THE PANHANDLE TOWN OF Happy (population: 632) sits on a lonely stretch of Interstate 27 between Amarillo and Lubbock. It’s not the kind of place you’d expect to be too pricey for Hollywood, but when Mark Illsley scouted locations for Happy, Texas, a comedy that lit up this year’s Sundance Film Festival, he decided that he couldn’t afford it. Not that Illsley didn’t try his best to film in Texas. Armed with a modest budget—about $1.7 million given to him by his family—he visited Happy and other small towns over the course of three years, covering hundreds of miles of back roads. “He even went to Dallas and Austin to see if he could find a place with a crew base,” says Tom Copeland, the director of the Texas Film Commission. But shooting in the Panhandle meant importing equipment and housing and feeding big-name Hollywood stars—in this case, Jeremy Northam (The Net) and Steve Zahn (You’ve Got Mail), who play escaped convicts who help the small town put on a girls’ beauty pageant, William H. Macy (Fargo) and Ron Perlman (Alien: Resurrection) as the town’s lawmen, and Illeana Douglas (To Die For), one of the town beauties. “Happy has no diner and no gas station, though it has seven churches,” says the film’s screenwriter and co-producer, Ed Stone, who lived near Happy when he attended Wayland Baptist University in Plainview. And the nearest hotel is fifteen miles away in Tulia.

So while Happy remained the perfect location, Illsley was forced to set his sights elsewhere. Working from pictures the director brought back from the scouting trip and tapping into his own memory, Stone wrote Happy-specific details into the script (for instance, the bank is right next to the boarding house, which makes it easy for Northam and Zahn to scope out a possible crime scene). Meanwhile, Illsley and company found the small town of Piru, California, which is thirty miles north of Los Angeles, and set it up to resemble a Texas town, right down to such specifics as the Texas license plates on trucks, which were provided by Copeland. “We lucked out,” Illsley says. “We were able to just park and shoot probably ninety percent of the movie from one base camp.”

The transformation may not fool Texans, but the film was good enough to spark a fierce bidding war at Sundance. Every major distributor ponied up bids, but Miramax handily won. The price? The studio reports $2.5 million, but industry sources say that with back-end profit-sharing, the deal could be worth more than $10 million—the most a film has ever brought at Sundance. “It’s astounding,” Douglas says. In fact, with Miramax backing it, Happy, Texas may join Red River and this year’s Slamdance fave, Dill Scallion (a honky-tonk comedy starring Billy Burke and Kathy Griffin) on the list of famous Texas movies made somewhere other than Texas. And now that Illsley knows it’s so easy to create locations based on pictures, he says that next time he’s getting on a plane and heading for Europe: “I’m going to bring back a bunch of pictures of Paris.”