HAYNESVILLE SHALE

How do you survive a gas boom and bust? For starters, pay in cash

MANSFIELD, La. -- Local officials in the Haynesville Shale believe they've unlocked the secret for successful spending of gas boom wealth.

The approach? Invest quickly in health, safety and education, and squirrel away the rest for a rainy day.

"Just because we have it don't mean we have to spend it," DeSoto Parish Sheriff Rodney Arbuckle likes to say.

The Haynesville story is a lesson for community leaders in places like North Dakota and Texas, where fuel extraction continues to drive local growth. Between 2008 and 2011, northwestern Louisiana reaped the benefits of a natural gas boom, which lifted annual tax revenues in DeSoto Parish -- where much of the Haynesville activity was concentrated -- from roughly $20 million to $120 million. In fiscal 2013, around the time most drillers left in search of more oily acreage, yearly tax income leveled off at about $40 million.

Now, Louisiana is poised to play host to two of the first natural gas export terminals in the continental United States (Greenwire, June 19). The completion of the Cameron and Sabine Pass liquefaction facilities could once again send gas companies drilling into the depths of the Haynesville, which is located less than 200 miles north of the export sites.

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If that happens, parish and muncipal officials say they wouldn't change a thing about the way they spend boom-time funds.

During the years DeSoto's coffers overflowed, parish officials shelled out for equipment and infrastructure upgrades -- but they paid in cash and avoided long-term financial commitments. Arbuckle -- who is responsible not only for law enforcement in the northwestern Louisiana parish, but also for tax collection -- boasts that his department currently has more than $40 million in the bank. That's enough to keep the sheriff's office afloat for three years without any other money coming in, he said.

The town of Mansfield, the DeSoto Parish seat, spent and saved similarly. Its investments in a new firetruck and fire station upgrades helped the rural town -- population 5,000 -- improve its rating with the Property Insurance Association of Louisiana. When activity in the Haynesville died down, municipal officials cut back on extra expenses, but they still have funds in reserve.

Mansfield Mayor Curtis McCoy said he can't imagine a better way to manage an unexpected influx of cash.

"We bought things we ordinarily wouldn't have been able to buy," he said. "We didn't buy anything on credit. Now we can rest easy."

Purchases 'we hope we never have to use'

DeSoto officials spared no expense on equipment and facilities they believed would help make the parish a safer place. Arbuckle has used Haynesville funds to purchase rifles, rescue vehicles and record storage. The parish's training center, once an open-air, tin-roofed tent adjacent to an ammunition shed, now features a state-of-the-art gym, industrial kitchen, computerized crime scene simulator and manicured shooting range.

One of Arbuckle's favorite purchases is an $800,000 helicopter that the parish bought secondhand for $285,000. The copter, which is shared with other parishes, has already been put to use to monitor natural disasters, assist in a drug raid and investigate a suspected methamphetamine lab, among other uses.

Arbuckle has met his share of disapproval for his purchasing decisions. Last year, his re-election campaign manager resigned, citing financial disagreements. But Arbuckle stands by his choices.

"Like I tell people in law enforcement and emergency services, there's a lot of stuff that we have that we hope we never have to use. But you need it," Arbuckle said. "And you'll get criticized a lot of the time for spending money on items, but when you're rescuing them and their families, they don't care how much you spend on it."

The parish has other new tools at its disposal. Officials have spent nearly $6 million on construction of four emergency medical service stations. The stations are home to new parish ambulances that are worth roughly $250,000 each. All were paid for in cash.

"When I was a deputy ... we'd see people die on the side of the road waiting, trying to get" medical attention, Arbuckle said, "because everything was volunteer, and you maybe had only one or two ambulances in the whole parish."

It's an expensive operation, but the parish has the funds to back it.

"A lot of these oil and gas companies are still in, and all the property that they own and these pipelines they own -- a tax comes off of that for us," said Jane Manning, administrative assistant for DeSoto Parish Emergency Medical Services.

In 2010, the parish also got a new animal shelter, which Arbuckle considers a critical asset for law enforcement.

"We didn't have a whole lot of options" before the shelter opened, he said. "Dog was hit or something, whatever, we just shot it. And some of them probably could've been fixed. Nobody stepped forward, and we didn't have no budget to do it."

Small-town impacts

DeSoto Parish's focus on law enforcement investments during the Haynesville boom wasn't triggered by an uptick in crime. While oil and gas drilling in places like North Dakota has put strain on local police officers, Louisiana's gas towns managed to avoid such troubles (EnergyWire, Aug. 8, 2013).

Grievances tended to come from landowners who didn't hold mineral rights and were therefore upset they would have to deal with the disturbance of drilling without the benefit of a royalty check, Arbuckle said.

"We got complaints about oil people, surveyors trespassing on their land," he said. "Because they're not really getting anything from the wells themselves, they don't want nothing to do with it. We had issues, disputes like that we had to deal with."

Oil field equipment theft was another problem, albeit a minor one, Arbuckle said.

The biggest issue for DeSoto Parish was the traffic that accompanied the gas industry's arrival.

"Life here when [the Haynesville] was booming, there were trucks everywhere," said Randi Walding, manager of Mansfield's C.E. "Rusty" Williams Airport, which garnered millions of dollars' worth of improvements from Louisiana's gas bonanza, including the installation of a $2 million corporate hangar. "It'd take you probably 20 minutes to get through town."

"It's weird," she said of life now in DeSoto Parish. "It's kind of like one night everyone just left. It's like a ghost town."

To alleviate congestion, Mansfield changed the timing of its traffic lights and invested in intersection upgrades, Mayor McCoy said. Parish police bought motorcycles to help officers better navigate the roads, Arbuckle said.

Much of the traffic flowed into Mansfield's three new hotels, where oil field workers spent their time between shifts. While the hotels enjoyed 100 percent occupancy when they first opened, Comfort Inn & Suites General Manager Julie Middleton said her establishment currently runs at 43 percent capacity. Still, nearly all her guests are Texans and Mississippians reporting for work in Louisiana's energy plays.

If drilling picks up again, workers will find more housing options are now available. To supplement his sheriff's income, Arbuckle is building a subdivision in what used to be the woods behind his own home. The houses -- which are in various stages of construction -- range in value from about $275,000 to $400,000, he estimates. The price of a half-acre lot just rose to $32,000, which is more than double what property owners paid prior to the gas boom.

"But you see you have a $300,000 house, and then you have a trailer," Arbuckle said, surveying his neighborhood. "It was a rural area that just developed so fast. I could tell you over here on the other side of the trailer, a friend of mine is developing another subdivision. They'll have about 300 more houses in there."

With those houses come more families. And with those families come more students to fill the schools.

High schools that rival colleges

DeSoto Parish schools have been the primary beneficiaries of the Haynesville boom. In fiscal 2011, the parish school board raked in $73 million -- more than seven times the collection it claimed in 2006.

At North DeSoto High, the crown jewel of the parish's school district, administrators poured money into academic and athletic investments. North DeSoto is putting a large chunk of its resources into programs that will prepare its students for careers in and around the oil field. That means focusing on skills in science, technology, engineering and mathematics -- or the STEM fields.

It's an area in which North DeSoto was sorely lacking before the Haynesville boom, Arbuckle said. His own son graduated from the high school about five years ago. When he left, he had his heart set on studying petroleum engineering.

But even though he had been an excellent student at North DeSoto, Arbuckle's son didn't feel prepared for college engineering classes. He changed his major to English and is now a first-year law student.

Today, North DeSoto offers an advanced engineering program with a curriculum that rivals that of nearby colleges, said Principal Bart Weaver.

"My son was at Louisiana Tech [University] in engineering, and I was telling him some of the things they do in engineering here, and he says, 'Well, that's what we do at Tech,'" Weaver said.

Families are clamoring to give their children the opportunity to take part in North DeSoto's programs. Enrollment at the high school has jumped from 490 in the 2009-10 academic year to 614 in 2012-13. Once a pasture for cows, a field across the street from the North DeSoto campus is now home to a sprawling subdivision of stone-faced houses. Many are occupied by families eager to send their kids to North DeSoto schools.

The school district's investments haven't been perfect. After spiking to $73 million in fiscal 2011, the board's share of the tax collection sank to $53 million in fiscal 2012 before settling at its current level of roughly $22 million. After pouring Haynesville money into new classrooms, teachers and equipment in 2011, administrators had to implement a $9 million reduction effort for the 2013-14 academic year, according to Cade Brumley, superintendent of DeSoto schools.

They cut elementary art and music teachers. They slashed counseling services in half. They froze teacher pay and trimmed wages for new faculty members.

"It wasn't a fun decision, but it was the right decision," Brumley said.

Administrators have since readjusted the budget to begin to reinstate eliminated staff and restore reduced salaries.

"It was a cash flow issue more than anything," Brumley said.

Despite its growing pains, the school district has improved academic performance and raised graduation rates since the start of the gas boom. If the district gets another influx of cash from a second round of Haynesville drilling, Brumley said, he will more closely track performance data that allow him to see in almost real time which investments are working and which are not.

"Not that we're experts, but I think that if any public entity experienced a significant and monumental decrease in revenue and wanted to come out stronger and leaner, I think we have a playbook for doing that," he said.

Next time around

The school budget disaster was one of just a few trip-ups in DeSoto Parish's boomtime spending experience.

Other parishes struggled a bit more, especially in 2012 as natural gas prices began to fall, recalls Louisiana Oil & Gas Association (LOGA) spokesman Ragan Dickens. Around the time Haynesville activity began to slow, some local officials were calling meetings to ask for more money from industry to help offset the financial loss, he said.

Though they burned through their money quickly, DeSoto's communities made wise investments, Dickens said.

LOGA is currently focused on an emerging oil boom in southern Louisiana's Tuscaloosa Marine Shale. One of the industry group's goals there has been to manage expectations about the amount of money individual landowners stand to make from selling their mineral rights to drillers.

"People saw the mailbox money here," Dickens said, referring to the popular term for royalty checks that leaseholders received in the mail.

But even as it looks ahead to the future of the Tuscaloosa Marine Shale, LOGA still keeps an eye on the Haynesville. Dickens predicts a resurgence for the gassy play as manufacturers, LNG exporters and power generators increase their demand for the fuel.

In anticipation of the gas revival, drillers are still maintaining a presence in the Haynesville.

"I see a lot more of [the gas activity] than other people do," said Walding, the airport manager in Mansfield. "Some people think it has [dropped off completely], but I fly, so I still see wells everywhere, so I know it hasn't. And whenever I go to lunch, I still see there's a parking lot full of oil people."

By Dickens' assessment, the reversal of the Haynesville's slowdown is as soon as two years out and as far as five.

But one thing's for sure, he says: It's coming.

Twitter: @pamelalauren | Email: pking@eenews.net

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