Looking Below the Surface: Planning for Impacts on People, Places, and Property from Natural Gas Development

Probate & Property Magazine: Volume 27 No 04

By

Sorell E. Negro is an associate in the Hartford, Connecticut, office of Robinson & Cole LLP. She is a 2012−14 RPTE Fellow and a member of the Land Use and Environmental Group.

Communities that host oil and natural gas development will experience economic benefits but should be prepared for new challenges and the need for increased government regulation to remedy problems caused by rapid growth in temporary population, increased stress on roads, and similar changes.

Although oil and gas development has traditionally occurred in rural areas and predominantly in the West, in the last decade advances in technology and additional discoveries of shale deposits have led to drilling in more densely populated areas and in eastern states, impacting more people as a result. The use of high-volume hydraulic fracturing with horizontal wells (“fracturing”) has enabled oil and gas companies to extract oil and gas from a significantly larger area through a single well. This technology was first employed in Texas, in the Barnett Shale, in the 1990s and came to eastern states in 2003, when the first horizontal well tapped the Marcellus Shale in Pennsylvania. See NYDEC, Revised Draft SGEIS on the Oil, Gas and Solution Mining Regulatory Program 5-5 & 5-52 (2011) (hereinafter RDSGEIS), available at www.dec.ny.gov/energy/75370.html; Emily C. Powers, Fracking and Federalism: Support for an Adaptive Approach That Avoids the Tragedy of the Regulatory Commons, 19 J.L. & Pol’y 913, 923 (2011).

Many communities across the United States that host oil and natural gas activities are in the midst of an economic boom—some call it the boom of the century—seeing dramatic increases in jobs, tax revenues, incomes, and housing prices, and even zero vacancy rates. The Secretary of Energy Advisory Board reported in August 2011 that “[o]wing to breakthroughs in technology, production from shale formations has gone from a negligible amount just a few years ago to being almost 30 percent of total U.S. natural gas production.” Secretary of Energy Advisory Board, Shale Gas Production Subcommittee 90-Day Report 1 (Aug. 18, 2011) (hereinafter Shale Gas Report), available at http://energy.gov/sites/prod/files/Final_90_day_Report.pdf.

Even with low natural gas prices, certain regions are still benefitting economically from natural gas development. Ohio, for example, is seeing increased demand in commercial real estate from new development brought by the oil and gas industry. In that state alone, Chesapeake Energy Corp. recently purchased $2 billion in land leases. Brian Louis, Fracking in Ohio Sparks Real Estate Rebound: Mortgages, Bloomberg (June 10, 2012), www.bloomberg.com/news/2012-06-11/fracking-in-ohio-sparks-real-estate-rebound-mortgages.html. Such economic growth is in stark contrast to the rest of the country, which is wading through a painfully persistent, lingering recession.

Along with the jobs, tax dollars, and new development come significant impacts on the communities that host these activities. This article addresses impacts on jobs, housing, traffic, and local infrastructure and how local governments experiencing or anticipating a boom can prepare.

Regulating the Industry vs. Regulating Impacts

The oil and gas industry is primarily regulated on the state level. State law also determines the extent of authority that municipalities can exercise, including the extent to which they can enact ordinances or regulations affecting natural gas operations, and states vary in how much power they delegate to local governments in this respect. Many states authorize municipalities to enact general land use ordinances that specify where certain industrial development can occur, such as high impact industry. For example, the Railroad Commission of Texas regulates the oil and gas industry, including production, delivery, and pipeline safety, but municipalities in Texas can determine, through zoning laws and permitting, whether and where drilling occurs. Drilling in Coppell, Texas, for example, which sits on the Barnett Shale, requires a permit and allows drilling only in areas zoned light industrial or agricultural. See Coppell, Tex., Ordinance No. 2009-1228, § 9-26-7(A) (2009). Whether a municipality may enact ordinances that regulate specific impacts from natural gas activities, such as temporary housing for workers or additional traffic and wear on roads, differs from state to state. In areas where municipalities have substantial authority to enact regulations affecting natural gas activities, oil and gas companies may be challenged by having to comply with each locality’s unique specifications.

Will Work for Gas

Many communities dish out permits for natural gas drilling in hope of lowering their unemployment rates and putting people to work, whether on rigs, driving trucks, or serving warm meals to the gas company’s crews. The number of jobs that will be created in a particular community or area is difficult to predict. In 2011, the U.S. Department of Energy reported that “well over 200,000 of [sic] jobs (direct, indirect, and induced) have been created over the last several years by the development of domestic production of shale gas, and tens of thousands more will be created in the future.” Shale Gas Report, supra, at 7. The impact of shale development on job creation varies across communities because the number of wells drilled in the area determines the number of workers needed.

Ultimately, oil and gas development is typically accompanied by a large, nonlocal, transient workforce, which will leave the area if the drilling relocates. Although an oil and gas company might not come in and hire an entire community to run its operations, nonetheless the influx of workers into a community for drilling boosts ancillary industries. A drilling boom creates new jobs that are secondary to the natural gas operations themselves, such as truck drivers, waitresses, and developers of new construction. Restaurants and hotels generally enjoy a significant uptick in activity and profits and often increase prices to capitalize on the swell in demand. Oil and gas workers spend money on local restaurants, hotels, and entertainment.

The new customers, however, may displace some traditional tourism. For example, the hotels and restaurants in Garfield County, Colorado, the second most active county in Colorado for gas drilling, were bustling to such an extent during the most recent boom, in the mid-2000s, that tens of thousands of hunters who traditionally flocked to the area in the fall to hunt elk, deer, and birds went elsewhere, where hotel rooms were easier to obtain. In addition, gas wells now exist in areas that historically have been prime hunting locations. This has changed the ambience and experience for many hunters and as a consequence has changed the community’s tourism industry and culture.

Not Enough Beds

The significant economic activity and newly available jobs—working for both the oil and gas industry directly and ancillary businesses—can increase the population of a boom town quickly and dramatically. This often inflates housing prices and can lead to housing shortages. For example, Sublette County, Wyoming, saw a 28% increase in its population between 2003 and 2007 because of a natural gas boom, while also seeing a 20% decrease in available housing and an annual increase in housing prices of $21,207. Audrey Putz, Alex Finken & Gary A. Goreham, Sustainability in Natural Resource-Dependent Regions That Experienced Boom-Bust-Recovery Cycles: Lessons Learned from a Review of the Literature, Department of Sociology and Anthropology, North Dakota State University 15 (July 2011), available at www.ag.ndsu.edu/ccv/documents/sustainability-report.

Many communities authorize construction of temporary housing units to house the oil and gas workers, and a collection of these units is known as a “man camp.” Temporary housing ranges from RVs and campgrounds to mobile homes or a village of prefabricated units constituting a structured man camp offering three gourmet meals a day, exercise facilities, and security guards. It is challenging for a booming community to accurately estimate the number of temporary housing units it needs. Williams County, North Dakota, recently placed a moratorium on applications for temporary housing units. During the last couple of years, the county had approved a large number of temporary housing units as the boom took off. Suddenly, in early 2012 the county realized that it had almost 10,000 approved beds without an indication of whether such beds would satisfy the demand. It decided to wait for the approved homes to be built to see whether there was still a need before approving more. In the meantime, those who could not find homes lived out of their cars or even in “informal man camps,” such as a collection of RVs on an empty lot. Ease Rules on Man Camps, Jamestown Sun, May 16, 2012, available at www.jamestownsun.com/event/article/id/161001/publisherID/10/.

Additional housing units also require additional infrastructure, which must be planned and paid for by the community. In Williams County, water and sewage treatment plants recently hit their capacity. The increased sewage and wastewater in that county have been addressed in several ways, none of which provide a “silver bullet” solution. Tioga, North Dakota, is enlarging its facilities to allow for disposal of sewage and wastewater from new development. Waste hauling companies transport the sewage from man camps to other cities for the time being, but this is not a permanent solution. Some larger man camps haul or dispose of their own waste. Target Facilities, which builds man camps, including some that can house hundreds or even thousands of workers, built a $3 million sewage facility large enough to handle the sewage and wastewater from its own man camps, and it can contract with other temporary housing facilities to take their sewage as well.

A booming community should take stock of its housing to understand what, if any, surplus it has before it issues new permits. It should also consider where it will permit temporary housing units and what the permitting process should be for the permissible temporary housing types. For example, are they a special use or a temporary use? Will a site plan review be required? In addition, the land use ordinances should define the temporary uses and key terms, such as “man camp,” “campground,” “temporary employee housing,” and “mobile home,” and the ordinances should clearly state in which zones these uses are permitted. The local government should draft ordinances to regulate informal man camps as well as formal ones, including noise and light ordinances, and setback requirements between mobile homes or RVs, or between the units and the street.

Traffic and Roads

Along with wells and gas lines, gas drilling operations generally are accompanied by heavy traffic and, consequently, significant impacts on roads. A natural gas well in the Marcellus Shale generally will require 5.6 million gallons of water to be fractured, and this water is delivered, and the wastewater is hauled away, by hundreds of truckloads. S. Tier Cent. Reg’l Planning and Dev. Bd. and the Planning Dep’ts of Chemung, Schuyler, and Steuben Cntys., Municipal Guide for Energy Impacted Communities 36 (Aug. 2012), available at www.stcplanning.org/usr/Program_Areas/Energy/Naturalgas_Resources/Final_Municipal_Guide_for_Energy_Impacted_Communities_November_ 2011_hyperlinked.pdf. In addition to bringing water to well sites, trucks carry sand, equipment, cement, and gravel. Often, this heavy traffic is using country roads in what used to be quiet communities.

During a recent gas boom in Garfield County, Colorado, in the mid-2000s, the central road running north-south through the city of Rifle was backed up all day long for a 30-block stretch. Towns in Garfield County regularly suffered from backups impeding getting on and off interstate highways starting at 6 a.m. In Williston, North Dakota, average commute times have doubled in the last two years, and it is common for people to be backed up for a mile to make a left-hand turn during rush hour. Local residents have re-routed their commutes to maximize their right-hand turns and minimize left-hand turns, even if it adds a couple of miles onto the trip each way.

Dust also can be a significant problem when roads are used so heavily by trucks, especially in western states with adobe clay on road surfaces. Oil and gas companies often employ such measures on the roads they use. The clay soil turns to mud when it rains or snows, and this mud gets caked onto trucks and dragged all over town and city streets. After the mud dries, it creates clouds of dust that spread quickly. This can be somewhat mitigated by putting gravel or water on the roads. Rifle, Colorado, like other communities, addressed its dust issue by buying a street sweeper. It also tried to pass an ordinance that would require lots to have gravel and would impose clean-up fines on anyone who tracked mud onto the street, but this proposed ordinance was defeated and chastised as being anti-industry. Local officials also explained that it was very difficult to impose any liability—even for dust—on the oil and gas companies because they use subcontractors for all of their needs, including trucking, which has the effect of insulating them from liability.

In 2008, the industry implemented a “closed-loop” system of above-ground pipelines for water in Garfield County. This eliminated the steady stream of hundreds of trucks hauling water to and from the well sites and also significantly mitigated problems with dust, traffic, and road degradation. Closed loop systems, however, cannot be implemented everywhere. For example, they are unstable at high elevations. The system works well on fields that the operator controls when the operator has a large number of gas wells.

Communities that do not have an extensive infrastructure for roads, especially for trucks, will likely need to expand their road systems. The roads also will be used much more intensively so will require more frequent maintenance. For example, Pennsylvania communities that have drilling operations have seen truck traffic increase by 10 times. Cornell Coop. Extension, Municipal Planning and Managing Potential Impacts from Natural Gas Development: Practical Steps Local Governments Can Take 19, webinar/presentation, available at http://tinyurl/.com/klfcxsx. In the Bakken Shale region in North Dakota, government officials are finding it impossible to keep up with increased road maintenance. The roads were simply not built to withstand the amount of traffic and weight that they currently carry. Rather than being repaved, certain holes in some county roads are filled in with gravel and marked so that drivers can avoid them. In 2009 alone, Sublette County, Wyoming, spent over $60 million on its roads and its water and sewage systems, and $160 million was still needed. Putz, Finken & Goreham, supra, at 17.

Some local governments have undertaken studies of the status of their road systems and expected road maintenance needs as a result of increased traffic from permitted gas drilling operations. It is a good idea for a local government to conduct a traffic impact study to understand the current state of its roads and the extent of road system expansion and road maintenance that will be needed. These studies often aid in establishing regulations for local roads or, alternatively, road use agreements with the haulers or well operators. It is important to note that local governments may not receive increases in tax revenues from the industry until years after drilling has begun, so current tax revenues may be needed to pay for increases in services, road maintenance, and new construction. Such up-front costs should factor into the local government’s planning efforts as much as possible.

In New York, local governments can establish reasonable rules and regulations to protect local roads from damage. N.Y. Envtl. Conserv. Law § 23-0303(2); N.Y. Veh. & Traf. Law § 1640(a)(5), (a)(10) & (a)(20). The state is also considering impacts to roads as it prepares its regulations for shale development. Although New York has had a moratorium on fracturing since 2008, its Department of Environmental Conservation (DEC) has been preparing a comprehensive regulatory framework for natural gas drilling. The DEC first issued a Draft Supplemental Generic Environmental Impact Statement (SGEIS) in 2009, which was created under the state’s Environmental Quality Review Act to study potential impacts of fracturing operations. After the SGEIS received over 13,000 comments, then-Governor Patterson released an executive order prohibiting the DEC from issuing gas drilling permits until it completed a revised draft supplemental generic environmental impact statement (RDSGEIS). The DEC released the RDSGEIS on September 7, 2011, and completed the notice and comment process on January 11, 2013.

The Southern Tier Central Regional Planning and Development Board in New York, along with the planning departments of Chemung, Schuyler, and Steuben Counties in the Southern Tier, recommend that New York towns consider establishing truck routes for through traffic, posting roads and establishing weight limits, issuing haul permits for local roads, and establishing a road use agreement that would require haulers to post bonds or otherwise pay for damage or repairs. Municipal Guide for Energy Impacted Communities, supra, at 36. In addition, local governments should develop a “haul route management system” to protect vulnerable roads from heavy trucks. Id. at 37.

Elsewhere, municipalities have already implemented regulations to minimize transportation impacts, such as by regulating the times when trucks are allowed on the roads. For example, Collier Township, Pennsylvania, requires an applicant for a gas drilling permit to provide the following information: proposed routes of all trucks to be used for hauling; the trucks’ estimated weights; evidence of compliance with weight limits on its streets or a bond and an excess maintenance agreement to ensure repair of road damage; and evidence that the intersections on the proposed routes have sufficient turning radiuses. Collier Township, Pa., Ord. No. 592, § 1703.29.j (2011). Local government oversight can be aided by requiring such specific information from the gas drilling operators so that the local governments can better understand, and plan for, how each operator will use and impact its roads.

The Community-Industry Relationship

Once a community is committed to permitting natural gas drilling, a working relationship between the community and the companies that are operating there can make a significant difference in residents’ comfort level and satisfaction. Communities have undertaken a variety of mechanisms for engaging citizens in the regulatory process. For example, Garfield County, Colorado, has community boards made up of local citizen representatives as well as representatives from the oil and gas industry. The board meets monthly to discuss policy issues and practical issues that the community is experiencing, and it then advises the County Board of Commissioners on these issues.

Garfield County has another innovative approach to building this relationship between the community and the natural gas companies: a citizen-based program called “Community Counts,” a model that is being replicated in other states. Community Counts offers a “1-800” phone number that residents can call to report a concern regarding drilling operations or to ask a question, such as to report a loud noise or noxious odor or ask how long such a disturbance may continue. The residents are connected with an oil or gas operator within a timely manner, often immediately, who listens and responds. The oil and gas companies pledged to participate in the program because they want to build their relationships with residents and swiftly address any problems of which they might otherwise not be aware. Some have reported that this program has been very successful and responsive, and residents appreciate that they no longer have to wait for a board meeting to raise their concerns or receive feedback. But some municipal officials within the county are wary of a program that is run by the industry and does not involve the local government. They see room for growth and communication in the industry-government relationship and believe there remains a need for a public forum.

As another example, the city of Arlington, Texas, works to foster a relationship among the city and gas well operators, developers, contractors, and the general public. Arlington’s Department of Community Development and Planning has a liaison position for this purpose, and the city holds weekly meetings with operators as well as open town hall meetings for local officials, the public, the industry, and others who are interested in attending.

Communication with the industry is important, as well as the community-industry relationship, and there are a variety of ways to foster this, including open town hall meetings and regular meetings with operators and community boards to advise local officials of residents’ concerns and questions. A planning department in a community that is preparing to permit oil or gas activities for the first time will need to undertake a significant amount of education and outreach in the community to explain the future social, economic, and environmental impacts of the operations, whereas communities in areas that have been living with natural gas operations will be more familiar with the industry. In both types of communities, planning is essential to ensure that the community maximizes the benefits from the economic stimulus and mitigates the negative impacts from unsustainable and impermanent growth.

Conclusion: “Failing to Plan Is Planning to Fail”

A community experiencing a sudden boom from oil or gas development, or both, should try to plan for what the community will look like and need after the bust—if the drilling relocates or significantly slows down—when population levels are closer to where they were before the boom. Local governments should consider permitting temporary housing and determine the location of such housing. They should also consider options for adaptive reuse of new housing units built during the boom that may not be needed a few years from now. Communities, especially smaller ones with little or no experience with this kind of economic activity, should not be intimidated into approving land use applications, including zone changes. Rather, it is important for the community to assess and understand its goals and plans, take the time to determine whether the land use applications meet the legal standards in place, and apply the same procedures to all land use applicants.

Natural gas activities impact the communities and regions in which they occur in significant ways, including job creation or displacement, housing prices and availability, traffic and road use and degradation, and stress on local government administration. Natural gas operations present unique opportunities for economic benefits as well as weighty challenges. As the nature of the oil and gas industry is typically cyclical, communities and regions supporting natural gas activities can maximize the benefits while minimizing negative impacts through planning, effective regulation, strong local leadership, and community involvement and cooperation.

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