Laredo: Fuel’s Paradise

Everybody in Laredo is being excessively kind to Tony Sanchez, Sr., these days, quite a change from several years ago when Sanchez took in ten to twelve thousand a year selling office supply furniture and trading oil and gas leases on the side to help make ends meet. Kindest of all are the bankers who once regarded him as a hapless pigeon, but who nowadays fawn over him like he was Babe Ruth at the Stork Club. Today, Sanchez owns the majority of stock in one of the banks and, for good measure, the Tesoro Savings and Loan out on IH-35. He also may be sitting on top of the biggest natural gas discovery in the United States.

It is one of the profound paradoxes of the human spirit that even when something looks worthless as hell by any measure, we still think that with an extra dash of work and stardust, it’ll work. This bedeviling Mysterious Instinct that protects the feeble-minded, the prospector, and, occasionally, the wildcatter, moved Mr. Sanchez to pay five to ten dollars an acre for leases on 9500 acres of burned-out, parched country, mostly on Lasker O’Keefe Hereford’s Nopalosa Ranch southeast of Laredo. Reassuring himself that he would be missing the opportunity of a lifetime if he didn’t, Sanchez borrowed and bought, convinced that natural gas lay beneath the cactus and mesquite.

Gulf Oil had held leases in the same area for seven years. Exxon had drilled two unsuccessful wells nearby in the early Sixties, but the majors had otherwise lollygagged around and done nothing. But, while driving endless miles through the brush country, Sanchez had seen the night rig lights of a successful Pemex well across the Rio Grande in Mexico, five or six miles south of Nuevo Laredo down the Monterrey highway. That Mysterious Instinct told him gas fields respected no political boundaries and it was time to throw the dice.

No one doubts that the reserves in Texas, the largest producer and user of energy in the country, are running out. Almost two-thirds of the state’s energy needs are met through natural gas, more than twice the national average, not to mention that 95 per cent of our electricity is generated by the airy stuff. But the Mysterious Instinct doesn’t strike men as often as before. In 1973, wildcatters drilled less than half as many wells as they did in 1956.

There was a time when wildcatters regarded gas finds as not much better than dry holes. Nobody yet has devised a way to truck it to railroad cars like crude oil. Laying pipelines that would carry the stuff to customers in big cities was usually too expensive; so the best thing to do was plug a gas well and continue without looking back.

Sixteen years ago natural gas was selling for ten cents a thousand cubic feet (mcf) at the wellhead and not even Mysterious Instinct would prompt drilling at those prices. As anybody knows who enjoys warmth and eating cooked food, gas prices have changed in recent years. Gas going out-of-state is regulated by the Federal Power Commission; Texas producers cannot charge more than 51 cents mcf for that gas.

However, the wellhead price of Texas gas sold in Texas is unregulated and is currently being sold at up to $1.68 per mcf. No one doubts, least of all Tony Sanchez, that it was this higher price incentive that enabled him to try his luck, since it cost $450,000 to drill one well and $3000 a day to keep it running.

Another company, Consolidated Oil and Gas had drilled the first well in the area on rancher Norman Clark’s property near a bend in the Rio Grande. Consolidated Number One Clark successfully logged in on Labor Day 1973 and still produces gas, right along with Number Two which was drilled 2500 feet away.

Word of a possible jackpot gas play spread quickly after the Clark wells came in. In December, Sanchez and his partner, geologist Brian O’Brien, were contracted by Good Hope Refining Corporation of Springfield, Massachusetts, about a deal. Good Hope had been an unsuccessful Louisiana outfit that had been jettisoned by Houston Oil and Minerals and eventually picked up by a young wheeler named Jack Stanley.

Sanchez sold half his Nopalosa holdings in a checkerboard fashion to Good Hope, which hit four winners in a row around Sanchez’s remaining acreage. As a reward for taking the big money gamble first, Good Hope now controls nearly 350,000 acres and has invested close to $50 million in the area.

Following their success, Sanchez drilled on his leases—that not long ago people would have traded for bus tickets to Corpus—and hit gas at 7200 feet 40 days later, plugging into the pipeline on Thanksgiving Day last year. Three more Sanchez-O’Brien wells, all on Nopalosa Ranch, have been equally successful. The gas is sold to Southern Pipeline, a wholly owned subsidiary of Good Hope, who sells it to Lo-Vaca Gathering Company, the notorious subsidiary of Coastal States, who sells it to their customers in Corpus Christi, Austin, and San Antonio.

Good Hope has kept busy drilling another 25 wells, finishing a $15-million pipeline to Corpus Christi, and beginning construction on a $75-million anhydrous ammonia plant near Ingleside.

By now, Sanchez, his son (attorney Tony Sanchez, Jr.) and O’Brien needed help. What was needed was an oil company that would march shoulder-to-shoulder and hand-in-hand with Sanchez-O’Brien in buying additional acreage before other independent operators moved in. Such a partner was Watson Oil Company from Shreveport who agreed in December 1974 to furnish the money to match the Sanchez team’s geological expertise and knowledge of the area. Profits would be split 50-50. Sanchez’ land man, Pete Growth, went to work spending $1.2 million for leases on 42,000 acres north of and in the city of Laredo, around Casa Blanca Lake, and in Zapata County farther southeast from the original play. The “Watson Program” was underway.

The 4000 leased acres within the city—about 9500 lots—were a problem. Residents were puzzled and confused over contracts to use their

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