Dallas Debate Shows City Power to Limit Drilling

DALLAS — Claudia and Ed Meyer do not want natural gas drilling near their Southwest Dallas home or anywhere else in the city, for that matter.

Their neighborhood sits next to a patch of land that developers, eager to tap the edge of the Barnett Shale, sought four years ago. Worried about the noise and the impact on air and water quality and a two-lane road where tankers might rumble to and fro, the Meyers, both in their 70s, have become fixtures at city meetings as they fight efforts to allow drilling.

“There’s so much to be concerned about,” Claudia Meyer said. “The more you learn, the more aspects there are.”

Their effort may seem pointless in a state built on oil and now embracing a drilling bonanza unseen in 30 years. But Dallas has not welcomed drillers with open arms. The saga over natural gas production here includes twists reminiscent of the popular television drama that bore the city’s name. Now, after a long-running debate, the city is considering new rules that industry backers say would effectively bar any drilling within city limits, depriving Dallas and its mineral holders of revenue.

Whether the rules would keep out all drilling is an open question, as is how much money the city could reap from the Barnett.

Drilling in the region has slowed, amid low gas prices and a southward shift to the lucrative Eagle Ford Shale. But the debate here and elsewhere demonstrates localities’ power to shape the footprint of an industry, providing openings — even in industry-friendly Texas — to groups pushing tighter rules.

In late September, the Dallas City Plan Commission backed an ordinance that would require 1,500-foot setbacks between rigs and “protected use” areas like homes, businesses and churches — five times the current buffer. The ordinance will go to the City Council, where observers say it has a good chance of passing in the coming months.

Dallas officials say they have no intention of banning drilling and are simply being cautious.

But energy companies call the rules unworkable, regardless of the motivation. “It pretty much puts the nail in the coffin in terms of mineral production,” said Dallas Cothrum, a consultant for Trinity East Energy, which has long planned to drill in the city.

Industry representatives and some local officials say that cities wielding such power do so at their own risk and that overly strict rules could trigger costly legal battles.

States, along with the federal government, regulate most aspects of drilling, including well integrity, pipeline safety, and air and water impact. Cities, however, have sought to regulate noise and to control the location of wells or related sites like compressor stations.

“It does allow citizens to control what’s going on in their own cities — and that’s a good thing,” said Stephen Lindsey, the mayor pro tem of Mansfield, a suburb of Fort Worth, one of Texas’ first major cities to embrace drilling. City rules should include flexibility for companies, added Lindsey, who works for Quicksilver Resources, a Fort Worth-based drilling company.

Texas’ unincorporated communities, however, lack that power. Drillers there must comply with state rules, which do not set buffers between drilling and homes. Efforts to give those localities some authority have gained little traction in the Legislature.

Dallas is not the only city considering stricter oil and gas rules. In Lubbock, home to more than 100 wells, a city committee is studying whether to update city rules. In the past two years, the Dallas suburbs Southlake and Flower Mound have enacted polarizing ordinances that the industry considers de facto bans on drilling.

In Dallas, resident activists have cheered parts of the proposal while calling for even stricter rules. Meanwhile, companies that spent millions planning to drill under the old rules say they feel swindled by the city’s shift.

“We’re sort of baffled,” said Steve Fort, president of Trinity East, which paid Dallas $19 million in 2008 to lease 3,500 acres of land and spent millions more on planning. “We feel like we paid for something here that we’re not receiving.”

Trinity East was one of three companies to lease the city’s mineral rights initially, but it was the only one that stuck around while the city revised its rules.

In August, however, the City Council rejected the company’s zoning permits, leaving its plans in limbo. Trinity East is now weighing its options, including litigation, and “all of them are on the table,” Fort said.

“What they’re saying to the industry is, they don’t want you here,” said John Holden, an oil, gas and mineral lawyer in Dallas. “I think they’ve set up a tremendous lawsuit.”

Paul Ridley, a member of the city’s plan commission, denies such intent. The purpose, he said, was “to not be all drilling in Dallas.”

A lawsuit could set up an unprecedented showdown over city policing powers versus companies’ rights to develop their mineral rights. If the city lost, it could be required to compensate the company for its undeveloped rights.

State Rep. Van Taylor, R-Plano, filed a bill last session seeking to legally define major local drilling restrictions as a “taking" that merited compensation. It died in committee.

Such challenges are rare, observers say, mainly because companies risk a public relations nightmare.

“The last thing I counsel my company to do is to sue the city,” Lindsey said. “Even if you win, you lose.”

Meanwhile, industry representatives and some lawyers point to Fort Worth, 40 miles west of Dallas, as a model for balancing economic and environmental concerns. Between 2006 and 2012, the city took in nearly $264 million in natural gas revenue, including lease bonuses, royalties and property taxes on mineral leases.

Fort Worth’s ordinance —  which limits noise, keeps most drilling 600 feet from homes and spells out duties for local inspectors —  has grown to more than 60 pages from five. Most recently, the city tightened rules on gas compressors.

But environmentalists point to the city as a model to avoid. It is pockmarked with more than 1,700 producing wells, with pad sites nestled beside sports fields, homes and schools.

“It’s gradually chipping away the quality of life,” said Don Young, a 62-year-old Fort Worth native and longtime activist, who worries that drilling has worsened air quality.

In 2011, a study commissioned by the city concluded that drilling exposed residents to harmful pollutants like acrolein, benzene and formaldehyde, but not at dangerous levels.

Ridley said Fort Worth had come up several times in the planning commission’s talks, but mostly when suggesting stricter regulations. “We arrived at what we thought was an effective means to protect people,” he said.