Plan Commission Will Consider New Gas Drilling Regs This Thursday

Categories: City Hall

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It's been more than a year since a task force sent the Dallas City Council its recommendations for retooling the city's gas drilling ordinance. But the first step toward updating city code will finally be taken at the Plan Commission. The city attorney's office will brief commissioners at this Thursday's meeting. That's where the rules governing how the city develops its natural gas -- generating no shortage of controversy and headache for prospective drillers -- will begin to take shape.

It was only three months ago that commissioners voted to deny drilling permits to Trinity East, which had paid the city nearly $20 million for the right to drill along the Trinity River. The fact that the city council had yet to take up task force recommendations that would prohibit Trinity East's proposed wells was a sticking point for commissioners like Paul Ridley.

There was no small amount of pressure bearing down on the commission. A rejection here meant the council would need a super-majority to approve the permits -- a feat it couldn't achieve with the old council or its new incarnation. Mayor Mike Rawlings warned that the city could face a lawsuit for breach of contract. Meanwhile, Jim Schutze got his hands on a rumored-but-heretofore-unseen letter between city manager Mary Suhm and Trinity East, offering to grease the driller's path to approval, sparking howls of outrage from drilling opponents and council members Scott Griggs and the outgoing Angela Hunt.

That certainly didn't help Trinity East's case. But a denial at the Plan Commission presented an insurmountable hurdle. For a time at least, the driller was in limbo. And despite the protestations of council members Scott Griggs and the outgoing Angela Hunt, there was little interest in putting the permits to a council vote right before the elections.

Beginning with Thursday's Plan Commission meeting, a new council will take up its predecessor's work and mold a new drilling ordinance. As natural gas prices continue their slow-but-steady upward trajectory, you can bet Trinity East will be watching too.

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7 comments
Dallasite54
Dallasite54

Second, I would anticipate that TE will come back with a "new" application that contains some material changes from the current pending SUPs. TE will say this new application is different, will explain why, file it and then dismiss any pending appeals before the city council on the "old" SUPs. They will argue the "new" application is timely, subject to the new regulations to be approved by CPC tomorrow and thereafter by council. Second, the Chapter 26 hearing contains almost no standards. If a majority of the city council makes the appropriate determination under Chapter 26 (whether right or wrong), someone has to sue the City in 30 days. The decision of the city council is discretionary, and good luck trying to overturn it. This is why I remain concerned about tomorrow's CPC hearing--it is the first step to give TE what it wants, address the concerns of residents about drilling in the floodplain and parks, and TE will show up with a new application and no longer be required to get a supermajority on the council. Sorry for the length of this.

Dallasite54
Dallasite54

@director 21.  I always appreciate your comments.  First, as to expiration of the permits:  I believe TE is well aware that there is not a supermajority in favor of the drilling SUPs.  Under Section 13 of the lease between the City and TE, TE can invoke the "force majeure" clause for its pending SUPs (which appear to be pending before the city council with no date certain for hearing them).  This is how Chesapeake describes force majeure clauses: "These situations can include acts of God, as well as delays caused by permits not being approved by city councils. . . . It can also arise if a city changes its drilling ordinances and inhibits the company’s ability to begin operations. . . .  This clause, known as force majeure, serves to extend a lease for an indefinite period of time until the event can be resolved.. . . [T]he force majeure provision of a lease makes Chesapeake’s obligations subject to compliance with all applicable laws, regulations and orders of any governmental authority. . . . It suspends the primary term of the lease when compliance is being delayed pending governmental approval. Under this provision, the denial of the necessary permit by a city constitutes Force Majeure because Chesapeake is prevented from conducting drilling operations by that city."  So, the leases do not expire while an application is pending. 

holmantx
holmantx topcommenter

I hadn't seen that letter Suhm issued to TE as an inducement to obtain the $19 mil.  I assumed one or more were out there, but that is probably the little added extra OOMPH! needed to induce Suhm (and Rogers) to throw in the public towel.

Now, both city deal cutters can testify with greater candor (and at the expense of city taxpayer liability) in a public court regarding Bad Faith vis vis . . . . cheating them fair and square, jusdt to get $19 mil they never intended to allow in the first place.

director21
director21

It should be noted that Scott and Angela made the request for an expedited Council hearing on the SUPs that were denied by the CPC because Trinity East themselves specifically made the request that a hearing be held in April. TE knew they would lose the vote, but getting it out of the way would start them on the way toward being able to file new applications with changes as prescribed by city ordinance.

There is also a mandatory waiting period (I think it is either 30 days or 90 days) between the time a permit application is denied and a new, changed application for the same location can be submitted. Since TE is running out of time on their leases they preferred a quick vote on the CPC denials so they could get the ball rolling in time to possibly meet their obligation of producing a "paying quantity" of gas prior to expiration of their leases next year.

Scott and Angela did not just unilaterally request that April vote - they merely  followed the request made by TE in March, when their applications were denied by the CPC. I agreed with them. TE has gone through the process and should be accorded every opportunity that is legally theirs in obtaining their permits. Unfortunately for TE, their allies on the Council failed to step up and help them by holding the vote to override the CPC denials in April or early May because none of them wanted that to be an issue during the City Council elections in May. Politics on the part of TE supporters on the Council doomed them to wait until at least September before any action will be taken.

Dallasite54
Dallasite54

Unfortunately, there is no "molding" of a new gas drilling ordinance occurring here.  The City is addressing the concerns raised by the opponents of Trinity East's 2012 permit application--the proposed amendments would permit drilling in the floodplain and in parks--and scant few other task force recommendations are being addressed.  This is a dress rehearsal for a new Trinity East application--minus almost all task force recommendations, but now offering a way to drill in the floodplain and parks.  Look at Section 51A-4.203(3.2)(E)(xi) of the proposed ordinance:  "In addition to an SUP, compliance with other city, state, or federal laws or regulations is required, and may include platting, fill or alteration permit, building permits, gas well permits, or a public hearing to change a park use to a non-park use. These additional regulations may be required before, concurrently with, after, or independently of the SUP process."  This is the first step of giving Trinity East the "go ahead" to drill in the floodplain and in parks.

director21
director21

@Dallasite54 Two points - first, the CPC already denied the TE SUP applications and the matter now requires a supermajority 12 votes on the City Council to override the CPC denials. The current Council already had enough votes to stop that from happening, and the new Council, being seated on June 25, will have even more opposition to fracing in our parks and floodplains, so for all practical purposes the TE permits are dead. After they are formally denied TE can come back with newly written (with changes) SUP applications and begin the entire process all over again from the start. Their leases will probably expire before that can happen. Mayor Rawlings has already informed TE that their leases will NOT be extended again. If they cannot obtain permits and start producing a "paying quantity" of gas before expiration of the leases, then TE will lose those leases according to terms of their agreement with the city.

Second, drilling on public parkland requires a TPWD-mandated public hearing, and certain specific conditions, which cannot possibly be met, have to exist in order for the city to allow drilling in parks, which requires changing the designation of parkland to industrial use, as required by state law and TPWD regulations. One of those specific conditions states that there can be "no prudent and feasible alternative to drilling on the surface of parkland." Since horizontal laterals have been drilled over 9.32 miles from the vertical well bore, and laterals are routinely drilled 1-2 miles away from the well bore, it cannot possibly be argued that there is "no prudent and feasible alternative to drilling on the surface of parkland."

What the CPC and Council are posturing for is the anticipated SUP requests from Luminant for the Northlake site adjacent to Lucy Billingsley's Cypress Waters development on the north, west and south sides of Northlake. We expect to see those applications presented to the CPC in late-August or September, but they could come later depending upon what actions the CPC and City Council take between now and then.

The Council is in recess during July, so no action will be taken by the Council until late-August, at the very earliest. City code requires a mandatory 30-day waiting period between the time an issue is recommended for consideration and the time the Council actually hears that issue in open public session.

Ultimately, the city cannot just do whatever it pleases with regard to public hearings. State and federal laws govern the time and conditions for public hearings, and those are not at the whim of the mayor or city manager. With the departure of City Attorney Tom Perkins in August and City Manager Mary Suhm in November it is going to be a more dysfunctional than usual City Hall until at least next year.

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