July 25, 2014

Residents of Denton, Texas, will vote this November on a proposed ban to partially prohibit hydraulic fracturing within city limits. Earlier this week, the Denton City Council declined to vote on the initiative, which came about after citizens petitioned the Council by gathering two thousand signatures in support, instead pushing it to a public vote this fall. Denton sits atop the Barnett Shale formation, one of the largest natural gas reserves in the country.

The upcoming vote is significant on many levels. Texas is the nation’s largest oil and gas producer. Texans traditionally hold a more favorable view on drilling and oil-related matters. Indeed, 275 wells in Denton have already undergone fracking — and the proposed ban would allow operators to continue extracting oil and natural gas from those wells. If the initiative passes, however, Denton would be the first Texas municipality to partially ban hydrofracking. Many people see the Texas situation as a litmus test for towns and cities across America.

Moreover, the initiative interjects a new legal wrinkle into the fracking debate. Texas law divides land ownership into two components: surface ownership and the mineral rights below. In Denton, mineral rights are mostly held by trusts or entities, and some of them are located outside of Denton. Future legal battles could conceivably pit owner against owner for the same land. The optics for any such battle wouldn’t be good: people versus entities; locals versus outsiders, and so on.

The Denton vote may also include a constitutional element. Former Texas Supreme Court Judge Tom Phillips, who represents the powerful Texas Oil and Gas Association, has gone on record as saying the Association’s thousands of members would “undoubtedly sue” if the fracking ban passes. He’s likely referring to the argument that any ban would nullify lease and ownership rights, which could constitute a “taking” under the Constitution or other applicable law. Association members would therefore be entitled to just compensation. Phillips contends further that Texas state regulation preempts any city’s right to ban “economically viable drilling.”

As we’ve seen from the recent Dryden decision in New York State, the specific language used in fracking bans, as well as the manner in which they are implemented, have considerable legal import. In Dryden, discussed at length [here], the New York Court of Appeals considered whether the Town of Dryden may ban oil and gas production activities, including hydrofracking, within municipal boundaries through the adoption of local zoning laws. The Dryden court answered in the affirmative. It found that the Town of Dryden could take such action because the supersession clause in New York’s oil and gas statutory framework does not preempt the home rule authority vested in municipalities to regulate land use. The court drew a distinction between regulating “land use,” which is permissible, and the “regulation of the details or procedure of the oil, gas and solution mining industries,” which would have been preempted.

Although we expect the arguments to crystalize as November draws closer, a few things are clear now: The legal issues are complex. The interests are hard to reconcile. And in Denton, Texas at least, the voters will have to sort these matters out until the legislature acts.