Denton, Texas bans fracking – what’s next?

Bans on hydraulic fracturing (fracking) have arisen in a variety of places over recent months creating significant issues for property rights, says Patricia M. Rosendahl at law firm Greenberg Traurig LLP.

Voters in Mendocino County and San Benito County, California, and Athens, Ohio, separately approved bans on fracking in the November elections.  

The New York State Governor and his Commissioners of Health and Environmental Conservation decided to ban fracking in New York on Dec. 19, 2014, as Steve Russo has discussed on this blog.  

However, a small Texas city northwest of Dallas, with a long history of oil and gas production, has drawn national attention after its citizens overwhelmingly voted to ban fracking.
On Nov. 4, 2014, voters of the City of Denton, Texas, approved an ordinance that banned fracking within the corporate city limits.  

While other cities in Texas have passed ordinances restricting fracking, Denton is the first city to outright ban the practice. Denton’s ordinance would make it a misdemeanor, subject to a fine of up to $2000/day, to engage in fracking within city limits.

Denton is located in the middle of the Barnett Shale, one of the nation’s largest gas fields, with 277 wells inside city limits.  Since many wells are grandfathered under older regulations, fracking has previously been allowed within a few hundred feet of homes.  

While the ordinance does not ban all drilling and would allow operators to keep pumping from wells already developed and fracked, the wells could not be fracked again.
Denton’s ordinance has thus far triggered two lawsuits seeking declaratory judgments that the ordinance is unconstitutional and/or preempted by state law: Patterson v. City of Denton is a challenge to the ordinance by the Commissioner of the Texas General Land Office, which leases state-owned mineral interests to operators within the City of Denton;  and Texas Oil & Gas Assn. v. City of Denton is a challenge brought by the oil and gas trade association.

The legal dispute centers on the scope of jurisdictional authority that home-rule cities like Denton possess under Texas law to regulate exploration and development of mineral interests.  Whether Denton’s ban on fracking conflicts with state law that expressly allows fracking is the constitutional issue raised in these suits, since the Texas Constitution prohibits home-rule cities from enacting ordinances in contravention of state law.  

In the wake of Denton’s new ordinance, two bills have been introduced in the Legislature that would make it more costly and difficult for any city seeking to regulate oil and gas activities.  

These bills will likely be opposed by the Texas Municipal League.

Although not a party to the suits, the Railroad Commission, Texas’ oil and gas regulatory agency, has been at the epicenter of the dispute, since it is the agency with statutory authority to permit wells for enhanced recovery projects, including fracking.  

Whether those issued permits by the Railroad Commission should also be required to comply with municipal regulations is the issue raised by the preemption argument in both suits.  

This issue has implications beyond the Denton ordinance since a number of cities in the Barnett Shale region have already enacted restrictive ordinances that industry claim amount to a de facto bans on fracking.   

Recognizing that fracking in heavily populated areas creates a special set of problems, the Railroad Commission has announced its intention to look more closely at the issue of drilling in urban areas, including more inspections of drilling sites.

Another group poised to assert a legal challenge to the Denton ordinance are the mineral estate owners, some of whom are already engaged in litigation with the City of Denton over an earlier ordinance claimed to be a de facto ban on drilling.  

Since many of the wells in Denton allegedly cannot be produced cost-effectively without hydraulic fracturing, the ban may potentially be challenged as an unconstitutional taking without compensation if it denies mineral interest owners the right to gain value from their property.

This matter is far from over, and further developments are anticipated.

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