Kevin Roden for Denton City Council

Gas Drilling Fee Vote – Some Context

June 8th, 2011Uncategorized1 comment

June 7, 2011

No doubt there will be some chatter regarding my vote tonight at my first city council meeting regarding the reduction of fees for gas drilling operations in Denton.  I voted with the rest of council to adopt an ordinance effectively doing away with the fees voted in by the council nearly a year ago as part of their Phase I review of the city’s gas well ordinances and instituting a new fee structure as recommended by an outside consultant.  The Denton Record-Chronicle’s Lowell Brown already caught up with me after the vote with a very honest question: “During the campaign, you argued that you would nickel and dime the hell out of the industry.  How does your vote tonight match with that claim?” (in reference to a statement I made regarding local gas drilling regulation at the Denton Neighborhood Alliance forum.)

I invite everyone to spend some time with the back-up agenda material that is available online relating to this item (4N of the Consent Agenda) – go here and then click on the link for the “Agenda with Backup.”

The city Planning Office admittedly “shot from the hip” when they suggested the new fee structure voted on by city council last August.  The fees were attempting to cover the costs of needed employees and support that would allow the city to effectively regulate the industry.  And this is a good thing – it would be a bad idea to essentially subsidize the gas industry on the backs of taxpayers.  Unfortunately, without having the Gas Well Inspection Division in place, the planning team had very little internal background in order to justify their fee suggestions.  Without this justification, the city risks a legal challenge that they are imposing a fee beyond what the service actually costs.  J. Stowe and Co., LLC came in to attempt a more thorough analysis.  It is unfortunate this issue played out in this way.  The increase of fees was a more popular component of the Phase I process.  I imagine the fees suggested under the current proposal would have been welcomed had they been a part of the original proposal last August.  Unfortunately, it now appears that the city is actually lowering the fees – and this perception is meaningful.

Here’s one silver lining – the council opted not to assess annual inspection fees of gas well sites in the Extra-Terrestrial Jurisdiction areas following their August 2010 review.  The consultant has argued that this should happen and tonight’s ordinance made this happen.  Considering there are 762 wells to be inspected in the city’s ETJ (and only 210 in the actual city limits), at $580 per annual inspection, this means a yearly increase of around $400,000 in fees assessed to the industry that resulted from tonight’s ordinance that wasn’t in play in the previous fee proposal approved last August.

Unfortunately for the general public, most of the discussion on this issue happened during a closed session called by the city’s legal department.  I can say this: concerned citizens would have appreciated the rather spirited discussion that took place on this issue.  Several questions remain about the new fee structure – and here are some of mine:

• Little to no analysis was done on certain items by the consultant, making some of his fee suggestions seem as arbitrary as the original city analysis.  This came to light specifically relating to the fee for the Gas Well Development Site Plan, which is why this suggestion was pulled out from the motion to approve the ordinance tonight.
• It is still unclear how the books balance between the costs associated with the new Gas Well Inspections Division (which now stands at 6 Full Time Employees – an increase of 2 since last August) are completely covered by the new suggested fees.  Taking into account just the annual inspection fees (which cover all wells – even those that have been around for a while both in they city and the ETJ), assuming a 85% collection rate, the salaries of the Division are covered.  Other items still need to be accounted for such as vehicles, equipment, office space, technology, administrative support, etc.  We will continue to examine this – there should be NO subsidization of the industry with tax payer money.
• Much of what we mean by “inspection” will not be filled-out until we proceed with Phase II of the ordinance review – the costs associated with this may certainly rise depending on the levels of protection we afford our citizens from these sites.

Rest assured, this issue of drilling and production fees will be fully vetted as we move through the Phase II process – and the fees can be re-examined at any point where it appears discrepancies exist.

It should be noted that two other encouraging decisions were made tonight for those concerned about natural gas drilling activity in Denton.  First, the council voted unanimously to adopt the Fair Share Resolution in order to encourage TCEQ to mandate new control measures for the release of Volatile Organic Compounds (VOCs) from the gas drilling industry ahead of its upcoming vote on a new DFW Air Plan.  The technology is already in place that can help both our air quality and the industry save more money – a rare win, win for this issue.

Second, there was support on the council to examine how citizens will be involved in the process of the Phase II gas well ordinance review.  Denton’s citizens are up for the task.  If you are interested in helping out, let me know.

As always, please share with me your thoughts and your questions – you can email me at kevin.roden@cityofdenton.com or call me at 940-206-5239.