Texas City to Vote on Hydraulic Fracturing Ban Nov. 4

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--In less than two weeks, voters will go to the polls in Denton, Texas, to vote on a proposal to ban hydraulic fracturing in their city, which is home to about 275 gas wells. Denton, a college town located about 50 miles northwest of Dallas, lies atop the Barnett Shale, where a little over a decade ago the hydraulic fracturing revolution got its start.

That geographical irony is not lost on the Oil & Gas Industry, which is fighting--and reportedly losing--a battle against the ban. "If the election were held today, we would lose," Dianne Edmondson, chairwoman of the Denton County Republican Party, told The New York Times. "I'm telling the anti-ban folks that they have to pick up their campaign." The Denton County GOP and the Chamber of Commerce have joined with oil & gas companies to oppose the ban.

In the same way that pitched local fights over hydraulic fracturing in Pennsylvania and Colorado drew national attention, the scuffle in Denton is being closely followed by the industry and its critics. The city already enacted a temporary moratorium to try to fix loopholes in its zoning laws that allowed hydraulic fracturing to take place as close as 200 feet away from homes. And, as in Colorado, oil & gas interests in Texas claim cities and counties can't regulate drilling--only the state can do that. For more on the fight over hydraulic fracturing in Colorado, see August 7, 2014, article - Oil & Gas Industry Sees Brisk Business in Colorado after Withdrawal of Voter Initiatives, and March 11, 2014, article - U.S. Oil & Gas Industry Gears Up to Defeat Voter Initiatives to Limit Hydraulic Fracturing.

If Denton's hydraulic fracturing's opponents win at the ballot box Nov. 4, it would be the first city in Texas to ban that drilling practice. The repercussions are expected to be widely felt across the state. U.S. Texas State Representative Phil King, a Republican who represents a district near Denton, told The New York Times, "The concern is that the anti-fracking community will try to take this all across the state and cities across the country and try to outlaw fracking."

In Colorado, North Dakota, Texas, Pennsylvania and other states with significant oil & gas production from hydraulic fracturing, drillers have been stung by the efforts of affected stakeholders like homeowners to slow or stop rapid oil & gas development. The concerns tend to be consistent across the different states: quality of life, air quality, water quality, heavy traffic, damage to roads, consumption of water, elevated noise and declining property values. Stakeholder engagement and a company's social license to operate (SLTO) are topics at virtually every Oil & Gas Industry conference being held today. For more on that, see August 11, 2014, article - Billions of Dollars at Risk if Oil & Gas Industry Can't Do a Better Job Telling its Story.

Speaking at a conference earlier this year, Brad Holly, Anadarko Petroleum Corporation's (NYSE:APC) (The Woodlands, Texas) vice president for operations, summarized the stakeholder engagement challenge facing the industry: "For too long, we've been focused on providing an essential ingredient for modern life. We've been very focused on the facts and the engineering, but not the perceptions."

The vote to ban hydraulic fracturing in Denton is only the most recent sign of how anxious the public has become over the practices of some drillers. Earlier this year, a Dallas jury awarded a family in North Texas $2.95 million in a lawsuit filed against Barnett Shale producer Aruba Petroleum Incorporated (Plano, Texas). The family, which lived about 15 miles west of Denton, claimed it had become sickened by Aruba's drilling. And in Denton, the citizen's initiative to ban hydraulic fracturing gained steam earlier this year after a company refracced an old well that was about 300 feet away from a home. The driller, EagleRidge Energy LLC (Dallas, Texas), has been criticized by other producers. EagleRidge claims it was acting within its rights, as the permit for the refracced well was issued decades ago, before nearby housing was built.

In The New York Times article, Chris Faulkner, president and chief executive of Breitling Energy Corporation (OTC:BECC) (Dallas, Texas), blamed EagleRidge for inciting much of the Denton rebellion. He said EagleRdge "is doing whatever they want to do without considering the impact on the city and the residents." The company did not respond to a request for comment.

Oil & Gas interests have said the ban would cripple Denton's economic future. They cite a study by The Perryman Group (Waco, Texas) that found regional gains in business activity and tax receipts related to the Barnett Shale include $11.8 billion in gross product per year and more than 107,650 permanent jobs. This economic activity generates annual tax receipts to the local government entities (including cities, counties, and school districts) and the state of an estimated $480.6 million and $644.7 million, respectively, the study found.

Since 2010, when development of the Barnett Shale began in earnest, cumulative gains in business activity include $110.7 billion in gross product and almost 993,600 person-years of employment. The associated tax effects since 2001 total about $4.5 billion to the local governments and more than $6 billion for the state.

Looking forward, Ray Perryman, president and chief executive officer of the economic consulting firm, estimated the total economic contribution of the Barnett Shale over the next decade will be about $153.4 billion in gross product, $6.1 billion in tax receipts to local governments and nearly $8 billion in tax receipts to the state.

Focusing on the city of Denton, Perryman said: "Much of the potential future development of the Barnett Shale and associated economic activity and opportunities in the city would be eliminated (if the ban was enacted). Potential losses in the city of Denton include $251.4 million in gross product."

Writing in the Odesssa American, Ed Ireland, executive director of the Barnett Shale Energy Education Council, said: "The current energy boom began in the Barnett Shale near Denton and is rapidly moving the country toward energy independence. Banning access to any natural gas and oil reserves in the U.S. is foolish and counterproductive, and a ban on drilling in Denton would be a tragic mistake for the citizens of Denton, Denton County, the state of Texas and the nation."

"The industry will be keeping a close eye on the voting in Denton November 4," remarked Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "Even at current low prices, gas production from the Barnett Shale remains robust. It would be a shame to see a ban on future development in the city of Denton. But the after-effects of a ban on hydraulic fracturing in Denton will reverberate across the U.S. Denton is another example that the Oil & Gas Industry needs to police its bad apples and work harder to win the trust and support of critical stakeholders like homeowners."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.