue.