Southlake gas drilling debate: Did city drag its feet or show needed caution?

By AMAN BATHEJA - Fort Worth Star Telegram - May 3, 2009
Gas drilling screeched to a halt in Southlake months ago, but it’s emerged as an issue in the mayoral race all the same.

Mayor Pro Tem John Terrell is vying with former Mayor Rick Stacy to be the city’s new leader.

Stacy argues that Southlake has been run ineffectually since he stepped down in 2003. As one example, he has repeatedly said the city missed out on a multimillion-dollar payday by not leasing its mineral rights before the natural gas market collapsed.

"It didn’t take 18 months to write the U.S. Constitution. Why would it take 18 months to write the ordinance?" Stacy said. "To miss that window of opportunity for the taxpayers, that cost us probably $12 [million] or $13 million."

The city spent well over a year holding public meetings on drilling before finally adopting a revised drilling ordinance last May. Before that, Southlake allowed drilling only in industrial areas. By last fall, the decline in natural gas prices had prompted most drilling companies to stop signing new leases.
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On his campaign Web site, Terrell describes himself as "a prime architect" of the new ordinance. He said the city needed to make sure that residents had time to have their say. The city needed to have the revisions in place before leasing its minerals rights to ensure that a drilling company followed the stricter rules. The city will lease its mineral rights when natural gas prices rebound, he said.

"There’s always a way to spin any story," Terrell said. "To me, our safety and our property values were far more important than the city retaining and extracting our minerals early."

1,000-foot setback

City Attorney Allen Taylor echoed Terrell’s argument. He noted that a drilling company that signed a contract before the new ordinance was approved would not have had to honor the revised ordinance’s required 1,000-foot setback for wells.

In October, the city issued a request for proposals to lease the mineral rights on its property, 520 acres on 46 sites scattered around the city. The request specified that a proposal must include a bonus of at least $20,000 per acre and a royalty of 25 percent or more of all revenue from oil and gas produced from the land.

The city received no responses, city spokeswoman Pilar Schank said. City staff spent time working with the council to create the request and issued it once "it met expectations," she said.

Karen Whitaker helped organize the White Chapel Corridor group in Southlake, whose members received signing bonuses of over $20,000 an acre for its mineral rights last summer. She questions why the city didn’t sell its mineral rights last summer as well, soon after the new ordinance was approved.

"We hit it at the perfect time, and I think at that point, if you were hitting your ear to the ground, you would have known the time was right," Whitaker said.

Whitaker said the bonus money would have been put to good use and agrees with Stacy that the city dragged its feet. "We need a rec center for our teens. There’s infrastructure that needs to be completed to handle our growth," Whitaker said. "We don’t have that, and that was free money."

Shortsighted criticism?

Southlake resident Tommy Pennington said he is comfortable with how the city handled the drilling issue.

"I’d love to see the city get the money, but at the same time I think we have to have our plan be solid instead of asking for forgiveness later when the damage is done," Pennington said.

Gene Powell, publisher of the Barnett Shale Newsletter, said the intense competition by drilling companies to sign up property owners is probably gone for good.

"I don’t think we’ll ever see bonus money anywhere near the range it was," Powell said.

Despite the worry about missed opportunities, Powell said, the focus on bonus payments was shortsighted. "The publicity has really been over the bonus money, which is wrong," Powell said. "The real money is in the royalties."

Whenever drilling companies did start signing up people again, Powell said, he expected royalty offers would be around the same levels they were last year.
AMAN BATHEJA, 817-390-7695