Monday, August 12, 2013

Devon Makes Money from EagleRidge's Blowout Well

This is my fourth post in what has turned out to be a series on mineral wealth and mineral property ownership in Denton using the Denton Central Appraisal District (DCAD) 2013 data.
I’ve learned a lot through this process. One thing I should clear up, and something I have corrected on my initial two posts, is that the energy companies are not usually the actual mineral owners. Though sometimes (as with EagleRidge and some of the Acme properties) they are the owners. Typically, though, the operators are leasing the minerals – although legally this does make them owners for the duration of the lease (it is called ‘ownership in fee simple determinable’). These leases usually grant about 75-80% of the wealth to the operator, because they are the ones who have to invest money to get the gas out of the ground.

So, the bigger questions are: Who are the mineral owners who are making the decision to allow fracking in Denton and who are taking home the remaining 20-25% of the wealth? What percentage of owners actually lives in Denton?

I’ve already noted it is hard to get a precise answer to these questions. But I have also started some case studies on wells to see if we can at least start to paint the picture.

In this post, I offer three more case studies and then in the next post I step back to make an estimate about the percentage of mineral owners who actually reside in Denton.

1. The Blowout Well: Ok, first let’s travel west down Jim Christal Road from the controversial Rayzor wells examined in my last post (near the hospital) to the controversial EagleRidge well that experienced a blowout (er, “emissions event”) back in April. The API for this well is 121-32229. It is not called Smith-Yorlum by the RRC, DCAD, or the City of Denton. Rather, it is called “Davis” or sometimes “Davis 1H.”

Who owns the minerals in this case? Remember, the owners hold all the power (thanks to the predominance of the mineral estate) to decide whether or not fracking happens. Surely (our naïve reader thinks) those who live nearby and are shouldering the risks of this industrial site are also the ones reaping the financial benefits. Ha!

Davis Well

Total Mineral Wealth = $844,890
Total Held by Denton Residents = $0

 Here are the data:

Devon Energy = Dallas/Oklahoma City = $66,430 (6.25% interest)
Davis Dianne = Dallas = $99,640 (9.375% interest)
Davis Wallace Jr & Mary = Dallas = $99,640 (9.375% interest)
Eagleridge Operating = Dallas = $579,180 (75% interest)

2. The Big Well. Now travel south down to Cole Ranch. Here we find a more complex well, Yarbrough-B. I have picked it, because it is the well with the highest appraised value in Denton at just under $3 million. This is probably a typical ownership pattern for wells on old ranchland that is now being developed as master planned communities or planned developments. We see almost all of the ownership belonging to absentee mineral holders (similar to the Rayzor wells in the previous post).

Total Mineral Wealth = $2,967,980
Total Held by Denton Residents = $7,730 (generously estimated)

Percent Held by Denton Residents = 0.26%

Here are the data:

Crandell Elaine K = Denton = $140
Crandell Harold B = Denton = $140
State Of Texas = Austin = $150
Miller Bob R = Denton = $440
Marshall William Wesley = Frisco = $2,200
Marshall Winston Schuyler = Gainesville (checks mailed to a lawyer with a PO box there) = $2,200
Briner Adrienne Taft Cole = Kalispell, MT = $2,930
Cole Jordan Hazen = Gainesville (checks mailed to a lawyer with a PO box there) = $2,930
Cole Joshua Cavender = Gainesville (checks mailed to a lawyer with a PO box there) = $2,930
Uland Elizabeth Cole = Carmel, IN = $3,230
Cole Yvonne = Denton (checks mailed c/o someone else at a Denton address…so hard to say where residence is, but to be generous I’ll count here as a Denton resident) = $7,010
Cole Antoinette E= Gainesville (checks mailed to a lawyer with a PO box there) =$8,790
Cole Cynthia Lou = Durango, CO = $8,790
Marsh Carol Bonner = Gainesville (checks mailed to a lawyer with a PO box there) = $8,790
Mead Susan Bonner Gainesville (checks mailed to a lawyer with a PO box there) = $8,790
Bonner Darcy Robert Jr = Gainesville (checks mailed to a lawyer with a PO box there) = $8,790
Hull Janie Marshall = Gainesville (checks mailed to a lawyer with a PO box there) = $8,790
Sparkman Kevin R = Keller = $12,330
Sparkman Donald W Jr = Taylor, TX = $12,930
Cole David Walker = Gainesville (checks mailed to a lawyer with a PO box there) = $13,190
Cole Linda Smith = Dallas = $13,190
Cole M T Trust #2 = Gainesville (checks mailed to a lawyer with a PO box there) = $143,470
Devon Energy Production Co Lp = Dallas/Oklahoma City = $2,695,830


3. Schoolhouse Wells: Now here is a slightly different look at five of the six wells right by Guyer High School (for some reason DCAD does not have data on the Guyer 2 well). They are all operated by Pioneer Natural Resources, headquartered in Irving, TX.

The total appraised value of those mineral properties is $543,560. The share that DISD gets of that is $95,520 which is 17.5%. The Blankemeyers, who live on Teasley, and the Penleys, who live on Emerson, each own $36,690 or about 6.7%. That puts over 30% of the minerals in local hands. 

That is certainly better, but it is still not as simple as the rural stories of farmers owning all the mineral interests on their property. In this case, we also have the Ft. Worth-based Value Family Properties owning $52,000 and Fortress Value Recovery an investment group based in New York, NY owns $14,100. Add this up and we get at least 12% of the wealth based outside of Denton.



  2. #2 - The big well - Cole Ranch. Drilling areas extensively before developing the land (in this case, residential property) is a giant problem going forward. Who warns potential families that the pretty new home in the shiny subdivision complete with parks and pools and elementary schools is a mine field of potential disaster? Who explains the split ownership? Why is it OK to build new homes just spitting distance of an existing gas well, when a gas well can not be placed within a much longer distance of an existing residence? Why would DISD place a school in such an area of heavy industry? When does common sense come into play?

  3. Your real estate agent should tell you!