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Chesapeake says Southlake ordinance discourages drilling

Chesapeake Energy is threatening to shift its drilling focus away from Southlake and might even file suit against the city because of its new drilling ordinance.

The Oklahoma City-based natural-gas company complains that the new 1,000-foot distance between wells and any homes, schools or offices will make drilling almost impossible. The company also doesn’t like Southlake’s exclusion of water storage tanks and so-called “frac ponds,” which are both used in the drilling process.

But the city argues that the new ordinance, which went into effect last week, allows for the council to discuss the issues with every well, and variances can be granted on just about anything.

Regardless, Chesapeake said it is turning its attention to other nearby towns.

“As a result of these issues and more, we are being more focused in our leasing efforts in Northeast Tarrant County and are in a general wait-and-see mode,” according to a statement released by Chesapeake. “If Southlake and other cities do not relax their drilling ordinances or give variances freely, it could lead to litigation by operators or mineral owners to overturn the ordinances or even for the condemnation of mineral rights.”

John Terrell, a city councilman who serves on the city’s oil and gas task force, said Chesapeake is taking the strictest interpretation of the ordinance.

“The reason we wrote it the way we did is to put the strictest prohibition in writing,” said Terrell, who also works with Chesapeake during his day job as a commercial real estate executive at Dallas/Fort Worth Airport. “We allow them to come in and explain to us if they have circumstances where 1,000 foot doesn’t work, or they need frac ponds.”

A frac pond stores the water that will be used to pump into the ground and fracture the shale below the surface. Then, a storage tank known as a “tank battery” holds the water after it is pumped back out of the ground. The water is then carried away on trucks.

According to documents obtained by the Star-Telegram under an Open Records Request, Chesapeake offered various notes on the proposed ordinance. The notes were included with a letter sent to the city May 20, the day that the city passed the ordinance.

“Frac ponds are critical components of operations,” Chesapeake wrote. “Without, production could be prevented.”

The company also wrote that the drilling “industry will not be able to drill/operate without water storage tanks.”

Calls to Fort Worth-based XTO Energy over a couple days this week were not returned.

Terrell said while he’s not heard anything directly from XTO one way or the other, he’s heard from others that the company “can work with the ordinance.”

Both drilling companies, through their designated landmen, have expressed strong interest in leasing residents in Southlake and elsewhere around Northeast Tarrant County.

Dale Resources, on behalf of Chesapeake, jumped out first in mid-April with a bonus offer of $17,000 per acre and a 25 percent royalty to a large group of property owners in Southlake, Colleyville, North Richland Hills and Keller.

Colt Exploration, representing XTO, quickly followed up with an offer of $18,500 to groups in Colleyville. It told the White Chapel Corridor Group in Southlake that it won’t be outbid.

Some other cities, including nearby Grapevine and Colleyville, have passed similar 1,000-foot setbacks, but Terrell argues that not all are willing to offer variances like what Southlake will consider.

Chesapeake, which wants Southlake to set a minimum distance of 600 feet, said there are numerous reasons for that, including the fact that it would decrease the workload for the city by filling less requests.

The company wrote: “It will fill the piggy banks of royalty owners and taxing entities quicker with a more expedited process.”

Residents have expressed a variety of opinions on the city’s new ordinance.

“A few extra bucks in our pocket is always nice and appreciated, but not at the expense of our quality of life there, which we’ve tried to nurture so carefully over the last 25 years,” said Vic Awtry. “I think if Chesapeake wants to be competitive, they need to step up and be competitive.”

Dale Crane, a leader of the Sunshine Group in Southlake, told the Star-Telegram last week after the ordinance passed that a 600-foot setback would allow the city and Carroll school district to generate more revenue.

The Carroll district doesn’t see any reason why it would be negatively affected by the new ordinance, even though “it may not be ideal for what the company had wanted to do,” said Julie Thannum, a spokeswoman for the the district.

But Chesapeake insists Southlake officials have gone down the wrong path, and that may lead Chesapeake elsewhere.

“Basically they’re saying they don’t want natural gas drilling with that ordinance,” said Jerri Robbins, a spokeswoman for Chesapeake. “Those cities that write friendlier ordinances will certainly reap the benefits from it, and we’ll be there, active in their community.”

DAVID WETHE, 817-390-7616