Governor Abbott Signs Bill Prohibiting Local Fracking Bans
V&E Shale Insights — Tracking Fracking E-communication, May 21, 2015
On May 18, 2015, Texas Governor Greg Abbott signed H.B. 40 into law, preventing local governments in Texas from banning fracking.1 The bill passed the Texas House and Senate with more than a two-thirds majority, which means it takes effect immediately.2 Representative Drew Darby and Senator Troy Fraser introduced the bill.
The new law expressly preempts the ability of a municipality or other political subdivision to ban, limit, or otherwise regulate oil and gas operations.3 Instead, that authority will reside with the State. The statute provides that local governments may only regulate oil and gas operations if the regulations (1) affect above ground activity related to an oil and gas operation that occurs at or above the surface of the ground; (2) are commercially reasonable; and (3) do not effectively prohibit oil and gas operations.4 To be “commercially reasonable,” a regulation must “allow a reasonably prudent operator to fully, effectively, and economically exploit, develop, produce, process, and transport oil and gas.”5 The law defines “oil and gas operation” broadly, meaning “an activity associated with the exploration, development, production, processing, and transportation of oil and gas,” including drilling, fracking, completion, maintenance, recompletion, disposal, abandonment, secondary and tertiary recovery, and remediation.6
The law identifies reasonable setback requirements, emergency response, lights, noise, traffic, and fire as areas that municipalities may continue to regulate.7 The bill also includes a “safe harbor” provision, stating that a local ordinance is presumed to be “commercially reasonable” if the ordinance has been in effect for at least five years and allowed oil and gas operations to continue during that period.8
The law responds to a fracking ban the city of Denton, Texas, passed in November 2014. Denton is the only municipality in Texas to prohibit fracking, but some municipalities in states such as Colorado, Ohio, Pennsylvania, and California have enacted similar bans. In those states, local ordinances banning fracking have been the main battleground in the fracking debate. H.B. 40 could represent a model for a legislative solution to such disputes, which have, to date, largely been resolved via litigation. In a statement, Governor Abbott said that H.B. 40 “ensures that Texas avoids a patchwork quilt of regulations that differ from region to region, differ from county to county or city to city.”9 He wrote that “those who own their own property will not have the heavy hand of local regulation deprive them of their rights.”10 Ed Longanecker, President of the Texas Independent Producers & Royalty Owners Associations, called H.B. 40 a “smart energy policy” that offers “regulatory certainty” to the oil and gas industry.11
H.B. 40 has been controversial because of the broad regulatory authority it gives the State. The Texas Municipal League, which represents 1,145 Texas cities, was an outspoken opponent of the bill until Representative Darby added the bill’s safe harbor provision and language clarifying that municipalities may still regulate setbacks, fire, noise, and other issues. In Texas, home-rule municipalities may generally “regulate exploration and development of mineral interests within [their] boundaries.”12 Preemption of such home-rule powers must be accomplished “with ‘unmistakable clarity.’”13 Whether H.B. 40 meets this standard may be the subject of future litigation.
Even if the law preempts municipal home-rule powers related to the regulation of oil and gas exploration and production with the requisite clarity, other provisions of H.B. 40 may result in litigation. For example, Bill Lane, senior staff attorney for the city of Mansfield, Texas, said the statute’s definition of “commercially reasonable” was vague. “It’s going to be litigated, I can tell you that.”14 Other opponents, like Representative Sylvester Turner, say the bill’s definition of “oil and gas operations” is too broad. This could create confusion about what activities municipalities can and cannot regulate. In addition, the provision grandfathering in existing municipal regulations as prima facie commercially reasonable has concerned some intrastate oil and gas pipeline operators. These operators have indicated there are existing municipal regulations that are not commercially reasonable but heretofore have been unenforced or subject to negotiated workarounds. Such regulations may gain prominence and force following the passage of H.B. 40.
For further information, please contact Vinson & Elkins lawyers Larry Nettles, Jay Rothrock, Ross Woessner, or one of the members of V&E's Shale and Fracking practice group. Visit our website to learn more about V&E’s Environmental practice.
1 Act of May 18, 2015, 84th Leg., R.S., H.B. 40, § 2 (to be codified at Tex. Nat. Res. Code Ann. Sec. 81.0523), available at http://www.capitol.state.tx.us/tlodocs/84R/billtext/pdf/HB00040F.pdf#navpanes=0.
2 Jim Malewitz, Abbot Signs “Denton Fracking Bill,” Tex. Trib., May 18, 2015,https://www.texastribune.org/2015/05/18/abbott-signs-denton-fracking-bill/.
3 H.B. 40.
9 Signature Statement, Office of the Governor of Texas, Governor Abbott Signs H.B. 40 Into Law (May 18, 2015),available at http://gov.texas.gov/news/signature/20903.
11 Press Release, Texas Independent Producers and Royalty Owners Association, Texas Governor Signs Oil and Natural Gas Pre-Emption Bill Into Law (May 18, 2015), available athttp://www.tipro.org/UserFiles/05.18.15_TIPRO_Statement.pdf.
12 Tex. Nat. Res. Code § 92.007.
13 In re Sanchez, 81 S.W.3d 794, 796 (Tex.2002) (quoting Dallas Merchant’s & Concessionaire’s Ass’n v. City of Dallas, 852 S.W.2d 489, 491 (Tex. 1993)).
14 Jim Malewitz, Texas House Approves “Denton Fracking Bill,” Tex. Trib., April 17, 2015,https://www.texastribune.org/2015/04/17/texas-house-drill-denton-fracking-bill/.