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October 16, 2014

Fracking Ban Vote Is Much Bigger Than Denton

  Dallas Morning News

On Nov. 4, Denton residents will vote on whether to ban hydraulic fracturing within city limits. And while it might seem like a local issue with limited impact — after all, there is relatively little drilling in the city of Denton now — the vote has national implications. That’s because environmentalists trying to stop the use of fossil fuels will boast that if a midsized town in a pro-energy red state like Texas can ban drilling, other communities should, too.

To be sure, there are Denton residents with some grievances. They believe that some wells have been drilled too close to communities. But that situation is a result of the city granting largely unrestricted drilling licenses years ago with no sunset provision to allow for changing conditions. The election will have no impact on those past mistakes.

But environmental activists would turn a ban vote into a PR campaign, as they push for bans, moratoriums or unrealistic zoning laws in towns and cities across the country. That’s because drilling bans might be their last chance to stop the energy revival that has so benefited both the Texas and U.S. economies.

Bloomberg News recently reported, “The activism comes as environmentalists are encouraging municipalities nationwide to join an estimated 435 measures to control or ban fracking.” Many of those municipalities are located in New York, Pennsylvania, California and even Colorado.

The situation is different in Texas. If Denton does impose a ban on drilling, the state will almost certainly sue to stop it. That’s because Texas law, as in many other states, pre-empts such local-community actions. The state reserves the right to oversee and manage the oil and gas industry.

Rather than an outright ban, cities should impose reasonable “setbacks” — a required distance between a well and a neighborhood or school. Denton passed a 1,200-foot setback in 2013, a distance so far that it comes close to being an effective drilling ban, and it doesn’t even apply to those earlier permits. Fort Worth, by contrast, has a setback of 600 feet, a distance that accommodates both the residents and mineral rights owners.

Proponents claim a drilling ban won’t have much of an economic impact on Denton because only a small portion of its revenues come from oil and gas sources. But they are ignoring the costs the city would have to pay if mineral rights owners successfully sue under the constitutional “takings” provision.

The Fifth Amendment to the U.S. Constitution says, in part, “… nor shall private property be taken for public use, without just compensation.”

So when the government takes private property — e.g., land to build a road — it must compensate the property owner. A “taking” is when government regulations substantially reduce the value of people’s private property, including mineral rights.

With respect to drilling, there is a federal court precedent. In 1983, Miller Bros. Oil Corp., based in Traverse City, Mich., leased the mineral rights below the Nordhouse Dunes Wilderness. The state’s Department of Natural Resources rejected the drilling plan, saying state law prohibited “any and all” energy development on the land.

Miller sued, and in 1989 Circuit Court Judge Peter Houk ruled that the state’s action was a taking of private property and awarded the plaintiffs $71.5 million, upping that to $120.8 million in 1995 — and the company never even had to drill.

If Denton bans drilling and the state were to decline to override the vote, the courts could require the city to compensate mineral rights owners for their lost royalties. But don’t expect the environmentalists to spend much time talking about those costs. If the city votes to ban, the environmentalists will have what they want: another notch in their anti-energy PR campaign.


 

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