Top 10 stories of 2014: Fracking fight shifts from Denton to the statehouse

Third in a series of the top stories of the past year.

After Cathy McMullen and her colleagues in Denton celebrated passage of the state’s first ban on hydraulic fracturing on election night in November, they took a few weeks off to rest and recharge their batteries.

They knew more fights would lie ahead to protect the new law.

Now the battleground has shifted from Denton to Austin, where lawmakers are already filing legislation designed to bring “clarity” to state and local regulations but which also may complicate efforts by cities to regulate the drilling process commonly used in the Barnett Shale.

“We knew it was going to be a long, dirty battle but we’re ready for it,” said McMullen, who led a grassroots group that fought to get the ban into the ballot. “We’re ready to come out fighting … We are going to have a lobbying effort and force to make sure the will of the people is heard.”

So far, two bills have been filed in Austin, both designed to make it more difficult — and potentially costly — for any city that gets in the way of the energy industry. But political observers suspect this is only the beginning.

“There are just going to be a lot of bills like this to make it harder to regulate,” said Cyrus Reed, acting director for the Lone Star chapter of the Sierra Club. “It is a conservative capitol and generally conservatives want the business of the state to flow easier.”

“There is a lot of mischief that can come out of these bills,” he said.

State Rep. Phil King, who fulfilled his earlier promise to take action by filing the first two bills addressing the issues coming out of Denton, said something must be done to calm the waters.

“I want to find that balance between local control and the need to have oil and gas regulated by an entity with the experience and the capacity to do that,” said King, R-Weatherford. “You can’t have the cities and the state doing this. Multiple levels of regulation puts too much uncertainty in there.”

Industry fears more bans

Clearly, the Denton fracking ban caught the oil and gas industry by surprise.

Denton is located in the middle of the Barnett Shale, one of the nation’s largest gas fields which covers 5,000 square miles in North Texas. While fracking’s widespread use has greatly boosted domestic oil and gas production, including the Permian Basin in West Texas and Eagle Ford in South Texas, it also has sparked controversy and growing opposition, including moratoriums in New York and several cities in Colorado and California.

Fort Worth, Arlington, Denton and other cities have struggled with urban drilling, which was made possible by the horizontal drilling technique pioneered in the Barnett. Wildcatters using this method can veer their vertical wells off in an arc, tapping into reserves far away. Drilling pads, sometimes in neighborhoods, support multiple wells and old wells could be reworked.

McMullen’s group, the Denton Drilling Awareness Group, became frustrated with the city of Denton’s efforts to control urban drilling after a company was allowed to search for natural gas within a few hundred feet of homes. They collected nearly 2,000 signatures to put a referendum on the ballot. The ordinance does not ban all drilling, just hydraulic fracturing, but industry representatives say it effectively bans drilling since it is not cost-effective to drill conventional wells that aren’t fracked.

Hours after the ban was overwhelmingly approved by a 59-41 percent margin, the Texas Oil and Gas Association and the state’s General Land Office filed lawsuits saying the ban intrudes on the authority of several state agencies, including the Texas Railroad Commission, which regulates the oil and gas industry. The city has responded to those lawsuits, saying activities associated with fracking — heavy truck traffic, liquid spills, vibrations — are the kind of public nuisances that cities routinely regulate.

McMullen always contended that her group’s cause was a specific reaction to conditions in Denton, not a broader move against the industry. Industry leaders worried, however, that the opposition to fracking might spread. Since the Denton ban was passed, Mansfield residents have begun pushing for tighter regulations, too, challenging the state’s supremacy over drilling.

“When you look at them nationally, there are a lot of them [bans] popping up all over the place,” said David Spence, a law school professor at the University of Texas at Austin.

Since the Denton vote, there has been some recognition by Railroad Commission Chairman Christi Craddick that more needs to be done to tackle the issues raised by the fracking ban. Earlier this month, she told the agency’s executive director to explore the need for more inspections in highly populated, urban areas throughout Texas.

“We are looking at a state in which drilling does not necessarily occur in less populated, rural areas, as it once did years ago,” Craddick said. “Because of both production and population growth across this state, our communities are more commonly touched by the development of oil and gas.”

Prior to making that statement, the commission filed an appropriations request seeking about $12 million in the next biennium to hire 104 employees to help permit, monitor and inspect wells and pipelines, according to a document filed in August with the Legislative Budget Board.

State Rep. Jim Keffer, chairman of the powerful House Energy Resources Committee, said he will support that spending because he and many members of the public thought the commission “was not anywhere to be seen publicly” during the explosion in urban drilling.

“There were a lot of people in Denton who had no idea the Railroad Commission existed,” said Keffer, R-Eastland. “My frustration with the Railroad Commission is that they have the expertise to do the job, it is just getting out there in the public doing that job.”

Getting out in front

Still, King and other lawmakers think it will take legislative action to make sure that the state takes a balanced approach to regulation, one that allows cities to protect the health and safety of its citizens while allowing the oil and gas industry to operate.

“I’m trying to get out in front of this before it gets out of hand,” King said. “The Legislature has a wonderful opportunity to come up with a reasonable approach to this that recognizes some of the issues of local control but clarifies that, at the end of the day, the Railroad Commission is the final regulator of oil and gas.”

One of King’s bills would require any city seeking to regulate oil and gas activities to get a fiscal note prepared by the state budget board that details how much the proposed action would impact taxes for the county, schools, hospitals and other governmental entities and publish it.

If a proposed ban is approved, either by a city council or by voters, then the city would be required to make up the difference. If, for example, the new regulation costs the school district $1 million in tax revenues, then the city needs to pay that to the district, King said. Education funding is crucial to lawmakers since school funding makes up one-third of the state budget.

On top of education funding, the city would be on the hook for other lost revenue to the state including severance taxes that would go to the schools.

“I want complete transparency,” King said. “Schools are 70 percent of most community property tax bills and so for a city to arbitrarily reduce those revenues, voters need to be aware of that and the city needs to make that up.”

Another of King’s bill is not limited to oil and gas regulation but also grows out of the situation in Denton. It would require the state Attorney General’s office to review any proposed ordinance being sought by citizen petition that involves the taking of property to see if it passes state and federal constitutional muster.

Keffer and state Sen. Craig Estes, R-Wichita Falls, praised King’s early efforts.

“I think all of the issues need to be fairly discussed and vetted to decide if a course of action is needed,” Estes said.

But to Bennett Sandlin, executive director of the Texas Municipal League, King’s bill that would require a city to pay the state on alleged losses in tax dollars is a “non starter” because it just doesn’t address fracking bans but any oil and gas measure that affects the right to produce.

“It is taking a smaller problem and hitting it with a sledgehammer,” Sandlin said. “It’s as bad as it gets. … I’ve never seen any legislation lately that has the city pay the state for something it’s done.”

He said cities across Texas are not lining up to enact bans on fracking. As a matter of fact, he said most communities carefully work out agreements with energy companies “and once they do and they comply, they are best buddies,” Sandlin said.

Jim Bradbury, a Fort Worth environmental attorney who helped write the Fort Worth gas drilling ordinance, said the King bill is “Orwellian” and “way over the top.”

“I think it will cause significant difficulties in areas where there right now isn’t any conflict,” Bradbury said. “It will place a Damocles over the cities. … The drillers will be able to use this bill as leverage.”

“It is a real finger in the eye of the cities who have worked out a balanced plan for urban drilling,” he said.

Another bill that may make a reappearance is one by Republican state senator-elect Van Taylor of Plano that would not allow a city to prevent or prohibit development of an oil and gas well permitted by the state unless it was limited to visual aesthetics, noise abatement and hours of operation.

“At its core, government is to protect life, liberty and property,” said Taylor, who offered a similar bill when serving in the House. “Government is supposed to protect property rights, not take them away.”

Keffer, whose House energy resources committee may deal with some of the legislation, said it is important for everyone to “take a breath” as they look at what road to take. It is clear that missteps have been made by the state and the industry in dealing with nuances of urban drilling.

“Things have changed. You’ve got more people involved in urban drilling that you have to assure and talk to and let them know they are protected,” Keffer said. “It is a two-way street and nobody needs to be winning over the other.”

“As Polyannish as it might sound, we need to find a win-win or not a lose-lose situation where the protections are there and the industry can do their work,” he said. “It is not brain surgery but it is something that can easily get off track.”

This story was originally published December 23, 2014 at 2:15 PM.