Item 4CM E M O R A N D U M
September 10, 2008
To: Shana Yelverton, City Manager
From: Ben Thatcher, Assistant City Manager
Subject:Resolution No. 08-049 Addressing Local Regulatory Oversight
of Gas Pipelines.
Action
Requested: Approve Resolution No. 08-049; Opposing the Continued
Preemption of Municipal Regulation of Certain Intra-State
Gas Utilities and Urging Legislative Action to Permit Greater
Local Regulatory Oversight.
Background
Information: The Town of Dish, TX has passed a resolution asking the Texas
State Legislature to allow for greater local oversight of intra-
state gas utilities. They have asked other municipalities to pass
the same resolution, in which they will then submit all the
resolutions to the Texas State Legislature.
The companies they are referring to in the resolution are not
typical public utilities that deliver a product to the consumer,
but transport natural gas for the benefit of the production
companies that they are affiliated with. However, currently
these companies have greater powers than typical public
utilities, or even municipalities. Further, these companies
refuse to collaborate in the coordination or utilization of other
producers’ pipelines in the region. Instead these companies
prefer to install their own redundant pipelines enforcing
eminent domain on property owners. For those municipalities
who have no requirement for these companies to map the
pipeline route, they are not even required to notify the
municipality of the installation.
The possibility of having several redundant pipelines crossing
our municipal boundaries can potentially ruin any opportunity
for future economic growth of those areas. When easements for
these lines are forcibly taken through threats of eminent
domain, they are permanent, and therefore, the future land use
is limited. Basically, it will be permanently used as limited
agricultural use land only. While in some instances the land
may not be ideal for other uses, these companies take the
shortest and least expensive route, not taking into
consideration the comprehensive plans set by the municipality.
Therefore, we might find one of these pipelines going through
areas that are planned commercial or residential areas,
destroying future growth. Developers will then have to work
around the pipeline easements when constructing homes and
businesses.
Financial
Considerations: N/A
Citizen Input/
Board Review: N/A
Legal Review: The Dish resolution was written by Bryn Meredith, a TOASE
attorney, who also helped the City of Southlake rewrite the oil
and gas ordinance.
Alternatives: As part of the upcoming legislative session it is the City’s intent
to also address this issue as part of its legislative agenda. Hillco
is aware of our participation on this resolution, and sees no
problem in doing so.
Supporting
Documents: Attached is the resolution for consideration as well as some
recent news articles about the subject.
Staff
Recommendation: Approval of Resolution No. 08-049.
RESOLUTION NO. 08-049
A RESOLUTION OF THE CITY OF SOUTHLAKE, TEXAS
OPPOSING THE CONTINUED PREEMPTION OF MUNICIPAL
REGULATION OF CERTAIN INTRA-STATE GAS UTILITIES;
URGING LEGISLATIVE ACTION TO PERMIT GREATER
LOCAL REGULATORY OVERSIGHT; AND PROVIDING AN
EFFECTIVE DATE.
WHEREAS,
the City of Southlake, Texas, is a home-rule municipality acting
under its charter adopted by the electorate pursuant to Article XI, Section 5 of the Texas
Constitution and Chapter 9 of the Local Government Code; and
WHEREAS,
the Legislature has vested regulatory authority in the State and has
largely preempted the local regulation of so-called “midstream” intra-state natural gas
pipeline utilities (“gas utilities”) on the basis that such companies are affected with a
public interest; and
WHEREAS,
the preemption of local regulation constrains the ability of the
public to participate through their locally elected officials to tailor policies to meet their
needs and demands; and
WHEREAS,
with the recent development of mineral reserves within the Barnett
Shale, oil and gas operators have become dependant on a comprehensive pipeline
infrastructure to deliver the produced hydrocarbons to market; and
WHEREAS
, in order to ensure the maximum profitability of natural gas
production, oil and gas operatorshave refused to cooperate with unaffiliated third party
gas utilities or coordinate pipeline efforts with other producers in the region and instead
are each opting to form their own affiliated gas utility company; and
WHEREAS
, each gas utility company serves not as a public-minded “utility”
accepting produced hydrocarbons from “competing” operators but operates exclusively
as the alter ego and servant of the utility’s affiliated oil and gas operator greatly blurring
the line between gas utility and oil and gas operator; and
WHEREAS,
the numerous gas utilities, frequently managed and exclusively
operated by the affiliated oil and gas operators’ own employees, work aggressively to
install a network of permanent gas lines across private property creating extensive “no-
build” zones many dozen feet in width and many miles in length, with little regard for the
availability of existing unaffiliated pipelines in the vicinity; and
WHEREAS,
in order to rapidly accomplish the installation of duplicative and
redundant pipeline networks, local citizens and business owners are quickly threatened
with eminent domain proceedings by the gas utilities and are intimidated into executing
one-sided permanent easements for nominal consideration; and
WHEREAS,
the proliferation of duplicative and redundant pipeline networks,
installed with regard only for the shortest and most cost-effective route, causes the
unnecessary fragmentation of land and the creation of unusable slivers, chipping away at
the long term economic potential of the land; and
WHEREAS
, municipalities, rendered virtually ineffective by the preemption
language of §121.202 of the Texas Utilities Code, are unable to respond to the plight of
their constituent citizens and business owners and are without the necessary authority to
safeguard the long-term economic viability of the region.
NOW THEREFORE, BE IT RESOLVED BY THE CITY OF
SOUTHLAKE, TEXAS THAT:
SECTION 1.
The City Council of the City of Southlake, Texas, respectfully requests and urges
the Legislature to revisit the prudence and continued appropriateness of preempting
municipalities from regulating the practices of midstream gas utilities and respectfully
requests that the Legislature confer additional regulatory authority upon municipalities
over the activities described herein in order to safeguard the interests of the public and
the long term economic viability of private property.
SECTION 2.
This Resolution shall be effective from its date of adoption.
PASSED AND APPROVED ON THIS ____ DAY OF ___________, 2008.
________________________________
MAYOR
ATTEST:
________________________________
CITY SECRETARY
EFFECTIVE: _____________________
DISH moves to shield itself from rising number of Barnett Shale pipelines I Dallas Morning News I New... Page 1 of 2
DISH moves to shield itself from rising number of Barnett Shale pipelines
12:29 PM CDT on Saturday, July 19, 2008
By PEGGY HEINKEL-WOLFE / Denton Record-Chronicle
pheinkel-wolfs dentonrc.com
DISH - Quiet country roads crisscross over miles of buried, high-pressure gas pipes that converge at the south end of
this Denton County town, where several energy companies operate compression plants.
DISH officials liken the area to the Grand Central Station of the Barnett Shale.
But an emerging practice by energy companies - using eminent-domain power to build multiple, redundant pipelines
across properties between the gas wells - has DISH officials and other Barnett Shale cities concerned.
DISH Town Commissioner William Sciscoe, who has leased his mineral rights, has become increasingly frustrated by
the companies' practice of digging through people's yards and driveways.
"It's been heart-wrenching," Mr. Sciscoe said. "People have no say, no recourse. There are high-pressure pipelines,
literally, under their toes in their front yards and driveways."
In Copper Canyon, Mayor Sue Tejml said officials have become concerned, too, as pipeline construction rushed in
behind the drilling of several new horizontal wells there.
Energy companies have discovered they can create a gas utility - with the power to condemn property - and install
their own lines, according to DISH's town attorney, Bryn Meredith. These midstream companies, even though they
compete with one another to get the gas to the market, have the same power over private property as a public utility.
Mr. Meredith said that reading the statute makes him question whether the Texas Legislature intended private energy
companies to have the same eminent-domain power meant for public utilities.
"I don't think the development of the Barnett Shale was anticipated and that the law was meant to give midstream
companies this type of power," Mr. Meredith said.
DISH Mayor Calvin Tillman said the fury of Barnett Shale activity has all but doomed future economic development in
his town. Many properties have long, wide easements across them. One local developer struggled to draw lots for his
subdivision in order to work around the easements.
Mr. Tillman is afraid what's happening in DISH could happen to many other Barnett Shale cities, "especially the small
ones.".
So DISH officials decided to take the lead, passing a resolution this week asking the Texas Legislature for help in
regulating pipelines. They are mailing copies of the resolution to all the Barnett Shale cities and asking them to pass it,
too.
http://www.dallasnews.com/sharedcontentldwsldnllatestnews/stories1071908dnmetdish.3 c6Ob45.html 7/21/2008
DISH moves to shield itself from rising number of Barnett Shale pipelines I Dallas Morning News I New... Page 2 of 2
Mr. Tillman said he plans to travel to as many of the cities as he can - he estimates there are 100 - and speaking
directly to their councils.
Some cities have already passed resolutions challenging pipeline company operations within their boundaries. They
include North Richland Hills, Southlake and Mansfield, Mr. Meredith said. But DISH's resolution asks the Legislature
to give cities the authority over midstream pipelines so they can better plan for their residents' future, he said.
Crosstex Energy Services, one of the few independent midstream companies in the Barnett Shale, must compete with
the midstream companies being formed by other energy companies. Crosstex spokeswoman Jill McMillan said the
company has tried to work cooperatively with cities and property owners.
Being able to move the gas to market quickly and efficiently pays off in lower energy prices for the consumer, but Ms.
McMillan acknowledged that the underlying property issues were complex.
"DISH is sticking their head out for this," Ms. McMillan said. "But maybe we'll all be stronger at the end of the day for
it."
http ://www. dallasnews. con/sharedcontentldwsldnllatestnews/stories1071908d=etdish.3 c6Ob45.html 7/21/2008
Dish takes on Tommy Lee Jones I Denton Record-Chronicle I News for Denton County, Texas I Opinion:... Page 1 of 2
I Editot3.als
Dish takes on Tommy Lee Jones
12:50 AM CDT on Sunday, July 20, 2008
The Law of Unintended Consequences is in force throughout the Barnett Shale, the vast sea of natural gas that bubbles just
beneath the surface of Denton County and much of North Texas. Our neighbors in the small community of Dish have just
stumbled onto another clause in this thorny law, and they're trying to get an amendment. We wish them well.
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though at a much slower pace. Landowners have enjoyed the money they've received for leasing their mineral rights to one
of several gas exploration companies that have descended upon the area since spiraling natural gas prices made it
economically feasible to drill for it in the stingy sedimentary shale of North Texas. The down side has been noisy trucks
that damage rural roads and raise clouds of dust, noise and light pollution caused by wells that run 24 hours a day, pristine
land littered with pipes, machinery and the other abandoned detritus of drilling operations, and the contamination of
groundwater by the. noxious sludge that is used to crack open the shale and free the precious gas.
The residents of Dish have run afoul of another Unintended Consequence. Exploration companies have to be able to move
the gas from the wellheads, and for that they need pipelines. Dish Town Attorney Bryn Meredith told the Record-
Chronicle's Peggy Heinkel-Wolfe that the companies have discovered if they form a gas utility company, they suddenly
have the power of eminent domain to obtain easements across the land of anyone in the proposed pipeline's path.
Dish town commissioner William Sciscoe is not unappreciative of the benefits of Barnett Shale development - he has .
some mineral leases himself - but he is shocked and saddened at what he sees happening in Dish to his neighbors who
have no way to fight having their land dug up for pipelines.
"It's been heart-wrenching," Sciscoe told Heinkel-Wolfe. "People have no say, no recourse. There are high-pressure
pipelines literally under their toes in their front yards and driveways."
Dish Mayor Calvin Tillman has found an even greater long-terns threat: Developers are wary about planning projects in an
area that might become a target for a gas pipeline easement claim.
Meredith, the town attorney, doesn't believe the Legislature had jury-rigged gas "utility" companies in mind when it
granted eminent domain rights to established utility companies, so he's drawn up a resolution asking lawmakers to
somehow rein in rapacious pipeline construction by these hastily formed "utilities." Tillman says he's going to circulate the
resolution among other cities in the Barnett Shale and urge them to pass it, too.
It will be interesting to see how Tillman, Sciscoe, Meredith, et al, fare against the forces of Big Gas. Exploration
companies enjoyed a brief honeymoon in North Texas during the early days of the gas boom, but they have had to resort to
massive public-relations efforts as the Law of Unintended Consequences has kicked in.
Chesapeake Energy Corp., one of the larger gas producers, has hired movie actor Tommy Lee Jones as a spokesman for its
operations, and the hero of Lonesome Dove is now ubiquitous on North Texas' billboards, and in newspaper and television
ads. To hear old Woodrow Call tell it, opposing a gas-drilling operation is akin to lobbing a hand grenade at the Alamo.
We can't help but wonder if he's got a well in his backyard, or if someone's digging a pipeline through it.
Chesapeake has also hired local TV news reader Tracy Rowlett to head up something called "Shale TV," a Web site that
will feature nothing but news about the Barnett Shale. Rowlett insists that the Web site will be even-handed, and present
both sides of any controversy. We hope Rowlett will forgive us our skepticism on that one.
http://v ww.dentorac.comisharedcontentldws/drelopinion/editorialslstoriesIDRC_editorial 0720.71 ac914... 7/21/2008
Near Justin; in the"quiet little Benton'{County town
DISH, Texas; there's, another gas xe`lated~eontroversy
-)reb; Ter.esttqwip be lower energy prices for the con s
sumer. However, the question must be asked,4 at what,',
cost to the living conditions for residents? Official's in .3
s, the sparsely populated town of about 4Q0.'hav>? _
become alarmed at the practice by the pipeline
f, builders of 199109 through private •yards 'and drive
! ,ways., Somei have referred. to the town as the brand
z Central Station of the Barnet Shale. Others are'afraid ,j
for their,safety because the high pressure conduits are
i ; directly under their feet in' their front yards !#'s difficult
to imagine how such ,a horrendous situation could have:
gotteri,this :liar unless public officials were asieep., at the
wheel:wherrthis collision'betweenprivate property an
business interests occurred. .
What makes this case particularly scary„is what ,
appears to be a' belief on-the part of some energy com4
i A panies;that theycan create a gasutility with thepower
to condemn property and install their own lines Such
eminent domain power has generally been reserved for'
entities that are legally described by statute as ptablic ,a.'t
r utilities, highways-.br railroad's. When did the Te.cas
Legislature designate private companies to vvield'sucl
authority? Recently, DISH officials started to fight back;.
passing a resolution. asking the Texas Legislaturefor y
' help in; regLilatmg.pipelines. Coples,,of the resolution
are being ma led't6 other towns affected by ,the Sarnet
"I Shale `'Southlake, Richland Hills and a few,; other-areas,;;
have Already passed the resolution. It's a good idea for`;
all towns-and.`cities to do the same, before we're;;all;
.tripping over pipelines embedded in our lawns y x
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;Allen GRAPHIC'DESIGNER `Jerry Allison
ext::227 ~ terry@thenewsconnection coin + a
Mursch GRAPHIC DESIGNER Supnya Srlntvasa 3
:cfion:com ext:224 supriya@thenewsconnechon^com
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.1, GRAPHIC DESIGNER:Julie Lyle
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Belle Raper GRAPHIC DESIGNER Sarah Greschner 7
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Ot. 224 -~sarah@thenewsc6onection.com
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ext.224 amanda@thenewsconnection:com
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In Dish, pipeline protest takes root I Fort Worth Star-Telegrani.com Page 1 of 2
~x Print This Article
Thursday, Aug 14, 2008
pastad on i hu, Aug. 14. 2009
In Dish, pipeline protest takes root
By MIKE LEE
mikelee@star-tologram.com
DISH - Chuck Paul thought he had things worked out pretty welt. In 2000, he bought 63 acres in this Denton
County town on which to raise horses.
He was considering subdividing the land when he retires.
But that possibility is on hold. Paul, 61, said his property is now crossed by three big pipeline rights of way and four
pipelines. And, he said, he's learned the hard way that it's difficult for a landowner to stop the process.
Once a pipeline is laid, the landowner can't build on the right of way, which can be 50 to 100 feet wide. And the
landowner has little say about the route, since stale law gives pipeline companies the same right to condemn land as
other public utilities.
"If the pipeline company wants to put a pipeline right through city hall, right through the county building, they can do
it," he said.
The pipeline companies say they're doing their best to lessen the impact on Dish residents.
But [own commissioners are calling on the Legislature to change the law that allows pipelines to pick their routes at
will, with no oversight from local governments. And they're trying to drum up support from other towns.
If the Legislature doesn't act, Paul and Mayor Calvin Tillman say other communities could suffer the same fate.
"Everyone in the city of Fort Worth, including the City Council, should be going to the state Legislature to get them to
change the legislation that they passed allowing the pipeline companies unfettered access," Paul said.
"Every piece of ground in the state of Texas is at risk."
Inhibiting development
Dish, formerly known as Clark, changed its name in 2005, in exchange for 10 years' worth of free Dish satellite TV
service for every resident. Located just north of Texas Motor Speedway, it seems poised for growth.
But the town was built next to an Atmos Energy transmission line. Such pipelines are the superhighways of the
energy business: They move large amounts of gas under high pressure from the production fields to the end users.
When the Barnett Shale natural gas boom began, Dish became a natural on-ramp to the pipelina, and companies
built three compressor stations to feed into it. That led to more pipelines.
"It's kind of a chicken-and-egg thing," Atmos spokesman Rand LaVonn said.
In Paul's case, the pipeline companies offered $30 per linear foot for a 50-fool-wide easement- about $25,000 to
$26,000 per acre. But Paul said the pipelines are laid out prevents him from using the land that's left. He thinks he
could have gotten $30,1100 an acre if he had subdivided the property.
"I've got about a 10-or 12-acre parrot in the back irs just nonusable," he said. "On the 60 acres I have, they've
basically taken charge of at least 30 acres of it."
Minimizing Impact
Gas companies say they're trying to lessen the impact on residents.
Atmos has spent $1.3 million to help reduce noise generated by two 3,550-horsepower compressors. The company
also plans to move a pressure-release valve and odorizing equipment away from nearby houses."We've worked very
harden this," LaVonn said. "We want to be a respectful neighbor."
Energy Transfer Partners, which also operates big transmission lines, has built a 36-inch pipeline and a 20-inch
pipeline in Dish. The company has two 1,500-horsepower compressors there and could add two more,
spokeswoman Vicki Granado said.
Like Atmos, Energy Transfer has tried to minimize the impact on residents. Its compressors run on electricity at
night, which lessens the noise. It tried to run its pipelines alongside existing power lines or railroad tracks.
"Unfortunately, the Texas Department of Transportation has not been very accommodating in allowing natural gas
pipelines to utilize their road easements;" Grenade said.
Chesapeake Energy, which built compressor stations in a joint venture with Almos, was one of the first companies to
enclose the machines, spokesman Justin Bond said. The company also chipped in for a park at Dish City Hail.
"Were really trying to raise the bar' and encourage other companies to enclose compressors, he said
Fort Worth debate
In Fort Worth, two members of the Gas Drilling Task Force have debated whether a master plan for drilling sites and
http://www.star-telegram.com/metro news/v-print/stoiy/831905.1-itinl 8/14/2008
In Dish, pipeline protest takes root I Fort Worth I Star-Telegram.com Page 2 of 2
pipelines should be created
Jim Bradbury, a lawyer who sits on the task force, proposed the idea in an opinion piece in the Star-Telegram. He
said the city needs to work with companies to make sure that there aren't multiple pipelines running through the
same neighborhoods.
"We cannot, in our neighborhoods, afford to have two wells, We pipelines," he said at a forum last week, 'T your
neighborhood has leased, there's got to be a well, there's get to be a pipeline, there's got to be trucks. It's gat to he
planned."
Lee Nicol, a land developer who also sits on the task force, said the idea won't work. 'Who is going to tell operators
that have invested millions of dollars in surface site localions and right of ways that they cannot be used since they
do not fit into a master plan?" Nicol wrote in another opinion piece. "Who is going to pay for shared pad sites, and
who gets to decide who uses them when?"
The Dish resolution questions whether the companies should have the power to condemn land. "Each gas utility.
operates exclusively as the alter ego and exclusive servant of the affiliated all and gas operator, greatly blurring the
line between gas utility and oil and gas operator," the resolution says.
The result is that towns get burdened with an unnecessary number of pipelines, Tillman said. And that land can't be
built on. "Itjust kills your growth," he said.
Tillman sent the resolution to more than 51) cities. Lake Worth adopted the resolution this week, and it has been up
for discussion in Copper Canyon and Nodhlake.
Staff writer Elizabeth Campbell contributed to this report.
http://www.star-telegram.com/metro news/v-print/stoly/831905.html 8/14/2008