It is perhaps the most ironic move in the industry in years.
The Barnett Shale – considered the birthplace of the shale boom, where the right combination of horizontal drilling and hydraulic fracturing unleashed the nation’s sweetly flowing unconventional hydrocarbons – has made history once again, but in a surprising way.
On Nov. 4, citizens in Denton – a city on the edge of the Barnett Shale in north Texas with a population of 123,000 – voted to ban hydraulic fracturing.
The ban was signed into law on Dec. 2, making Denton, which has 280 active gas wells, the first city in the Lone Star State to outlaw the practice.
In the wake of the vote, a storm continues to brew among a hodgepodge of players. There are relieved citizens touting their victory. There is the Denton mayor, who staunchly believes the ban will hardly put a dent in city coffers, much less operators’ future plans to drill. There are the operators who vehemently disagree. There is the Texas Railroad Commission, which oversees drilling permits in Texas and promises to override the decision it considers illegal.
Then, there is the story behind the story – the convoluted path that made this perfect storm possible.
Did That Really Happen?
Eclipsed by the news of Republicans taking Congress from the Democrats the night of the election, the ban on fracturing supported by 59 percent of Denton voters quietly ushered in a new order.
Riled by the local campaigns of Frack Free Denton and the Denton Drilling Awareness Group (DDAG), citizens cast their ballots to not only stop hydraulic fracturing but to prevent a host of other objectionable practices they lumped under the “fracking” umbrella.
“They can’t drill a well 300 feet from a park anymore. They can’t flare 200 feet from a child’s bedroom anymore,” said Cathy McMullen, leader of the DDAG who was quoted in the Fort Worth Star-Telegram the day after the election.
Denton Mayor Chris Watts said residents have long complained about rigs outside their windows, concerns over contaminated water, bright lights and dust. When the city increased setbacks between wells and homes to 1,200 feet in 2013, it was not enough to quell residents, who wanted hydraulic fracturing banned altogether and gathered a reported 2,000 signatures of support.
Last July, Denton’s city council voted 5-2 against a proposal to ban hydraulic fracturing and instead put the issue before voters.
“Any place has the right to exercise a vote, and Denton went all the way,” said Ken Morgan, director of the Energy Institute at Texas Christian University (TCU) in Fort Worth, Texas. “What’s going to happen to Denton is probably a fair amount of lawsuits.”
Two already have been filed by the Texas Oil & Gas Association and Texas General Land Office, claiming state law pre-empts local laws.
A City-Created Problem
Things didn’t have to go this far.
That is the opinion of Ed Ireland, executive director of the Barnett Shale Energy Education Council and former member of the City of Denton Gas Drilling Task Force.
Prior to the election, Ireland spent months disseminating information to the public about the myths and facts of hydraulic fracturing – to little avail.
If the devil is in the details, then the details of the city’s well permitting process lie at the heart of the controversy.
As drilling in the Barnett Shale began to approach Denton’s city limits years ago, the city, in a curious move, tasked its fire department with issuing local drilling permits, Ireland said. Unfamiliar with its new domain, the fire department issued permits not for individual wells, but for entire well pads – in perpetuity, he said.
At the time, most of the drilling took place in rural parts of the city, so the fact that individual wells were not permitted was not an issue, Ireland said.
Then, the city began to grow.
“The city allowed the developers to build houses up to 250 feet away from existing pad sites,” Ireland said. “So you’ve got operators who can drill forever and now houses up to 250 feet from pad sites.
“And the operators come back to drill and say, ‘I have a permit,’” he said. “It’s a city-created problem.”
Not So Fast
The City of Denton contests Ireland’s claims, insisting that individual wells have always required local permits.
“The development plat has always been intended to be the first approval required for a gas well in the city,” said Public Information Officer Lindsey Baker in an email. “Once a play was approved in accordance with Denton Development Code guidelines, a gas well permit was issued by the Fire Department.”
She added that each gas well development plat required the operator to identify various setback distances to each specific well’s surface hole location before a permit was issued to a specifically identified well.
The city’s mayor seems hazier on the issue. When asked about the fire department issuing permits solely for well pads, he said, “That may be accurate but that was a long time ago. That was before my time.”
In October 2013, Denton officials took their governance to task, asking a Denton County court for a restraining order against EagleRidge Energy, a Dallas-based company, claiming it was drilling wells that violated the city’s newly adopted and more stringent setback regulations.
District Judge L. Dee Shipman dismissed the request after reading EagleRidge’s plat, which was issued in 2002.
“It looks to me like in their plat the city gave them the right to drill on that property multiple wells as long as they’re approved by the Texas Railroad Commission,” Shipman said, according to a transcript of the hearing. “And then you took that right to drill those wells that are properly approved by the Texas Railroad Commission away from them in the future. Why isn’t that deprivation of a vested right?”
Days later the city dropped its request.
“A plat is a plat – not a permit for one well,” Ireland said. “That plat permit is for as many wells as you want to drill. They have an entire pad site permitted in perpetuity.”
Means to An End
The ban on hydraulic fracturing is really a ban on drilling, Ireland said.
“We are talking about wells in the Barnett Shale,” he said. “They don’t produce anything unless they are hydraulically fractured.”
Somehow that message got lost as anti-frac’ing groups posted alarming claims on their websites. Frack Free Denton wrote: “Fracking (sic) is a major reason why Denton has the most unhealthy air and highest rates of childhood asthma in Texas,” and “Fracking a single well contaminates four-eight million gallons of precious freshwater forever.”
When asked about the ban on hydraulic fracturing specifically, Watts said he did not believe it would have dire effects.
“That’s just one step of the completion process. Gas and oil wells that are producing now will go on producing,” he said. Operators “can drill new wells, but no frac’ing.”
He added that he didn’t expect the city to take a huge financial hit either.
A July 2014 report issued by The Perryman Group of Waco, Texas, estimated that a hydraulic fracturing ban could potentially cost Denton $251.4 million in economic activity and 2,000 jobs over the next 10 years. It also could cost the city and its school district $5.1 million and $4.6 million in revenues, respectively. The study was commissioned by the Fort Worth Chamber of Commerce, which represents some industry players in the Barnett Shale.
“Without frac’ing, we can’t drill any wells,” said AAPG member Herb Martin, vice president of exploration at Devon Energy, the largest operator in the Barnett Shale since it acquired Mitchell Energy in 2002. “There is no play.”
Look Before You Leap
Texas is no stranger to the oil and gas industry, and people buying houses here need to do their homework before settling down, said AAPG member David J. Entzminger, past president of the AAPG Southwest Region.
“It’s kind of like buying a house in a floodplain,” he said. “It’s your option if you want to buy in that floodplain, but eventually – and it may be years later – you’re going to flood.”
Morgan of TCU said a better job must be done informing citizens about hydraulic fracturing, or the industry will continue to see more bans, similar to the one in Denton and those that occurred in Colorado over the past several years.
“The industry really needs to sit down and think about its public image and if there is misinformation out there. We’ve been able to enjoy lower prices at the pump. We’ve been able to have more jobs,” he said. “If we begin to shut down these areas, will that have an impact? Yes. This is a hot potato.”
Just as the governor of Colorado was able to strike a compromise with anti-fracturing advocates last August, the same type of dialogue must occur in other cities where tug-of-wars exist between industry and citizens, Entzminger said.
“As long as we have severed rights – meaning surface owners and mineral owners are not the same and probably don’t have the same feelings – we’re going to have some challenges that we are going to have to work around,” he said.
“Sometimes people use frac’ing as a means to something that’s not what they are really concerned with,” he added. “What are people’s real issues? This is what we need to know.”
The Last Word
While citizens in Denton have won the battle, the war they must fight is just on the horizon. Angry and litigious operators aside, the fighting words of Texas Railroad Commissioner David Porter have been printed in countless Texas newspapers and continue to be shared:
“As the senior energy regulator in Texas, I am disappointed that Denton voters fell prey to scare tactics and mischaracterizations of the truth in passing the hydraulic fracturing ban,” he said.
“Bans based on misinformation – instead of science and fact – potentially threaten this energy renaissance and as a result, the well-being of all Texans.
“This issue will continue to be hotly contested,” he continued. “I am confident that reason and science will triumph, and the ban will be overturned.”