Texas natural gas producers are suing the City of Arlington, TX, to stop a recently enacted $2,400 per well annual fee on operators. The fee's anticipated $781,450 annual revenue would fund the city's "Natural Gas Well Preparedness and Response Plan," which was adopted in March.
The Texas Independent Producers and Royalty Owners Association (TIPRO) and the Texas Oil & Gas Association (TXOGA) filed a lawsuit Monday in U.S. District Court for the Northern District of Texas, claiming that Arlington city officials have not explained how the fee, which the producers call a tax, would increase public safety as it relates to oil and gas operations. Arlington, which is in Tarrant County, overlies the Barnett Shale and is part of the Dallas-Fort Worth metropolitan area.
"Safety is the top priority of oil and natural gas operators. In addition to maintaining their own emergency responders on call 24 hours a day, 365 days a year, local oil and natural gas operators have offered to provide the Arlington Fire Department with training free of charge," said TXOGA's Deb Hastings, executive vice president. "The city has repeatedly declined. Even though fires at oil and natural gas well sites are very rare, oil and gas operators routinely provide free training to local fire departments and emergency response teams across Texas."
TIPRO President Justin Furnace said gas well operators already reimburse the city for costs incurred from well incidents. The obligation on the part of producers, he said, is part of the city's Amended Gas Well Drilling Ordinance, which the city adopted last December (see Shale Daily, Dec. 8, 2011).
Arlington City Council unanimously passed the Natural Gas Well Preparedness and Response Plan in early March. The plan, which was presented to the council in early February by Fire Chief Don Crowson, calls for a system approach of three elements to be addressed: oversight, inspection and response capacity. It also calls for a unified partnership between the departments of Fire, Community Development and Planning, Water and Public Works and Transportation, the council said.
"I believe that the natural gas industry is part of the solution, and we will reach out to them just as we have discussed," Crowson said at the time. "We will work with the industry on communications, relationships, and together find appropriate solutions."
Crowson said the plan was needed "due to the unique challenges for public safety, the rapid growth of drill sites and the fact that sites are located in urban settings near neighborhoods, schools, and businesses," council said.
Plan costs include hiring a natural gas well program manager, a natural gas well site safety and security fire inspector and six fire fighters assigned and specially trained to handle natural gas well incidents, council said. The department also planned to assign another 42 firefighters at the city's Fire Stations No. 1 and 9 to the mission.
To the natural gas industry, the plan is redundant and expensive.
"The City of Arlington already imposes the highest fees for oil and natural gas operations in North Texas," Hastings said. "Operators paid $1.8 million in city fees in 2011 alone and the city received $2.5 million in mineral ad valorem revenues. And the City of Arlington received an additional $105 million in bonuses and royalties over a five-year period ending in 2011.
"We believe the new tax is not only unnecessary from a public safety perspective, but also unconstitutional and in violation of Texas law, leaving no option but to take the issue before the court to examine."