Texas Relinquishment Act Lands: A Case Study for Federal Leasing

Texas Passes Law Protecting State Regulation of Oil and Gas Industry

Texas Gov. Greg Abbott on May 18 signed House Bill (HB) 40, an act relating to the exclusive jurisdiction of Texas to regulate oil and gas operations in the state and the express preemption of local regulation of those operations.

“HB 40 does a profound job of helping to protect private property rights here in the State of Texas, ensuring those who own their own property will not have the heavy hand of local regulation deprive them of their rights,” Gov. Abbot said in a May 18 statement. “This law ensures that Texas avoids a patchwork quilt of regulations that differ from region to region, differ from county to county or city to city, [and] strikes a meaningful and correct balance between local control and preserving the state’s authority to ensure that regulations are even-handed and do not hamper job creation.”

The law calls into question the status of ongoing lawsuits against the City of Denton, Texas, which put forward an ordinance to ban hydraulic fracturing to voters in the November 2014 elections. Denton voters passed the ban with a 58% vote.

In response to the ban, the TXOGA and the Texas General Land Office (GLO) immediately filed lawsuits in Denton County and Travis County, respectively, against the city. The City of Denton, in its response to the lawsuit, claimed that environmental conditions in Denton that are caused by hydraulic fracturing “constitute a public nuisance, which may be abated and future occurrences prevented by the city under its regulatory powers.”

A source familiar with the lawsuit told Oilman on May 21 that attorneys on both sides are currently determining how the new law will affect the lawsuit and the legality of the Denton ban.

Texas Oil & Gas Association (TXOGA) President Todd Staples supported the new law in a May 18 statement.

“HB 40 enjoys widespread, bi-partisan support because the legislation provides cities with authority to reasonably regulate surface activity related to oil and gas operations, while affirming that regulation of oil and natural gas operations, like fracking and production, is under the exclusive jurisdiction of the state,” he said. “HB 40 balances local control and property rights, while allowing Texas to continue to benefit from billions of dollars in annual state and local taxes that directly fund our schools, roads and essential services.”

The Texas Senate on May 4 approved the bill by a vote of 24 to 7 and the Texas House on April 20 approved the bill by a vote of 125 to 20. Both chambers signed the bill on May 5 and sent the bill to the governor.

The law establishes that an oil and gas operation is subject to the exclusive jurisdiction of the state. According to law text, except under certain conditions, a municipality or other political subdivision may not enact or enforce an ordinance or other measure, or an amendment or revision of an ordinance or other measure, that bans, limits or otherwise regulates an oil and gas operation within the boundaries or extraterritorial jurisdiction of the municipality or political subdivision. In addition, the law establishes that the authority of a municipality or other political subdivision to regulate an oil and gas operation is expressly preempted, except that a municipality may enact, amend or enforce an ordinance or other measure that:

  • Regulates only aboveground activity related to an oil and gas operation that occurs at or above the surface of the ground, including a regulation governing fire and emergency response, traffic, lights or noise, or imposing notice or reasonable setback requirements
  • Is commercially reasonable
  • Does not effectively prohibit an oil and gas operation conducted by a reasonably prudent operator

The National Resources Defense Council (NRDC) decided to represent the groups responsible for moving the ballot measure in Denton in the lawsuits brought by the TXOGA and the GLO. NRDC was joined as co-counsel by Earthjustice.

NRDC attorney Dan Raichel told Oilman on May 22 that NRDC cannot comment on the lawsuits, but that he believes the law dramatically changes how Texas views municipal control over industrial activities, which has been historically favorable to municipalities.

“A lot of [Texas] municipalities would say that they have good ordinances, and now they are exposed to the threat of litigation and proving in court what isn’t commercially reasonable,” he said. “HB 40 gives a powerful tool to industry to intimidate municipalities with litigations, whether or not they have a legitimate case.”

According to Raichel, other states have moved to establish measures similar to HB 40 that were met with resistance. In Pennsylvania, for example, there were

substantive due process issues with a state-wide zoning scheme for oil and gas activity that the state tried to impose on municipalities.

“[The law] was struck down by both the Commonwealth Appellate Court and the State Supreme Court,” he said, noting that the two opinions used different grounds.

The Appellate Court, Raichel said, established that allowing a major industrial activity essentially everywhere in the state, regardless of local conditions, is not a rational comprehensive plan for development, and therefore was not a constitutionally permissible law. While the Supreme Court concurred with the lower court’s opinion, it determined that the law violated the state’s environmental rights amendment.

“The Supreme Court opinion may not be translatable to other states, but the issues raised in the Commonwealth opinion are, because the federal constitution has substantive due process protections, and in many states, there are similar protections,” he said.

Raichel said that he would not be surprised if a coalition of Texas municipalities tries to see what legal options they have with respect to HB 40.

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