Drilling Ordinance Committee - Why bother?

The headline in today's newspaper speaks volumes: Drilling ordinance may be changed, council indicate. The story describes how Midland City Council members - and oilmen Wes Perry (mayor) and Scott Dufford in particular - are preparing to undo more than a year of work performed by a task force (commissioned, by the way, by the Council) based primarily on the vehement objections of their fellow oil and gas producers.

That the toughest restrictions of the proposed ordinance will be softened or even deleted seems to be a foregone conclusion. The only question that remains is why any private citizen will be willing to volunteer his or her time for future task forces or study groups. I can only imagine the frustration that the drilling ordinance committee members are feeling now.

I didn't bother to attend any of the public hearings for the proposed ordinance, having experienced the debate last year as our neighborhood sought to insulate itself from the more unpalatable side-effects of drilling on immediately adjacent acreage. The outcome of that debate was never in doubt, as the oil and gas interests waved thinly-veiled threats of expensive lawsuits and gave only lip-service to the idea of compromise.

I will admit that my thinking about this issue was clarified through the process, and for what it's worth, here's where I now stand.

  • The city cannot legally prevent drilling within its jurisdiction, nor should it try to override well spacing regulations that have long been established by agencies which have significantly more expertise in such matters. The "taking" or condemnation of mineral interests through excessive limits on drilling is a legitimate legal and even ethical issue; regardless of how surface owners may protest, in Texas, the mineral owners' rights have primacy.

  • That said, the city is also under no obligation to ensure the profitability of drilling within its jurisdiction. To clarify, it's irrelevant for an oil company to protest on purely economic grounds any ordinance or regulation that is designed to protect residents and help ensure orderly residential and commercial development of the city. Every piece of legislation or regulation, whether at the federal, state, or local level, adds cost to the oil and gas development process. The industry deals with a huge regulatory burden on a daily basis. And yet, miraculously, drilling continues, and profits are made. What should not be overlooked is that there is a level of oil and gas pricing that makes the burden of these regulations insignificant from a financial perspective, and when oil prices hit more than $140/barrel last year, it forever removed the force of the argument that the economics of drilling for oil in the formations around Midland just can't support the least bit of additional regulation. If the city deems that a concrete block wall costing $100,000 (a figure I have a hard time believing, by the way) is a reasonable way to shield a producing oil well, the driller will just have to factor that into his economics and if they're too thin, then he'll have to wait for prices to make them better. History has shown that they will.
This is such an emotional issue for Midland. We're all in the oil and gas business to some extent, and the economic health of the city is inextricably tied to the health of the industry. Perhaps it's naive or even hypocritical for residents to take a "not in my backyard" stance on drilling. But the industry isn't doing itself any favors by adopting an adversarial stance at every turn.

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This page contains a single entry by Eric published on October 28, 2009 7:35 AM.

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