Trinity East's Fracking Plans Might Be Screwed with the New Dallas City Council

Categories: Biz, City Hall

griggshunt.jpg
Mark Graham
Angela Hunt and Scott Griggs: Drilling opponent Hunt is leaving the council, but that might not help Trinity East's plans to frack on parkland.
Even with two seats in limbo, the complexion of the new Dallas City Council looks decidedly unfavorable for Trinity East, the would-be fracker from Fort Worth that paid the city millions for the rights to its natural gas. Because the Plan Commission voted against the company's drilling permits, four "no" votes on the council is enough to deny Trinity East's appeal of the commission vote. It looks like the opposition gets to four easily.

See also:
Trinity East's Vapor Chase

Counting noses, there's Scott Griggs, a stalwart opponent of drilling, who defeated Delia Jasso for a redrawn District 1. You've got Adam Medrano, newly elected to District 2, who has said without equivocation that he doesn't believe in drilling urban areas. Carolyn Davis, just handily re-elected, has also opposed drilling in the city. Sandy Greyson is considered a likely "no" vote, as is Monica Alonzo in District 6. Philip Kingston, Angela Hunt's handpicked successor in District 14, is looking strong against Bobby Abtahi in a run-off. My, how the balance has shifted.

"I think the past year's public debate has had a profound influence ... so that the Council has shifted from hardcore, unquestioning support to something less than that," says Jim Schermbeck of Downwinders at Risk.

It's a treacherous road ahead for Trinity East. I sat down with its managers for a recent cover story and discussed their travails in City Hall. It isn't just the $19 million the company paid the city in 2008 that's on the line. Trinity East President Steve Fort said they've invested four times that, leasing up acreage across Dallas County, from Irving to Farmers Branch. Dallas, by far its largest mineral owner, is the centerpiece in a plan to develop the easternmost edge of the Barnett Shale. The city's block of contiguous acreage, they said, is what makes the enterprise profitable. Without it the company may fold, their lobbyist at City Hall, Dallas Cothrum, has indicated.

Griggs and Hunt, who was term-limited, requested an up-or-down vote in April, so the governing body that had expended so much energy on the issue could make the call before elections changed the makeup of the council in unpredictable ways. Even with Hunt out of the equation, the defeat of the drilling permits looks all but guaranteed. Question is, if Trinity East is toast in Dallas, will Mayor Mike Rawlings' much ballyhooed fear of a lawsuit pan out, or will the company wash its hands of the city and limp back to Fort Worth?

I reached out to Cothrum for his thoughts on the new City Council, and will update accordingly when I hear from him.


My Voice Nation Help
44 comments
fracquestions
fracquestions

The real problem for Trinity East is that there will be new Council members who have nearly zero knowledge of the issue of gas drilling and will have to be brought up to speed so they can make informed decisions on how to address an issue that can and possibly will adversely affect a lot of citizens if allowed to proceed.

Industry will come in and bullshit them about how great it is, about how much money everybody is going to make off it, about how safe it is and how it is going to "give us energy independence from the Middle East", which we all know is a "patriotic" thing to do. Of course, there will be many of us there to set the record straight, and so far our record is perfect - we have not lost a single battle. Our knowledge grows daily. Our support grows daily. Our credibility grows daily because we have relied on fact-based arguments. Our message has been well honed and effectively delivered. And, now we have an even friendlier Council, and I suspect we will have a friendlier CPC, as well.

Our interest is not in protecting the mineral rights of citizens. It is in protecting the health and safety, quality of life, property values and the environment from those who seek to cause harm for their own greedy purposes without regard for the damage they do to others. There are already many restrictions on what one can and cannot do with their own property for the good of the community as a whole. Preventing drilling in Dallas is just one more case of doing what is necessary to make Dallas desireable as a place to live, work and play.

The truth be told, Trinity East never even really cared about drilling in Dallas. What they really wanted was their compressor facility and refinery by the new soccer fields in northwest Dallas to serve their well sites planned for Farmers Branch, Lewisville and Irving. The gas wells were merely a distraction. They know there is no viable flow of gas to be found in Dallas. That is why nobody has EVER drilled oil or gas wells here.

manpanties
manpanties

could the city control production and keep it all instead of just royalties?

bbetzen
bbetzen

"... listening to the Jeff Blisses of the world is the best single way there is to find out what's working."

Amen Jim!  You said it well in this simple sentence. I always learned the most from my louder students.  They kept you going.  Listening to students is essential to teaching.   This teacher was not listening long before this videotape was made.  The problems grew.  This was the ultimate blow up!  Thank you Jeff Blesses.

holmantx
holmantx topcommenter

Did you ask him how much that revenue stream (the City's part) is worth in Present Value dollars?  How much annual revenue each year . . . how many millions of dollars would that royalty interest have generated to pay for city services instead of the alternative.  

Do you think the citizen might like to know that number in order to make an informed decision?  Hasn't that been part of the equation all along?

Because that amount is how much the taxpayer is going to have to replace . . . the old fashioned way.  Through sales and property taxes, which is nothing more than a claim on the future labor of us all.

That MASSIVE income stream is from wealth the citizen already owns.  It's in the ground.  It exists and it is on city-owned land.  We have the royalty over-ride position.  Do you have any idea what that is worth?  How many streets it will fix, people it will feed and shelter?

Remember why Suhm went after it in the first place?  We were in dire economic straits.  She had just laid off  830 employees.  Do you recognize the suffering that it brought on?

That smell you smell, is the smell of money.

And it must be replaced.

fracquestions
fracquestions

@manpanties The City of Dallas does not have the experience or operations to conduct drilling, fracing and production activities, but even if it did the amount of money generated by the gas retrieved would be far less than the cost to produce it.

Trinity East is a really dumb company. CEO Thomas Blanton and President Steve Fort claim they spent $76 million leasing lands in Farmers Branch, Dallas and Irving on the basis that they would get the right to drill and build their compressor complex and refinery in northwest Dallas, on city-owned park land and in the Trinity River floodplain when drilling in parks and floodplains is clearly prohibited by existing ordinances, as was stipulated in their leases and SUPs. Yet, they went ahead and spent all that money anyway on the assumption that nobody would get wise to what they were doing and object to it.

Blanton and Fort are precisely the type of gamblers that make Las Vegas thrive. They go in knowing that the odds are stacked against them in favor of the house, and they still plop down their (investors') money and risk it all on something that is not ever going to happen in Dallas. There is only one word for that type of behavior - STUPID!

MaxNoDifference
MaxNoDifference

@manpanties City employees doing the drilling and maintaining the wells?  Sounds like an industrial accident just waiting to happen.  The fireball would make the incident at West look like a roman candle.

fracquestions
fracquestions

@holmantx No matter how many times it is explained to you, you just do not get it.

Currently, natural gas is selling for about one third its production cost. That is the cost BEFORE the added costs for pipeline infrastructure, compressor stations, refining to remove adulterants such as water, liquid hydrocarbons, dirt, etc., transportation (by pipeline and truck), taxes and other costs are calculated.

The current contract with the City of Dallas (leases) calls for recovery of operating costs plus 15% BEFORE ANY royalty is paid, and when the royalty is paid the city will get 25%. At the current wellhead price for natural gas the rate will have to triple, or more, before there is ANY revenue on which to pay royalties, which is why nobody in the Barnett Shale has been receiving royalty checks for the past three years.

The current market condition is also why Chesapeake now has only two drilling rigs in the entire Barnett Shale rather than the 46 it had just two years ago. Those rigs rent for about $500K PER DAY, and nobody can afford to rent and operate rigs where the wells they drill are not paying off. That is why most drilling rigs are now in the Eagle Ford or Bakken drilling for oil instead of natural gas.

So, to summarize, the citizens of Dallas are sitting on top of zero value, and if we are counting on that money to fill budget shortfalls, then we are going to be in even bigger trouble than we were in when Mary Suhn did her illegal backroom deal out of the light of day in 2008.

The new City Council has a guaranteed ability to kill the Trinity East deal - that one is DOA at City Hall. It will probably have an easy enough time getting the votes to oppose any new applications that may come down the pike. Unfortunately for you, you are on the wrong side of this issue and your side is going to lose. But, you already knew that.

brantley.hargrove1
brantley.hargrove1

@holmantx That's kind of unknowable,  holman. So many factors: Natural gas price fluctuations, estimated overall recovery, which is tricky to pin down given that only two test wells -- in Irving -- have been drilled. Technology has come a long way, but this business is still a gamble.

dallasdrilling.wordpress.com
dallasdrilling.wordpress.com

@holmantx We stand to make shit on those leases. The better question is to ask The Dallas Observer if they ever thought about why the map of the Trinity East Energy leases match the same route as the new Trinity Toll Road.

holmantx
holmantx topcommenter

@fracquestions @holmantx I have no problem keeping it in the ground as an asset until it's price rises but that has not been the opposing argument.  

No drilling under any circumstances.  

If gas prices rise to $9 per mcf (or any designated strike price), then the citizen should consider it.

But the debate has never considered the economic benefit vs the cost.  Just "NO!".

And contracts cut circa 2008 would not be the contract the city should agree to in 2013.

As it is, even those 2008 contracts are capsizing energy companies - such as TE saying they may go Chapter 11.

So as my esteemed colleague Mr. Scotsmerkin would say, lighten up.  The issue is numbers.  And at this juncture, no one has run the $ numbers to us, the owners of the land on which they will be placed into production.

And I'd like to see the summary analysis of the seismic studies they have been performing.

Then the City can hire their own people to measure the fields and come up with our own estimate of the recoverable reserves.

Then we can calculate a strike price, and the benefit to the people versu the total economic an quality of life cost.

holmantx
holmantx topcommenter

@brantley.hargrove1 @holmantx 

Bullshit.  Gas fields are commonly engineered (appraised) by third parties for banks and others who loan money to drill them out.  It's how they get paid back - through the estimate of recoverable (engineered) reserves estimated by professionals in that field.  

Nobody loans money on wide open wildcatting when it isn't known about how much it will produce, or at all.

Certainly TE has either run the number internally, or hired it done.

It is probably how TE induced the City to consider the upfront lease.

and why Suhm misled TE that she and her staff would publicly support them in return for the $19 mil.  

Otherwise - why drill?

and lose the evil empire, unseen hand crap.  

It make everyone sound like morons.

there was money to be made - huge money.

and has been quantified - measured.

What is that number?

holmantx
holmantx topcommenter

@dallasdrilling.wordpress.com @holmantx 

The $19 mil was a drop in the bucket.  That just bought the right to drill, text and complete a gas field that would have been a huge revenue generator.  And the City would have gotten its money off the top as the royalty owner interest.  



RTGolden1
RTGolden1 topcommenter

@fracquestions @TheCredibleHulk @holmantx And, in your last comment, you destroy all your previous arguments.  Why not just stick to presenting the facts as you know them?  Why degenerate into lewd personal attacks on people you don't even know?  You had a good argument going until you slipped into the very unfair park-ish, playground name-calling.  Now, you're just another internet loudmouth, gathering your 15 minutes of fame, even if you're too cowardly to let anyone know who you are.

fracquestions
fracquestions

@TheCredibleHulk @holmantx holmantx is a con man trying to lure suckers into believe the same set of bullshit tripe to which he subscribes. He is frustrated that so many of us are actually knowledgeable, having carefully studied the issue, and that we are able to rip him a new one using facts and science to undermine his pro-industry propaganda rants.

But, what really irks him is that he knows we are winning and there is nothing he can do about it. This last Council election probably sealed the fate of drilling in Dallas, but for those who advocate drilling here it is a bitter pill to swallow.

Considering that they usually love to swallow, you would think they would be accustomed to the taste by now.

fracquestions
fracquestions

@holmantx @fracquestions You are the true idiot. You do not know or care what the law says if it interferes with your dogma. You don't care about the quality of life issues that are the difference between a city like Dallas and one like Detroit. You are actually dumb enough to buy into the lies about the money to be made because you choose greed over what is best for the greater community.

Your pathetic attempt to twist what I said fails. Golf courses and shooting ranges ARE my personal playground, as they are for many other residents and nearby neighbors, as well as visitors from other places.

Finally, if you think this issue is going to be settled by a referendum where the average citizen gets to vote on it, then you are even more stupid than I imagined, and it is hard to conceive of that even being possible. This decision will be made by the CPC and the City Council. For the next two years you can any chance of drilling here goodbye - and you already know that, but you are in denial over it.

holmantx
holmantx topcommenter

@fracquestions @holmantx 

Your golf game uninhibited is not a concern of the greater good.

Kids don't care.

And you have, I suspect, already shrilled the objection over rifle shots (ha!) by the rednecks - man-o-man.

Dallas is not your personal playground.

And the last is most revealing.

Why, we can't let the people - the Great Unwashed - decide what's good for them.

Elitist paternalism at its finest.

you are an idiot.

fracquestions
fracquestions

@holmantx @fracquestions Bottom line - you know far less than you pretend to know!

I play that golf course and I don't want the distraction during site preparation, drilling and fracing or the explosion hazard when it goes on-line.

Kids will be playing at those new soccer fields just 600 feet away from major explosion and fire hazards in the form of a refinery and compressor complex.

Citizens will be shooting rifles, pistols and shotguns at Elm Fork Shooting Sports gun range just 100 feet away from those well sites along Northwest Highway.

Drilling in floodplains and on city-owned park land is prohibited by existing laws. If nothing else matters, the fact that it is a violation of law to drill the Trinity East wells is enough to stop them forever.

Besides, if most citizens have as little knowledge of the economic costs as you do, then I am not in favor of letting them make an emotional decision based upon some trumped up claims of Jed Clampett wealth that will never materialze.

holmantx
holmantx topcommenter

@fracquestions 

A - we are not talking about an incongruous use of the land like a drag strip in a residential area.

B - it's in the flood plain and the site can be built out of it.

C - 10-acre minimums work well when screened, and there is no economic obsolescence (noise or fumes) to area development.

D - what's the number?  Let the citizens of Dallas make an informed decision based upon the facts and the cost - and the benefits.

Bottom line -we know more than you.

fracquestions
fracquestions

@holmantx I am prevented from building a drag strip on my personal property because doing so would endanger my neighbors and disrupt their quality of life and real estate values. By the same token, gas well drilling has no place in a densely populated urban area ... PERIOD!

I really do not understand why you are so insistent that there is a viable quantity of gas to be mined under Dallas. The only wells ever drilled on Dallas soil were abject failures (UD 1H and UD-Dallas 1H) one of which blew out during fracing and was cemented and abandoned. Later, those wells that were originally listed as "Production Wells" on RCT report forms were called "Test Wells" by Trinity East as a coverup for their failures.

Regardless of price, the cost to Dallas residents in terms of water consumption, water pollution and permanent removal from the hydrologic cycle, air pollution, soil contamination, major adverse health and safety issues, cost of road and bridge repairs, noise and light pollution, and so many other negatives far outweigh any benefits we would ever receive, especially when we are so far removed from the Barnett Shale payload.

Our city government has already proven itself to be inept and corrupt, so why should be trust it to know what is in the best interest of citizens? Fortunately, our leaders are becoming educated and more of them are turning against the practice. The road ahead just got a lot harder for the pro-drilling crowd.

And, by the way, I actually DID talk to the people in gas management in Fort Worth and here is what I found out. In 2008, FW made about $71 between upfront bonus money and royalties. The following year that dropped to $38 million even though many more wells were drilled. In 2010, FW received about $53 Million. The kicker is that FW got just about 73% as much revenue in 2010 as it got in 2008 - on FOUR TIMES AS MANY WELLS!

Fort Worth has over 1,700 wells. Dallas was going to get as many as 52 wells from Trinity East IF they actually drilled their maximum number of permitted wells as listed on their SUPs. Assuming that Dallas wells produced an equal amount of gas as those in Fort Worth (which they would NOT do) and the gas sold for an equal price (which it would NOT do), then based upon 2010 numbers Dallas would receive about $1.62 million, and that would not even come close to paying for road and bridge repairs, let alone any of the other accrued costs associated with drilling.

THAT is the "benefit to the people versu the total economic an quality of life cost."

RTGolden1
RTGolden1 topcommenter

@schermbeck @holmantx @brantley.hargrove1 One could just as easily tell you to quit pimping for the opposition.  Both sides of the fracking argument have their solid points and both sides are full of crap.  There IS, as Holman has been pointing out, a number at which the profit potential exceeds the public aversion, environmental concerns and potential health risks.  Anyone enjoying modern conveniences has apparently already crossed that number several times in their lives.  Unless you live in a cave and somehow manage to survive without food, you yourself are an environmental enemy.  You use electricity, gas, plastics, and more than likely some kind of wireless device made in a pollution belching asian sweatshop, so get off your high horse.

fracquestions
fracquestions

@holmantx @brantley.hargrove1 If anybody knows bullshit it is you, holmantx! You are full of it. Everything you are saying is a lie and you know it, but yet you keep saying it anyway as if anybody is going to be convinced. Well, guess what. Nobody is buying your bullshit lies, and the new City Council is going to be a much harder place to land a drilling permit than the current one.

holmantx
holmantx topcommenter

@schermbeck @holmantx @brantley.hargrove1 Uh oh.  Send in the clowns.

Google Earth the west 6 counties of the Metroplex.  See all those itty-bitty while patches?  Those are gas wells streaming wealth into government coffers.  Those towns from Burleson to Azle who have city-owned property are hooked up, and laughing at Dallas' rendition of Austin weirdness. 

We have an asset. And what we need is a utilitarian as opposed to abolitionist approach to hazardous substances used or created by technology. It is irrational, by implication if not explicitly, to assert a vision of a "Natural State" with intrinsic rights to impede the activities of man, combined with hysterical fears of environmental poisons, disproportionate to the threat and dismissive of their associated benefits.

And that has been your goofy argument all along. 

You don't even know what the number is, nor care.  But you will.

schermbeck
schermbeck

@holmantx @brantley.hargrove1 Quit pimping for the industry. That imaginary truckload of money doesn't have to be "replaced" because it doesn't exist. Royalties are at an all time low and anyway they'd have to pay for street repairs, damage to air quality, etc.  A very successful corner McDonald's would bring more long-term economic development to South Dallas than a gas well...or three. Given the track record of this company to date, you're giving them way too much credit for doing their due diligence. But no matter. For many people, the amount of money is less important than the damage to public health and quality of life.

 

brantley.hargrove1
brantley.hargrove1

@holmantx And, as we've seen, EOR numbers in the shale have undergone some serious revisions.

holmantx
holmantx topcommenter

@primi_timpano This just in:  Dallas Business Journal -  Exxon announces $10B plan to export LNG from Texas

If Exxon Mobil Corp. (NYSE: XOM) gets its way, liquid natural gas could be flowing out of Texas to countries around the world within five years.

The Irving-based oil and gas giant announced a partnership with Golden Pass Products and state-owned Qatar Petroleum International for a $10 billion expansion of the Sabine Pass LNG terminal along the Gulf Coast near Port Arthur.

snip!  Oh nooooo.  There's no money in it for the citizen.  Not now.

The only difference between Texas and California is that we encourage drilling and they block it. 

And California has more oil and gas than we do. 

And they are so far upside down and in the red they need a bail-out, their people are bolting out of the state, and their FULL TIME state assembly doesn’t know whether to shit or wind their wrist watch on how they are going to dig themselves out of a hole the size of the Grand Canyon.

Dallas is the Detroit of Texas.

My friends, the federal government will not always be there to match all that the city of Dallas is spending.  They are in a worse fix than California.  There is a good chance we will have to some day cover our own spending.

holmantx
holmantx topcommenter

@primi_timpano 

What's the friggin' number?

you don't know and Mr. Hargrove didn't even think to ask.

It is that number which is the central item the citizen needs to know to weigh the costs vs benefits.

It is the only reason TE was willing to loosen $19 in seed money in the first place.  

All you people who are unemployed, underemployed, or just making ends meet might want to recognize you are the ones who are going to make it up in sales taxes and property taxes (through apartment rent, home ownership, and where your employer resides on commercial property).  Just because you don't see that money being sucked out of your ass doesn't mean you aren't paying the freight on the replacement tax revenue.

City revenue sources are finite.  It has to come from somewhere, and it has a direct impact upon the quality of life.

primi_timpano
primi_timpano topcommenter

It is not likely to be high enough.

Starting with 3-4 dollar gas severely limits a company's inclination to drill. Disinclination means lower volumes, which means lower revenue. These wells are toast until prices rise.

holmantx
holmantx topcommenter

@fracquestions 

We cheated 'em fair and square.  Of course, Suhm issued a promise to facilitate as an inducement to obtain the $19 mil, but before and after the promise to help she told the council she had no intention of helping.

It's called Bad Faith.

fracquestions
fracquestions

@holmantx @dallasdrilling.wordpress.com As has already been well established by Mary Suhm's testamony in open Council session, Trinity East did NOT buy a right to drill. They bought an exclusive land lease with absolutely NO guarantee of a right to drill. Holmantx keeps trying to make it sound like they have a right that does not exist in fact or in law.

fracquestions
fracquestions

@ScottsMerkin @holmantx @RTGolden1 @dallasdrilling.wordpress.com Guys, the city ALREADY made the deal! It is past tense, not future tense. The deal is that the producer gets tom recoup his costs plus 15% before any royalties are paid. It's all in the lease if you would bother to read it, but instead you want to argue about the straw man in the room.

ScottsMerkin
ScottsMerkin topcommenter

@holmantx @ScottsMerkin @RTGolden1 @dallasdrilling.wordpress.com OH EM GEEE, dude calm down, no one is complaining that gas is low, im jsut saying all the big money you think is there for Dallas to get, just isnt there right now.   If they city made a deal now, it wouldnt be getting good value for those rights.  Cmon, you know this city,  if the money was right, theyd have already had em drilling

holmantx
holmantx topcommenter

@ScottsMerkin @holmantx @RTGolden1 @dallasdrilling.wordpress.com

BWAHH!  see what I'm talking about?

the price goes down . . . 

Whiner - "Waah!  gas went down.  Evil oil companies lied!  They robbed us. Hep me Mr. President.  I'm a victim.  REGULATE 'EM!  TAX TH' SHIT OUTTA 'EM!"

the price goes up . . . 

Whiner: "Waah!  Evil Wall Street bought my electric company and prices quadrupled.  Hep me Mr. President.  I'm a victim.  REGULATE 'EM! TAX TH' SHIT OUTTA 'EM!"

holmantx
holmantx topcommenter

@ScottsMerkin @holmantx @RTGolden1 @dallasdrilling.wordpress.com 

Now this is emblematic of what I am talking about.  One stupid comment after another.

Would you prefer EFH be profitable at their buy-in scenario?  How much would it cost in electricity and fuel for Joe and Jane if horiz drilling, flooding, and new fracking had not been invented?  Do you care?  Or do you just want the benefit up front so everyone else suffers?

Go ask the City of Fort Worth what that number is.  Does their citizen benefit?

Greedy basterd.

or worse, you worship the green God, so we all must reside in misery.

We need higher energy prices so we are pushed into mass transit.  Then just get this Leftist federal government to lay in a $4 per mcf tax on top.  See, that way we won't have to participate in drills that don't pan out.  Every loser like you wins.

ScottsMerkin
ScottsMerkin topcommenter

@holmantx @RTGolden1 @dallasdrilling.wordpress.com ask anyone in Tarrant County how often those checks come.  since they flooded the market with gas, the price dropped to nothing, the market for it sucks and no one is making money except the gas driller.  Dallas missed the boom  a few years back.  Even DFW is not making what they thought they would.  If I remember rightly, they had to threaten to sue to get the royalties that were promised

holmantx
holmantx topcommenter

@RTGolden1 @holmantx @dallasdrilling.wordpress.com The royalty interest is taken out of gross revenue.  It's a split out of the top.  It is the working interest that is net of the costs of production.  Royalty income can be made pristine on a contract.

Maybe our house lawyers should drive over to Fort Worth's house lawyers and get a contract to plagiarize.  Or DFW Airport.  

No sense giving away the farm on any contract.   

RTGolden1
RTGolden1 topcommenter

@holmantx @dallasdrilling.wordpress.com Except, as folks west of here are discovering, drilling lease contracts are drawn up  to minimize royalty payouts.  Royalties are taken out of net profit, not gross receipts, and the gas and oil industry is masterful at reducing its net profit on paper.

Now Trending

Dallas Concert Tickets

From the Vault

 

General

Loading...