March 16, 2015 Practice Points

Texas Legislature Considering Blocking Cities from Banning Fracking

Several bills would make it difficult, if not impossible, for municipalities to pass outright bans on hydraulic fracturing.

By Courtney Scobie – March 16, 2015

Texas lawmakers have introduced several bills during the state’s current legislative session that would make it difficult, if not impossible, for municipalities to pass outright bans on hydraulic fracturing, or fracking. The bills were drafted and introduced in response to the city of Denton passing a ban on fracking within the city limits during the November 2014 elections.

Before the legislative session began, state representative Phil King of Weatherford, a small city located over the Barnett Shale, filed two bills that would limit such municipal regulations.House Bill (HB) 539 requires cities to determine how much money certain drilling regulations would cost the state, the local school districts, and other government entities in terms of lost royalties, tax revenues, and fees. Such an assessment would be required before the city votes on a drilling regulation. If a drilling regulation went into effect, then the city would have to reimburse those entities for the revenue shortfalls caused by the regulation.

King also introduced HB 540, which would require all referenda and initiative petitions to go before the Texas attorney general for review before being placed on a city ballot. The attorney general would determine whether the proposal violated the state or federal constitution and whether it would result in a government taking of minerals requiring compensation. Litigation currently pending against the city of Denton over its fracking ban alleges that the ban both violates the Texas constitution and constitutes a government taking.

On March 11, 2015, state representative Drew Darby of San Angelo, located in the heart of the Eagle Ford Shale, introduced HB 40, by far the toughest bill on municipal regulation of fracking. This bill would grant all authority for regulating the oil and gas industry and their activities to the Texas Railroad Commission and make clear that state law preempts any regulation by cities and counties related to oil and gas. The bill does allow cities to regulate surface activities, through noise, light, traffic, and setback ordinances, but only as long as they are commercially reasonable and do not prohibit drilling operations. The bill is not retroactive, so it would not overturn the Denton fracking ban. A companion bill, Senate Bill (SB) 1165, was filed by state senator Troy Fraser of Horseshoe Bay, who also serves as chairman of the Senate Natural Resources and Economic Development Committee.

Darby also introduced HB 2855, which would force cities who want to adopt drilling ordinances to go to the Railroad Commission for review of the ordinance. Decisions by the commission on such ordinances could not be appealed.

The current legislative session ends June 1, 2015. Barring a special session, action on these bills should take place before then.

Keywords: energy litigation, Texas, fracking, Texas Railroad Commission, Denton, preemption, municipal regulations

Courtney Scobie is with Ajamie LLP in Houston, Texas.

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