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Drilling-Friendly Texas Bill Advances With Some Changes

A compromise bill intended to block municipal anti-drilling/hydraulic fracturing (fracking) ordinances was passed by a Texas House committee Monday and is on its way to the full House. It includes some concessions to the legislation's critics, namely Texas cities and their residents upset by drilling activities.

The Texas House Energy Resources Committee Monday adopted an HB 40 substitute in a 10-1 vote. It adds some provisions to committee Chairman Drew Darby's (R-San Angelo) original proposal.

For one, it clarifies the term "commercially reasonable" as it applies to drilling and drilling-related activities. During a committee hearing last week, bill opponents voiced concerns that the term was too broad. The substitute also provides more specifics on the aboveground drilling-related activities that municipalities may regulate, such as required setbacks from drilling operations as well as fire and emergency response-related measures.

The substitute also recognizes some existing municipal ordinances by saying that compromise rules arrived at with industry input would be deemed to be commercially reasonable if they have been in effect for at least five years and oil/gas operations were allowed to continue during that period.

HB 40 is now less stringent than its Senate companion, which was passed out of committee last week without amendments (see Shale Daily, March 24).

The House bill and SB 1165, which was introduced by Sen. Troy Fraser (R-Horseshoe Bay), were drafted in response to a fracking ban enacted last year by the city of Denton (see Shale Daily, March 24; March 12).

Meanwhile, another bill targeting municipal regulation of drilling and fracking -- HB 539, by Rep. Phil King (R-Weatherford), which would put cities on the hook for tax revenues lost due to restrictions they place on industry activity -- was pending in committee Tuesday (see Shale Daily, Dec. 18, 2014).

The Texas Municipal League (TML) opposes the bills that would limit city control of drilling/fracking, but some of its concerns were accommodated in the HB 40 substitute. Still, TML Executive Director Bennett Sandlin told NGI’s Shale Daily, the group would prefer that no bill limiting local control ultimately passes.

Sandlin said the substitute HB 40 is "much improved. It's not 100% perfect. It's a lot better than the as-filed version.

“The most important [change] is just explicit recognition in the bill that you can have reasonable health and safety rules like setbacks. We thought it was very concerning that the initial bill didn't mention setbacks in it because the way we read the bill, it probably preempted those. So we got that clear understanding that your basic setbacks, your basic noise ordinances are still fine under this scheme even though a lot of other authority goes over to the state.

“We don't support the bill; we still don't think anything needs to pass, but the substitute is a lot better."

While the current bill enumerates some things that cities may regulate, emergency response issues, for instance, it does not name everything that TML is concerned about, Sandlin said. There is no mention of disposal wells or fracking ponds, he said, adding that perhaps there is hope of adding those things later. "We think the word 'including' is helpful, so it may not be an exclusive list" of what cities may regulate, he said.

The Texas Oil & Gas Association (TXOGA) backs legislation that would reinforce state rather than local oversight of drilling. On Monday, the trade association released the results of a poll on local regulation of drilling/fracking that it funded.

The poll, conducted by WPA Opinion Research, shows that when asked specifically, 75% of Texans think state regulatory agencies should be in charge of regulating the oil and gas industry as opposed to their city council. Preference for state regulation of the oil and gas industry was bipartisan with 87% of Republicans, 71% of independents and 62% of Democrats in agreement.

The question posed by WPA Opinion Research is specific to issues addressed in HB 40 and SB 1165. "SB 1165 and HB 40 reflect a common sense approach that is in line with the vast majority of Texans' belief that the state -- not city councils -- should regulate the oil and gas industry," said TXOGA President Todd Staples.

TML responded by pointing out a University of Texas/Texas Tribune poll from February that found that by an 11-point margin (45-34%), more Texas voters support local control of fracking than oppose it. It found that 50% of Republicans support local control of fracking while 35% oppose it.

“Which poll on fracking are you going to believe? An independent poll sponsored by a news organization and conducted by university researchers or a self-serving poll purchased by oil and gas lobbyists?” TML said.

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