Stakes are high as Denton frack ban goes to City Council Tuesday

Jul 14, 2014, 12:11pm CDT Updated: Jul 15, 2014, 7:11am CDT

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Jake Dean

Residents in Denton gathered signatures for a petition to ban fracking in Denton after Barnett Shale wells like this one were drilled within a few hundred feet of homes.

Staff Writer- Dallas Business Journal
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The stakes are high as Denton’s City Council prepares to vote Tuesday night on Texas’ first fracking ban.

The controversy likely will test cities' ability to control zoning and drilling within their borders similar to what recently occurred in New York.

Faced with a petition from residents, the Denton City Council can either adopt the fracking ban or, the more likely scenario, let the voters decide in November.

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The oil and gas industry warns that the loss of production in the Barnett Shale could cost millions while leaving Denton vulnerable to lawsuits from the state, energy companies and mineral owners.

“I believe a complete ban is preempted by state law,” said Tom Phillips, a retired Texas Supreme Court justice and a partner at Baker Botts.

Phillips will speak at Tuesday’s meeting on behalf of his client, the Texas Oil and Gas Association.

“There’s a comprehensive regulatory scheme in place for drilling and there’s a strong state policy in Texas in favor of the efficient comprehensive development of our oil and gas resources,” Phillips said.

Beyond that, Phillips said the ban amounts to inverse condemnation because state law requires that oil and gas minerals be “fully and effectively exploited.” Banning fracking, a well completion technique necessary to recovery natural gas in the Barnett Shale, makes the minerals unrecoverable and the mineral owners are entitled to compensation for that, Phillips said.

“Lawsuits will be brought and I believe some of them will prevail,” Phillips said. “The ban may be unconstitutional from the get go. And if it’s not unconstitutional, then Denton will be exposed to years of litigation and may be exposed to years of monetary judgments against it.”

The grassroots petition drive is a direct reaction to the Barnett Shale wells that were drilled and fracked within a few hundred feet of homes in South Denton. Residents were dismayed that these wells slipped through loopholes in the city’s drilling regulations. They saw no other option but to force a fracking ban. The petition had about 1,600 signatures, about three times more than were required, and was certified in June.

They said last week that they were encouraged by court decisions in New York, which ruled in favor of a city’s ability to ban fracking.

Then, there’s the money aspect.

Banning fracking would cost the city millions of dollars in lost revenue and gross domestic product, economist Ray Perryman said in a statement released Monday. He plans to present his findings at the meeting Tuesday.

“Over the next 10 years, a hydraulic fracturing ban in the city of Denton would negatively impact the city of Denton’s local economy by $251.4 million in lost gross product; 2,077 lost person-years of employment; and put a severe financial strain on the city and its taxpayers from millions of dollars in lost oil and gas related revenue,” Perryman said.

“Those negative impact will be felt well beyond the confines of city government,” Perryman said. “The state of Texas, Denton County, local school districts and even the University of North Texas will all lose millions of dollars in oil and gas related revenue, which would need to be recouped through either cut backs in current public services or by increased taxes, higher fees or tuition rate hikes.”

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