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FORT WORTH-Hillwood and a Dallas-based oil and gas company yesterday unveiled first-time plans to tap gas reserves in the 15,000-acre AllianceTexas, which sits atop one of the largest gas fields in the nation and the top producing play in the state. The first phase calls for 32 gas wells to be drilled on 1,300 acres at a cost of nearly $700,000 per well.

Hillwood has spent the past year discussing the plan with operator, Chief Oil & Gas LLC, which will drill the 32 wells over the next two years under a lease to operate the nine surface sites “in perpetuity,” Mike Berry, Hillwood Properties president, tells GlobeSt.com. In turn, Hillwood gets an income stream “in perpetuity” with all of the natural gas bound for the commodities market…for the time being.

The rising price of natural gas, the declining cost to drill and light sand frac technology prompted talks to mine mineral rights that Hillwood’s held for decades, Berry says. Hillwood’s savvy negotiating team cornered the usual royalties for the company, but also locked in a clause for “in-kind” supplies that could be tapped for an AllianceTexas user with a need for enough energy to fuel a large manufacturing plant. He says the idea hasn’t been presented to the Chicago-based Boeing Co., as yet, but could surface if it’s sincere in its interest in Texas for the highly touted Dreamliner project. Whether it’s Boeing or another, the tact would be to build a central plant, harness the energy and resell it to the user, according to Berry.

The partnership between developer and driller is being touted as an industry first as drilling begins on the first of four wells west of the Alliance Airport runway in Haslet. Chief will own the first few wells, but as more are developed “we might take an ownership interest,” Berry says.

The 1,300 acres lie in the middle of AllianceTexas’ Westport, home to Burlington Northern Santa Fe’s intermodal hub and such tenants/owners as Kraft Foods, JCPenney, Volkswagen Audi, Michaels and SC Johnson & Son. At last count, the 15,000-acre AllianceTexas contained 115 companies, a 22.5-million-sf inventory and 20,000 employees.

“The planning side of this was absolutely critical,” says Berry, who along with Hillwood chairman Ross Perot Jr. and Chief’s president Trevor D. Rees-Jones unveiled the plans at a noon launch at the drilling site of Alliance A-1. The drilling will not disturb the AllianceTexas tenants, owners or customers, officials stress. Hillwood’s role entails cleanup as well as planning.

Berry says strategic planning has ensured underground development won’t interfere with surface development, a feat that wasn’t easily mapped out but is key since above-ground development is Hillwood’s core business. “If this project works successfully, it will be the model for us to roll it out all across AllianceTexas,” he says. Success also could lead to a case study and prototype ranking for the development industry to show that builder and driller can effectively work together to mine all potential from a master-planned development of AllianceTexas’ proportions.

Hillwood’s partner is an independent oil and gas company founded in 1994. Since 1995, Chief Oil & Gas has drilled more than 100 wells in the Bend conglomerate and Barnett Shale formations in the Fort Worth Basin, which takes in Wise, Denton, Tarrant and Jack counties. In recent years, Chief’s focus has been to amass acreage in the Barnett Shale after a competitor successfully used light sand frac technology to tap reserves. Prior to partnering with Hillwood, Chief controlled in excess of 16,000 acres in the Fort Worth Basin.

In 1998, the Barnett Shale produced 50 million cubic feet per day of natural gas; three years later, the volume was 570 million cubic feet daily. A US Geological Survey estimated the recoverable reserves at 10 TCF or the equivalent of a 1.67-billion barrel oilfield.

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