Texas Legislation Ends Municipalities' Say In Fracking Bans

Roughly six months after Denton, Texas, voters overwhelming approved a ban on hydraulic fracturing within the city limits, Gov. Greg Abbott signed legislation May 18 that wipes away the vote—and perhaps a good deal more.

Abbott signed HB 40, known as the Denton Fracking Bill, which bars and preempts cities and other political subdivisions from regulation of oil and gas activity. In 2014, the Denton’s ban made national news in a state known for its oil and gas industry.

Abbott said the law protects property owners from the “heavy hand” of local regulation.

“This law ensures that Texas avoids a patchwork quilt of regulations that differ from region to region, differ from county to county or city to city,” Abbott said.

Supporters and opponents of the law expect lawsuits to challenge the legislation. Supporters say the law rightly gives the Texas Railroad Commission (RRC) the ability to regulate oil and gas activity in the state.

Opponents say the law may have gone too far, and that years of work between the industry and cities could unravel. The law could nullify many subsurface oil and gas ordinances, environmentalists argue, including several in cities such as Midland.

Ed Longanecker, president of the Texas Independent Producers & Royalty Owners Association (TIPRO), said May 18 that Abbott had bi-partisan support in the Legislature and local government leaders.

“This is a balanced approach that protects the ability of municipalities to reasonably regulate surface activity related to oil and gas development, while offering the regulatory certainty necessary for our industry operations,” he said.

The Law

HB 40, filed in March by Rep. Drew Darby, chairman of the House Energy Resources Ways & Means Committee, kills Denton’s fracking ban outright.

Cities can enforce certain ordinances above ground, but limits to oil and gas operations, particularly underground must meet a four-prong test. Ordinances must:

• Regulate operations at or above the surface of activity;
• Be commercially reasonable, allowing the operator to effectively and economically develop and transport oil and gas;
• Cannot effectively prohibit an oil and gas operation; and
• Cannot be otherwise preempted by state and federal law.

Dianne Edmonson, chairman of the Denton County Republican Party, said while she supports local control, the state constitution gives the RRC responsibility for oil and gas activities. She supports the bill because it still offers safeguards for cities and because the Republican Party platform calls for support of hydraulic fracturing.

“It still protects the roles of the city to regulate to a certain extent oil and gas activities but does not allow them to totally ban drilling, which is what that ban was doing,” Edmonson said.

However, Edmonson said the fight is far from over. She said outside influences, including environmentalist groups, led to the ban in the first place.

“While I think the legislation was a good compromise on local control and constitutionally, ultimately this issue is going to be decided in the court,” she said. “If nothing else I think there will be lawsuits resulting from the legislation itself.”

In November, 59% of Denton residents voted to prohibit hydraulic fracturing within the city. Immediately afterward, the Texas Land Commissioner and the Texas Oil & Gas Association filed suits challenging the ordinance.

City Rights

Within a week of the election, Christi Craddick, chairwoman of the RRC, said she would ignore the ban. “I’m the expert in oil and gas,” she said at the time. “The city of Denton is not. We’re going to continue permitting up there because that’s my job.”

Leading up to the bill’s passage, Texas mayors and city officials from North Texas to Victoria sent an opposition letter to the Legislature. They noted that 300 Texas cities had adopted ordinances to limit drilling within their borders that could be undone.

Opponents say state regulations are “notoriously weak” and that fines for some violations date back 30 years and haven’t kept up with inflation.

Supporters argued that ordinances preempted by the bill are mostly duplicative of state agency regulations. They say it would incentivize cooperation between operations and cities.

But Scott Anderson, senior policy director for the Environmental Defense Fund, said the law would unspool years of work between the municipalities and operators.

“The bigger news behind the bill, in addition to banning bans, is that this bill also takes away a huge portion of the authority that Texas cities have had for almost 100 years to regulate oil and gas operations,” he said.

Along with Denton’s ban, it also overturns “thousands of provisions dating back at least to Longview in the 1930s, which both have facilitated oil and gas development inside of city limits and also protected lives and property from the worst aspects of drilling.”

Municipal ordinances, whether zoning or specific to oil and gas, are “just gone” if they regulate subsurface operations, Anderson said. He served as an oil lobbyist for 25 years and general counsel and executive vice president at the Texas Independent Producers and Royalty Owners Association. In part, he helped cities draft drilling ordinances.

“There are many such ordinances in many Texas towns,” he said.

He said the new law will drive closer collaboration between city governments and the RRC as well as collaboration between cities and environmental advocacy groups. Cities also may consider new alternatives of achieving their goals to make up for their loss in jurisdiction.

“You might see an increased use of negotiated contracts and memorandum of understanding with companies as a condition of doing business inside of city limits,” he said.

Anderson also agreed with Edmonson that lawsuits are coming.

“I think it’s going to encourage citizens to depend more on private litigation suits for nuisance, trespass, that sort of thing rather than relying on municipal regulation,” he said. “I also think it’s going to lead the industry to have some second thoughts when they realize some of the unanticipated consequences of the bill.”

Conservative Views

Some conservatives with an environmental tilt were concerned about repercussions. Republican Trammel S. Crow, who founded Earth Day Dallas and is son of the Trammell Crow Co. founder, wrote to the Legislature in April to voice concerns about the bill.

He said local government oversight and oil and gas development have coexisted side by side for decades.

“HB 40 drastically shifts this balance of power away from local government,” he said. “Undermining reasonable local regulations will also ultimately undermine support for the oil and gas industry.” While the Denton fracking ban may have violated that balance, “this legislation is trying to remove a bullet with a butcher knife when a scalpel is the better tool.”

Todd Staples, president of the Texas Oil & Gas Association, argued that the bill maintains balance between cities and the RRC as the ultimate authority. He said that 40% of the Texas economy and 2 million jobs are supported by the oil and natural gas industry.

“Striking the right balance with carefully constructed policy has never been more important,” Staples said. “The legislation provides cities with authority to reasonably regulate surface level oil and gas activities while affirming that regulation of … fracking and production is under the exclusive jurisdiction of the state. HB 40 is a fair bill that balances local control and property rights.”

Contact the author, Darren Barbee, at dbarbee@hartenergy.com.