Study: Denton Fracking Ban Would Cost City Millions

It has often been said that opposition to hydraulic fracturing, or “fracking”, is in effect opposition to all development of oil and natural gas, given how integral this technology has become to unlocking the vast stores of energy contained in various shale formations in the United States and around the globe.  Nowhere does this principle apply more obviously than in the Barnett Shale of North Texas, the first shale play to be made economically viable thanks to the wedding of fracking with horizontal drilling in the late 1990s.

Which is why it is ironic that on Tuesday, the City Council of Denton, Texas, which sits smack dab in the middle of the Barnett Shale, will consider an activist petition to place a ban on hydraulic fracturing within the city limits.  Given that the development of the Barnett Shale has been a contributing factor to Denton’s growth and economic prosperity over the last decade and a half, it’s clear that a ban would enact economic hardship to the city and it’s surrounding communities.

According to respected economist Ray Perryman, President of the Perryman Group, based in Waco, the cost would indeed be significant.  In a study issued today, Dr. Perryman estimates the costs of the proposed ban on fracking to the City of Denton alone at 2,077 person years in lost employment and more than $251 million in lost economic impact between now and 2023.  Losses to the State of Texas, including Denton County, would be on the order of 2,718 person years and more than $354 million in that same time frame.

No matter how one cuts it, that is a very substantial loss of opportunity in response to fright tactics and misinformation distributed by activists, who are organized and supported by the same groups who supported the Occupy Wall Street movement several years ago.  It would also be a loss in reputation for the City itself, given that natural gas development that has taken place within its city limits over the last 14 years was based on hundreds of legally acquired leases and other contractual agreements, all of which would be effectively abrogated by a vote in favor of the “ban fracking” petition.

That’s a serious matter, and it’s something one would hope the leaders of any community would take into consideration whenever outside instigators mount this sort of effort in a place they calculate is particularly vulnerable to it. Denton, with its large population of voting-age college students, appears to these activists to be the perfect proving ground for their national campaign to ban oil and natural gas development.

The reality is that the leases within the Denton city limits were executed with the expectation that operators would be allowed to drill and complete the wells necessary to fully develop the resources, consistent with applicable state laws.  Operators also expected, in good faith, that they would be able to re-enter already drilled wells years down the road and re-stimulate them in order to maximize ultimate recoveries.  A ban on fracking would not only deny the drilling of new wells, it would also deny the ability to re-stimulate existing wells.

The activist community would no doubt respond by saying “So what?  These are rich corporations we’re talking about, not people.”  But of course, that’s wrong too.  People work for these corporations, millions of them living in Texas.  People also invest through their retirement funds in these corporations, millions of them living in Texas.  All people benefit from the products these corporations produce, and from products manufactured by other industries that use petroleum products as feedstocks.  Real people are also at the other end of these lease agreements, and those people stand to lose many millions of dollars in potential royalty revenues if the City of Denton passes an ordinance banning fracking. As the Texas Royalty Council and TIPRO have pointed out, a ban on fracking would deny residents their private property rights.

Finally, though Dr. Perryman’s study didn’t look at this, there is also the likelihood that passage of this ban will mire the city in years of protracted litigation that will cost its citizens many more millions of dollars.  Any ban will certainly be challenged in court by a variety of damaged parties, such as those mentioned above, and it is very likely that some, if not all of them will prevail under Texas law.

One would hope that the elected leaders on the Denton City Council will consider Dr. Perryman’s study and these other realities fully before voting on whether or not to put this question before the voters.  Leaders are elected to lead, not just to be a pass-through to the whims of out-of-state anti-development groups.  An exercise of leadership in this case would save the people of Denton, and the rest of the state of Texas, hundreds of millions of dollars and years of unnecessary litigation.


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