PROBLEM SOLVED: What Happens When A City Wants to Protect its Surface Lands from Oilfield Development?

Problem: Our exploration & production (E&P) client leased a golf course property for drilling and mineral development in a rather affluent suburb of a larger city. Now, the city declared a moratorium in drilling and frac-stimulation. What do we do?

Solution: An outright moratorium is probably unconstitutional, and certainly a reverse condemnation. So, let’s go negotiate!

Story: A few years ago, soon after the outset of the beginnings of the Barnett Shale play just north of Fort Worth, our client did actually lease a golf course for underlying oil and gas development. The idea was to use directional drilling to avoid the greens and fairways. The outcry from the homeowners was incredible and resulted in folks going door-to-door with photos of ugly, horrible 1930’s-era well sites. None of those photos were of our operations, of course, but no matter. The outcry led to a moratorium of any development in the city limits. My client wanted a lawsuit filed immediately to prevent delays that might trigger continuous drilling time clauses. After some discussion, I was allowed to try a different approach.

My thought was to contact the city attorney and figure out the problem. After only a couple of calls, it became clear that the city had realized that it had zero ordinances in place to deal with this new drilling activity. Faced with the demands of the community, it had little choice but to create the moratorium. Their primary goal was to delay until having time to build a zoning ordinance to have some reasonable restrictions and requirements for oil and gas wells. My response was admittedly somewhat self-serving: “How about I assist your construction of an ordinance? After all, I’m a former petroleum engineer with board certifications in commercial and residential real estate!”

Well, fortunately we had developed a good rapport. We went to work.

Oil Rig city background.jpg

Analysis: Our collective research found that several of the local cities and municipalities in this area were all scrambling to develop some protections during this same period. We assisted in generating a good structure for drilling and production standards for the community. The ordinances are still in place, and require site plan pre-approvals, a development plan with supporting facilities, gates and signs, safety items for fire suppression and prevention equipment, noise controls, no venting of gas except as allowed by the Texas Railroad Commission, requirements for flow lines, storage tanks, etc.

All of these ordinances largely mirrored the current statewide requirements and regulations, and all were reasonable and acceptable to our E&P client. The town hall meeting that followed was a little scary, but even that part went more smoothly once everyone knew that plans would be known and approved in advance.

Conclusion: One of my favorite quotes is from Abraham Lincoln: “Discourage litigation. Persuade your neighbors to compromise whenever you can. As a peacemaker the lawyer has superior opportunity of being a good man. There will still be business enough.” 

Dore Rothberg McKay takes pride in being part of the risk profile decisions and business activities of a large section of the oil & gas services industry. We hope to continue to earn your respect and your trust.