Chesapeake Energy's decision to let drilling leases it held in Southlake, Texas, expire would not cause the city to rethink its tough new drilling ordinance, city officials said Monday.
"I don't feel it was prohibitive," Councilwoman Carolyn Morris said of a revised drilling ordinance the Southlake City Council passed last month. "We're trying to do what's responsible for the health and safety of our community."
Morris said a letter that Chesapeake Vice President Julie Wilson sent November 9 to the holders of 1,400 leases in Southlake "was very bad PR" for the company, in that it blamed the city ordinance for Chesapeake's decision to pull out of the town, rather than the more likely cause -- low natural gas prices.
In her letter, Wilson cited passage of the ordinance as the reason that "Chesapeake will not be seeking any permit approvals and will allow the last of our nearly 1,400 leases in Southlake to expire."
The council members "placed unnecessary and restrictive conditions on doing business in their city, restrictions no other municipality has imposed," Wilson said.
Morris said the ordinance, which the city passed October 18, updated and added some safeguards to a drilling ordinance the council originally passed in 2008.
Among the more controversial restrictions in the revised ordinance is a prohibition on conducting hydraulic fracturing operations during summer months, a provision that advocates had said was needed to protect water supplies at a time when the state was undergoing a severe drought.
With its decision, Chesapeake became the second gas producer to decide that it did not want to operate within Southlake's city limits.
In May, XTO Energy informed city officials that the company had decided not to move forward with development activity at two sites in the city where XTO had filed for drilling permits.
The Fort Worth-based producer made its decision after the council in January announced a 180-day moratorium on accepting or processing new drilling permits.
City Councilwoman Pamela Muller said in an interview that the council had approved plans for XTO to drill on one of the two sites after the producer had agreed to abide by the same restrictions that later were included in the drilling ordinance.
She said city officials were considering the location of the pipeline that XTO had planned for the second site when the producer announced plans to cease operations in the city.
Wilson said that some of the provisions in the Southlake ordinance -- such as a 1,000-foot setback requirement -- would make it impossible for the company to operate economically within the city.
"They've also got a prohibition again frack-water ponds in the city and no fracking in summer months. Permit fees are 12 times higher than in other cities," Wilson said.
The Southlake ordinance also would require oil and gas operators to use a non-radioactive tracer substance in their fracking fluids, something that "is not commercially available and not needed," she added. "Some things are real deal killers."
Wilson dismissed the contention that Chesapeake's decision to pull out of Southlake was solely brought on by low gas prices. "If that were true we wouldn't be operating anywhere, would we?" she said.
She commented that the producer has a number of rigs currently operating in the Barnett Shale region. "We have a number of cities inside the Barnett Shale that are much more eager to have our drilling rigs. Some cities are more willing to work with natural gas drillers for their own economic development," Wilson said.
