Confusion Swirls Over Bill to Clarify Drilling Rules

Texas cities shouldn’t fear his proposed legislation to clarify when and how cities can regulate regulate oil and gas activities, a top state lawmaker said Monday.

“We recognize that the cities have the right to do ordinances,” Rep. Drew Darby, R-San Angelo, said Monday at a hearing of the House Energy Resources Committee, which he chairs. “Purposeful municipal regulation can be important in developing the minerals in this state.”

Those words, however, did not appear to assure many of the local officials who came to Austin to voice their concerns.

Darby’s legislation – House Bill 40 – would limit municipalities' regulatory domain to "surface activity that is incident to oil and gas operations” when rules are "commercially reasonable" and don’t conflict with other state rules.

It's one of nearly a dozen bills filed in the aftermath of Denton’s vote to ban hydraulic fracturing within city limits, and it’s among those most likely to pass.

Energy industry representatives, environmentalists and local officials overflowed the hearing room on Monday, and testimony stretched late into the night. In their questions and statements, Darby's colleagues largely supported the legislation.

"We’re not here to harm the cities," said Rep. Jim Keffer, R-Eastland. “We’re trying to set and make reasonably clear the parameters.”

Rep. Tom Craddick, R-Midland, briefly questioned the proposal, but only to suggest that it didn’t go far enough to limit local control.

“I think the oil companies are the ones being beat up by this bill,” he said.

The debate comes as oil and gas companies face increased pushback as the industry's footprint extends into cities – particularly those sitting atop the Barnett Shale, which stretches some 5,000 square miles across North Texas. In some cases, neighborhoods are expanding closer to longtime drilling sites.

The biggest battleground has been in Denton, which in November voted to become the state’s first city to ban hydraulic fracturing, or fracking. But concerns about noise, traffic and the environment have swirled in other city halls. 

Texas law says the state intends its mineral resources to be “fully and effectively exploited,” but courts have said the power isn’t absolute. The Texas Railroad Commission oversees the state’s oil and gas industry, with authority to adopt “all necessary rules for governing and regulating persons and their operations.” Local governments have the right to impose reasonable health and safety restrictions, and the Legislature has granted most Texas cities the power to “regulate exploration and development of mineral interests.” 

Many cities have long regulated noise and controlled the location of wells or related sites like compressor stations. It’s unclear where hydraulic fracturing, or particularly large setbacks between wells and homes and businesses falls.

Darby said his legislation, backed by a litany of petroleum groups, seeks to add clarity on the matter and combat a “patchwork of inconsistent regulation that undermines safe, consistent production of oil and gas.”

“Commercially reasonable,” he said, “is an objective standard, not a subjective one.”

Whether that's the case depends on whom you ask. 

Some critics say the language in Darby's bill would only add to the confusion, potentially taking away tools cities have long used to police health and safety.

“This bill creates an ambiguous standard” that will trigger more litigation than the current standard, said Bryn Meredith, an attorney for a slew of cities atop North Texas’ Barnett Shale. “This bill will have a chilling effect on smaller cities and they may elect not to regulate oil and gas.”

Shannon Ratliff, an attorney who worked on the bill, said it creates a straightforward standard that can be applied to weigh whether a city ordinance goes too far. 

“I don’t see this as an enlargement of the cities' power,” he testified. “You’ve got those rights reserved, but you cannot go over the line."

Players on both sides of the tug-of-war over drilling regulations on Monday loudly voiced their viewpoints – even before the hearing on Darby's bill. 

In a video released Monday morning, the Texas Oil and Gas Association said the legislation is necessary because a patchwork of local drilling ordinances – including extreme setback requirements – is harming energy production and threatening the 'Texas Miracle."

“Extreme setbacks on energy development are not necessary to protect health and safety,” the video said. 

Meanwhile, local control advocates said Darby's bill could jeopardize long-standing drilling ordinances across Texas.   

"The industry is seeking to wipe out hundreds of city ordinances that have protected residential neighborhoods all across the state from adverse impacts of drilling,” Bennett Sandlin, executive Director of the Texas Municipal League, said in a statement early Monday.

At least 312 of Texas' more than 1,200 cities have drilling ordinances on their books, according to survey data the group released Monday. 

Disclosure: The Texas Municipal League is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.