Flower Mound Responds to Questions Regarding Issuance of Recent Well Permit

2121 Cross Timbers Road
Flower Mound, Texas 75028
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Flower Mound Responds to Questions Regarding Issuance of Recent Well Permit

M E M O R A N D U M

TO: Honorable Mayor and Town Councilmembers

FROM: Harlan Jefferson, Town Manager

Kent Collins, Assistant Town Manager

Terrence S. Welch, Town Attorney

Matthew Woods, Director, Environmental Services

Brandon Bammel, Environmental Review Analyst, Oil & Gas Inspector

DATE: September 10, 2010

RE: Hilliard Gas Wells and Tank Battery Setback Issues

At the special Town Council meeting on Tuesday, September 7, 2010, a resident, Ms. Jennifer Rogers, presented the Town Council with a packet of information that purportedly showed the Town wrongfully issued a drilling permit for the Hilliard Tract, based in large part on a prior gas drilling permit issued for the Armstrong-Huggins wells in west Flower Mound in or about March 2008. The packet of materials about that permit and related documentation (including minutes of the March 12, 2008, Oil and Gas Board of Appeals (“OGBOA”) meeting where setback variances were considered and approved) were provided to you in support of the proposition that Town staff misinterpreted its own ordinances. As the following responses to Ms. Rogers’ contentions will clearly and unequivocally show, not only are Ms. Rogers’ conclusions absolutely incorrect and based on a very selective reading of the relevant minutes, but the criteria the Town staff utilized in reviewing the Armstrong-Huggins wells were entirely consistent with the three (3) other tank battery setback variances referenced in the Town Attorney’s August 26 memorandum to you. While we appreciate Ms. Rogers’ involvement in Town meetings and her input, the conclusions drawn by her are erroneous, selective and appear to demonstrate a desire to reach a conclusion not based on actual facts. Each of the contentions raised by her will be addressed below.

First Contention: “It is clear that tank batteries must be 1,000 feet from any residence—mineral owner or not.”

We understand that Ms. Rogers and other individuals have concluded that a well permit should not have been administratively approved at the Hilliard Tract because a 1,000 foot tank battery setback variance from a residence is required, pursuant to Section 34-422(d)(2) of the Town’s Code of Ordinances. While we will not restate the matters addressed in the Town Attorney’s August 23 and August 26 legal opinions to you, it nevertheless is Ms. Rogers’ contention that “a careful review of the oil and gas board of appeals minutes from March 12, 2008, shows that variances were required and approved for a residence with leased minerals from 1,000 to 510 feet from a tank battery” and that the applicant’s representative at that meeting, Mr. Bobby Dollak, “realized that tank batteries had to be 1,000 feet away from any residence—mineral owner or not.” This is completely erroneous, and a review of the minutes and related documentation from the March 12, 2008, meeting of the Oil and Gas Board of Appeals unequivocally confirms that the Town’s interpretation has been consistent over the years since the 2007 oil and gas ordinance amendments were adopted. Additionally, minutes, power point presentations and agenda packets from the January 25, 2007, Town Council meeting and minutes, power point presentations and agenda packets from the March 15, 2007, Town Council meeting universally support the Town’s consistent interpretation of Section 34-422(d)(2) that any setback for tank batteries, well facilities and equipment must “match” the setback approved for well bores from residences, schools, floodplains and human occupied buildings, among others. These matters are discussed below.

Armstrong-Huggins Wells 1H and 2H/OGBOA Meeting, March 12, 2008

As addressed in the Town Attorney’s previous legal opinions, it is and always has been the Town’s consistent interpretation of Section 34-422(d)(2) of the Town’s Code of Ordinances that a 1,000-foot tank battery setback from a residence is not mandated in all instances and any setback for tank batteries, well facilities and equipment must “match” the setback approved for well bores from residences, schools, floodplains and human occupied buildings, among others. This is the exact position taken by the Town at the March 12, 2008, OGBOA meeting. This is confirmed by the comments of Town staff, by the comments of Mr. Dollak, and by the motions presented for consideration by the OGBOA in ruling upon the requested variances.

Armstrong-Huggins Wells 1H and 2H were considered by the OGBOA at its March 12, 2008, meeting, agenda item #2, as noted above. At that meeting, a series of setback variances were reviewed by the OGBOA, including setbacks for tank batteries, well facilities and equipment, pursuant to Section 34-422(d)(2) (hereinafter “the tank battery setback”). The discussion by various individuals, while perhaps somewhat confusing if you accept Ms. Rogers’ contention, is quite clear, according to Mr. Dollak:

[MR. DOLLAK:] . . . Even doing these slides, I mean, they start becoming repetitious; but the way your ordinance is written, I have to ask for the same variances for the tank as I do the wells themselves: so that’s why there’s so many.

See Minutes, March 12, 2008, OGBOA Meeting at 37, lines 12-16[1] (hereinafter “March 12 Minutes”) (emphasis added). Since there is no testimony to the contrary by Mr. Dollak, it is clear that the tank battery setbacks “matched” the well setbacks, contrary to Ms. Rogers’ contention that there is a “hard and fast” 1,000 foot residential setback in every instance. Mr. Dollak’s position on this point, consistent with the Town’s position, was again referenced by Mr. Dollak at that same meeting when he discussed both (i) the home of a resident in Tour 18 who was not included in the mineral lease and (ii) those individuals who were home owners and who had a mineral interest:

[MR. DOLLAK:] . . . We are — we are 934 feet away from the tank battery to the resident in Tour 18 which not part of the lease. The resident’s not part of the lease. The ordinance says 1,000 foot from that resident. The other two are actual members of the lease, and they — we can get a variance down to 300 foot setback for those.

See March 12 Minutes at 34, line 3—35, line 8 (emphasis added). The Town’s Oil and Gas Inspector at that time, Mr. Dustan Compton, confirmed Mr. Dollak’s [and reiterated Town staff’s] position that tank battery setback “matched” residential and related setbacks from well bores:

MR. COMPTON: The tank batteries do have limitations of where they can be reduced down to. 500 feet if a residence does not have mineral interest[s] and 300 feet if the residence does have mineral interest[s].

See March 12 Minutes at 59, lines 20-23 (emphasis added). If one were to accept Ms. Rogers’ reasoning, then both Mr. Dollak and Mr. Compton also must have misinterpreted the tank battery setback. We believe a reading of their testimony is clear—tank batteries must meet the same setbacks applicable to the underlying well bore setback. Simply stated, for a residence where there is no mineral interest ownership, tank batteries must be 1,000 feet from a residence, with a variance permissible down to 500 feet; and for a residence where there is mineral interest ownership, tank batteries must be 500 feet from a residence, with a variance permissible down to 300 feet. That is fully consistent with the last sentence of Section 34-422(d)(2): “Centralized tank batteries . . . shall comply with all well bore permit setback requirements.”

Further, the “human occupied building” issue also was addressed at the OGBOA’s March 12, 2008, meeting:

BOARD MEMBER WALKER: And tank — and tank batteries and the human occupied, that drops to 300 feet as a minimum; so we cannot grant a variance closer than 300 feet to a human occupied building? I just want to make sure.

MR. LATHROM: Yes, sir.

See March 12 Minutes at 79, lines 16-20. If this still is not sufficient to show that the Town’s interpretation, as well as that of applicants and OGBOA members, of the tank battery setback has not been consistent (that is, the 1,000-500-300 foot provisions contained in the 2007 oil and gas ordinance amendments, as referenced above), several of the motions made by the OGBOA members on March 12, 2008, reflect this consistency. See March 12 Minutes at 147, lines 6—21 (motion by Chairman Murphy to reduce tank battery setbacks to below 1,000 feet) and 148, line 16—149, line 2 (motion by Board Member Ward to reduce tank battery setback to 404 feet from a human occupancy building).

Town Council Meetings of January 25, 2007, and March 15, 2007

As the foregoing reflects, and as previously referenced in the Town Council minutes of January 25, 2007, and as presented by Town staff, it is clear that the tank battery setback was and has been consistently interpreted as approved by the Town Council:

Staff Recommendation:

• Change setback to match recommended setbacks for:

o Residence – 1,000 feet, 500 feet, never less than 300 feet

o Floodplain – 300 feet

o HumanOccupied Building– 500 feet, never less than 300 feet

• Centralized facilities shall comply with the well bore requirements.

• Allow for a variance process from the OGBOA.

The Council concurred with staff’s recommendation.

See Flower Mound Town Council Minutes, January 25, 2007.

The agenda packet for that meeting again confirms this interpretation. Specifically, at page 5-5 of Agenda Item No. 5 for the January 25, 2007, Town Council meeting, the following information was included relative to proposed amendments to the Town’s oil and gas ordinance:

Tank Batteries, Well Facilities, and Equipment

Staff recommends adopting the same regulation for a setback as for a residence and floodplain. At minimum, a variance process through the Oil and Gas Board of Appeals is recommended.

Id. (emphasis added). The power point presentation provided by Town staff at that meeting also confirmed this understanding. Specifically, at page 12 of the presentation that evening, the slide entitled “Setbacks” for “Tank Batteries, Well Facilities, and Equipment” noted that staff recommended to “[c]hange setback to match recommended setbacks for: Residence—1,000 feet, 500 feet, never less than 300 feet . . . Centralized facilities shall comply with the well bore requirements.” (Emphasis added.) The residential setbacks proposed and considered are the same as currently exist in the Town’s oil and gas ordinance, with distinctions based on mineral/no mineral interest ownership.

If one follows the progression of Town Council minutes, agenda packets and presentations from January 25, 2007, forward, it is abundantly clear that any setback for tank batteries, well facilities and equipment indeed was to “match” the setback approved for well bores from residences, schools, floodplains and human occupied buildings, among others.

On March 15, 2007, the Town Council held a public hearing to consider proposed amendments to the oil and gas ordinance. Agenda Item No. 16 for the March 15, 2007, Town Council public hearing discussed thirty-one (31) proposed amendments to the oil and gas ordinance. Tank batteries, well facilities and equipment were addressed at page 16-4 of the agenda item:

Tank Batteries, Well Facilities, and Equipment

The proposed ordinance adopts the same regulation for a tank battery, well facility, and equipment setback as for the proposed residence and floodplain setback changes. Compression facilities, centralized tank batteries, and associated facilities are included in the setbacks. . . .

Id. (emphasis added). The power point presentation provided by Town staff at that meeting again confirmed this understanding. Specifically, at page 5 of the presentation that evening, the slide entitled “Setbacks” for “Tank Batteries, Well Facilities, and Equipment” noted that the proposed amendment to the ordinance was to “[c]hange setback to match recommended setbacks for: Residence—1,000 feet, 500 feet, never less than 300 feet . . . Centralized facilities shall comply with the well bore requirements.” (Emphasis added.) The residential setbacks that were proposed and subsequently adopted are the same as currently exist in the Town’s oil and gas ordinance, with setback distances based on mineral/no mineral interest ownership.

As reflected in the minutes of that meeting, a civil engineer from Southlake questioned setbacks for compression equipment, pursuant to Section 34-422, at which time Dustan Compton, the Town’s Oil and Gas Inspector, confirmed that compression facilities and production equipment must meet the same setbacks as well bores:

Ms. Hattan referred to the setback requirements for compressor stations. She asked if the compressor facilities were meeting the noise requirements why was the Town requiring the facilities to meet the same setbacks as wells.

Mr. Compton stated typically the compressor stations were associated with the gas well activity, so it was considered a type of production equipment. Variances to the setbacks were available through the Board.

See Flower Mound Town Council Minutes, March 15, 2007 (emphasis added).

Oil and Gas Drilling Ordinance Comparison Chart

One issue raised by Ms. Rogers, although not addressed in her written remarks on September 7, 2010, is that there was a discrepancy between a version of the Oil and Gas Drilling Ordinance Comparison Chart on-line on the Town’s website prior to August 2010 and a modified version dated August 2010 that included different setback distances for tank batteries, well facilities and equipment. Ms. Rogers is correct—the original Comparison Chart was included and discussed at the March 15, 2007, Town Council meeting and contained the correct setback distances. During the late summer of 2010, Town staff noticed the error in the version that was on-line at that time and modified it. As a consequence, the March 2007 version is entirely consistent with the current August 2010 on-line version. Apparently the version on-line prior to August 2010 had been incorrectly transcribed. To provide clarification, the following language is noted, as it relates to tank batteries, well facilities and equipment setbacks:

Comparison Chart from the March 15, 2007, Town Council Meeting, Power Point Presentation, p. 14 (emphasis added):

Setback

Current [2003] Distance

Proposed Distance

Tank

Tank Batteries, Well Facilities, and Equipment

1000 feet from public park, residences, church, public building, hospital, and human occupied building; 500 feet from property line; 500 feet from floodplain –no variance possible

1,000 foot setback from public park, church, public building, hospital and school; Residence owner with mineral interest: 500 foot setback with a possible variance from the OGBOA down to 300 feet, Mineral and residence owner not the same: 1,000 foot setback with a possible variance from the OGBOA down to 500 feet; Change setback to 300 feet from the floodplain; measured from the tank batteries, well facilities, or equipment. Centralized facilities shall comply with the well bore requirements Allow variance process from the OGBOA.

The version of the Comparison Chart that was on the Town’s website prior to August 2010 had an error relative to the setback for a residence with mineral interest ownership (the error is underlined) as well as an error about the adoption date:

Regulation

Initial Ordinance

(adopted May 2003)

Current Ordinance

(adopted May 2007[[2]])

Tank Batteries, Well Facilities, and Equipment

1000 feet from public park,

residences, church, public building, hospital, and human occupied building

no variance possible

1,000 foot setback from public park, church, public building, hospital and school – variance down to 500 feet; 1,000 foot setback from residence whose owner is without mineral interest in the application – variance down to 500 feet;

1,000 foot setback from residence whose owner is with mineral interest in the

application – variance down to 300 feet; 500 foot setback from human occupied building – variance down to 300 feet; All measured from nearest tank, facility, equipment, etc.

In an effort to correct that error and to provide further clarity so that the Comparison Chart currently on-line is entirely consistent with the original 2007 Comparison Chart, the current version (as of today’s date) of the Comparison Chart, corrected to be in accordance with the 2007 oil and gas ordinance amendments, is as follows:

Regulation

Regulation Prior to 2007

Ordinance Amendments

New/Current Regulation

1000 feet from public park,

residences, church, public building, hospital, and human occupied building

no variance possible

1,000 foot setback from public park, church, public building, hospital and school – variance down to 500 feet; 1,000 foot setback from residence whose owner does not have mineral interest in the application – variance down to 500 feet; 500 foot setback from residence whose owner does have mineral interest in the application – variance down to 300 feet; 500 foot setback from human occupied building – variance down to 300 feet; All measured from nearest tank, facility, equipment, etc.

As should be noted, the underlined language in the Comparison Chart from the March 15, 2007, Town Council meeting is in strict accordance with the underlined language in the current, on-line Comparison Chart. While there was an error in the version that was on-line prior to the current version, it was corrected in August to comply with both the 2007 version of the Comparison Chart and the current provisions of the Town’s oil and gas ordinance.

Based on the foregoing—the minutes from the March 12, 2008, OGBOA meeting, the Town Council’s January 25, 2007 meeting minutes, agenda packet and presentation, and the Town Council’s March 15, 2007, meeting minutes, agenda packet and presentation, and the 2007 Comparison Chart and current on-line Comparison Chart—if the Town Council were to accept Ms. Rogers’ interpretation of the tank battery setback, then a 1,000 foot residential setback would be required in all cases and anything less would require a variance; however, as all of the foregoing documentation reflects, neither the applicant, Town staff, the Town Attorney’s Office nor OGBOA members accepted that interpretation. Why? The reason is simple: as reflected in the voluminous records referenced above, and as enforced by the Town, Section 34-422(d)(2) expressly allows the 1,000-500-300 foot setback provisions referenced in the Town’s oil and gas ordinance after the 2007 amendments were approved. Surely no one would contend that the Town Council, Town staff, the Town Attorney’s Office, members of the OGBOA and applicants all misunderstood the tank battery setback, particularly after that section was addressed in great detail on multiple occasions at multiple Town Council and OGBOA meetings. If so, however, the record clearly and indisputably contradicts such a contention.[3]

Second Contention: The Town’s November 19, 2009, letter to Titan stated “the proposed tank batteries do not meet the required setbacks of . . . 1000 feet from any residence.”

Ms. Rogers’ interpretation of tank battery setbacks from residences based on staff comments very early in the administrative review process is taken out of context and assumes that Titan had submitted a complete application to the Town for consideration of a drilling permit. The initial setback sheet submitted to the Town by Titan did not reflect any storage tanks or tank battery setbacks on the property, although the production site plan (which reflected no distance measurements) showed storage tanks.

As indicated by the Town’s Oil and Gas Inspector, Brandon Bammel, the first Titan submittal did not show the location and measurements of distances of any storage tanks or tank batteries on the site. As a consequence, Mr. Bammel estimated the possible variances associated with that first submittal. One of the estimated variances was storage tanks 1,000 feet from a residence without a mineral interest since he did not know who had, or did not have, a mineral interest ownership because none of the relevant title work had been completed or submitted at that time by Titan to the Town. Consequently, in his first set of comments (November 19, 2009) to Titan, in item #8, Mr. Bammel indicated as follows:

8. Show the location of the tank batteries on the well site. Once the tanks are shown on the well pad, label a 500 ft and 1000 ft buffer off of the tanks. Staff needs to identify the tank location on the pad site so the measurements for setbacks are accurate.

Item #13 of the first set of comments also stated as follows:

13. Preliminary setbacks identified for the pad site, 1H well and surface equipment includes:

• 500’ from an Environmentally Sensitive Area (Upland Habitat and Waters of the State).

• 500’ from a Human Occupied Building.

• 500’ to a residence with mineral interest.

• Storage tanks shall be at least 1000’ from any residence.

• Storage tanks shall be at least 1000’ from any human occupied building.

• Storage tanks shall be at least 500’ from any property line. . . .

Setbacks are subject to change as the details on Exhibit E-1 [setback page] are incomplete. More details need to be added to the site plans before all variances can be accounted for.

(Emphasis added.) Thus, the lack of detail in the initial submittal by Titan made it impossible to determine what setback variances might be needed since no tank batteries or measurements were shown on any of the initial plans submitted by Titan, and Mr. Bammel’s comments to Titan reflected those concerns. In addition, Mr. Bammel was not “signing off” on any setbacks since Titan’s application at that time lacked appropriate detail and distance measurements.

The second submittal by Titan, approximately 90 days later, addressed many of the concerns expressed by Mr. Bammel in his first set of comments. The second submittal more clearly defined the location of the tank batteries and setback variances, and were included in Mr. Bammel’s second set of comments to Titan on February 26, 2010:

Preliminary setbacks identified for the pad site, 1H well and surface equipment includes:

• 500’ from an Environmentally Sensitive Area (Upland Habitat and Waters of the State) measured from the edge of disturbance.

• 500’ from a Human Occupied Building.

• 500’ to a residence with mineral interest.

• Storage tanks shall be at least 500’ from a residence on a mineral lease.

• Storage tanks shall be at least 500’ from any human occupied building.

• Storage tanks shall be at least 1000’ from a public park.

• Storage tanks shall be at least 500’ from any property line.

• 500’ to new construction of Aberdeen Dr.

As a consequence, when the Titan application and requested setbacks ultimately were considered by the OGBOA, no storage tank/tank battery setback variances were needed because the site plan had been modified by Titan to properly reflect the location of the tank batteries, and the zone of protection around those tank batteries fully complied with the Town’s applicable ordinances, including the tank battery setback. Therefore, the contention that the November 19, 2009, letter from Mr. Bammel to Titan somehow indicates that a 1,000 foot tank battery setback was needed disregards the fact that the letter in question was only issued during the preliminary stages of staff review; no storage tanks or tank batteries were shown at all on the first setback submittal by Titan; Mr. Bammel notified Titan accordingly (as reflected in the first set of comments); and subsequently, Titan addressed these issues and provided the Town with all necessary setback information and appropriate measurements. Ms. Rogers’ contention is unfounded and the November 19 correspondence to Titan by Mr. Bammel is only a “snapshot” at one point of time at the beginning of the staff review process, with detailed comments contained in the November 19 comments. Nevertheless, Ms. Rogers inexplicably presumes that a November 2009 statement, more fully explained in staff comments of the same date, was never addressed throughout the Town review process. That assumption simply is incorrect.

Third Contention: The Town Attorney’s legal opinion dated August 26, 2010, supports Ms. Rogers’ belief that the 2007 Town Council did not intend to “match” setbacks, as reflected in the Town Council minutes of January 25, 2007.

Quite frankly, we are baffled by Ms. Rogers’ unsupported contention. The August 26 legal opinion goes to great length in addressing all of the reasons why the “hard and fast” 1,000 foot tank battery setback contention propounded by Ms. Rogers is erroneous. She simply concludes that this legal opinion somehow supports her belief. Without some explanation by her, we find that an incredibly difficult position to believe, let alone address.

Fourth Contention: In reviewing Section 34-422(d)(2), the Town Attorney is “discounting the first sentences to reach his conclusion.”

Again, without any explanation of Ms. Rogers’ comments other than this simple conclusion, it is difficult to respond to her since it is unclear what she means. In an effort to address her concerns, the Town Attorney’s legal analysis clearly does take into account the first sentence of Section 34-422(d)(2). Indeed, that is the central or key principle of that subsection; however, exceptions are then noted in the following sentences. If we accept Ms. Rogers’ logic, then the last sentence of Section 34-422(d)(2) is rendered meaningless because there is no exception to the general principle of 1,000 foot tank battery setbacks. Without reiterating the comments in the Town Attorney’s previous legal opinions, that contention is without support in either the law or logic.

Fifth Contention: The Town is discounting its “very valuable variance process.”

This statement appears to be illogical. Ms. Rogers has argued that all tank batteries must be set back 1,000 feet from any residence, regardless whether there is a mineral interest possessed by the landowner or not. Now she argues that the Town has a “very valuable variance process.” Without further explanation by her, we are uncertain how to respond since her position seems self-contradictory.

It appears that the first major thrust of Ms. Rogers’ argument is that the OGBOA’s March 2008 consideration of the Armstrong-Huggins wells confirms her belief that a 1,000 foot tank battery setback is mandated in all instances. On the contrary, a reading of the minutes of the OGBOA’s March 12, 2008, meeting clearly supports the Town’s interpretation of its ordinances and consistent practices over the years (since 2007) that Section 34-422(d)(2) of the Town’s Code of Ordinances does not require a 1,000-foot setback in all instances and any setback for tank batteries, well facilities and equipment must “match” the setback approved for well bores from residences, schools, floodplains and human occupied buildings, among others. Second, her conclusion about the November 19, 2009, correspondence to Titan by Mr. Bammel is taken completely out of context since at the time that letter was issued to Titan, Titan (i) had not provided any information to the Town about tank batteries; (ii) no setback measurements for tank batteries were provided to the Town by Titan in its first submittal; and (iii) there was no information provided to the Town about mineral interest ownership. Her conclusion also ignores the fact that subsequent information was provided to the Town by Titan that indeed did address those issues regarding the location of tank batteries and their respective setbacks and that the detailed first set and second set of comments provided by the Town to Titan did list the shortcomings and applicable standards required of Titan.

Why Administrative Approval of the Titan/Hilliard Permit was Mandated

Over the course of the last several weeks, a variety of arguments have been made why the Town should not have administratively approved the Titan/Hilliard drilling permit. Responses to those issues have been addressed in various legal opinions to you; however, let us reiterate the reasons that have been advanced to date, and the Town’s responses:

1. The Titan/Hilliard permit should not have been administratively approved because a variance is needed for tank batteries located within 1,000 feet of residences.

Response: That conclusion overlooks (i) the express words used in Section 34-422(d)(2) of the Code of Ordinances and completely ignores the last sentence of that section; (ii) the Town Council’s consideration in 2007 of amendments to the oil and gas ordinance specifically addressed this issue and the Town Council, at its January 25, 2007, meeting specifically “concurred with staff’s recommendation”; (iii) the agenda packet at the January 25, 2007, Town Council meeting specifically supported the Town’s interpretation of “matching” tank battery setbacks with residential applicable setbacks; (iv) the presentation at the January 25, 2007, Town Council meeting specifically supported the Town’s interpretation of “matching” tank battery setbacks with applicable residential setbacks; (v) the Town Council’s consideration in 2007 of amendments to the oil and gas ordinance specifically addressed this issue and the Town Council, at its March 15, 2007, meeting, approved the tank battery setback amendment that previously was approved by the Town Council; (vi) the agenda packet at the March 15, 2007, Town Council meeting specifically supported the Town’s interpretation of “matching” tank battery setbacks with residential applicable setbacks; (vii) the presentation at the January 25, 2007, Town Council meeting specifically supported the Town’s interpretation of “matching” tank battery setbacks with applicable residential setbacks; (viii) the legislative history and legislative intent behind Section 34-422(d)(2) are clear; (ix) basic tenets of statutory construction support the Town’s interpretation of its ordinance[4]; (x) the Texas Code Construction Act, and specific principles contained therein, support the Town’s interpretation; (xi) entire amendments to ordinances and statutes are intended to be effective, and accepting Ms. Rogers’ and others’ interpretation of the tank battery setback would result in the last sentence of that section being of no import and surplus language with no meaning; (xii) administrative construction of a legislative enactment by the administrative agency charged with its enforcement is given great weight; (xiii) the Town has consistently applied the tank battery setback at other locations in the Town, and the treatment of the Titan/Hilliard site was no different; (xiv) at no time at any public hearing before the OGBOA has any applicant, any member of the public, the Town Council or the OGBOA suggested the Town’s interpretation of Section 34-422(d)(2) was incorrect relative to tank battery setbacks; (xv) practical reasons support such interpretation since, if Ms. Rogers’ contention is correct, well bores could be 500 feet from residences but tank batteries and related equipment would have to be 1,000 feet away, thus leading to larger pad sites; and (xvi) Ms. Rogers’ interpretation is not an accepted drilling practice nor has any other local government in the area adopted such an interpretation. It also should be noted that the current Oil and Gas Ordinance Comparison Chart is in full compliance with the 2007 Comparison Chart, and the applicable residential setbacks “match” tank battery setbacks.

2. The Titan/Hilliard amended permit application should not have been administratively approved because Titan/Hilliard had not vested any rights under state law.

Response: State law (chapter 245 of the Texas Local Government Code) is very clear on this point—if the Town exercises its jurisdiction over the project (i.e., gas drilling), then an applicant’s rights vest as of the date the Town receives either an application for drilling or fair notice of what permission is being sought from the Town. Moving the proposed pad site from one location on the tract to a different location, or changing the equipment to be utilized on the pad site from that which originally was submitted, is immaterial since the Town had notice of the project and the Town clearly was exerting its jurisdiction over the project.

3. The Titan/Hilliard permit should not have been administratively approved because a specific use permit (“SUP”) was needed.

Response: As referenced in greater detail in the Town Attorney’s August 23 legal opinion, this matter was addressed by both the Planning and Zoning Commission and the Town Council in 2003, where it was abundantly clear that it was never the intent of the Town to require an SUP for any oil and gas drilling operations. Further, it is unequivocal that gas drilling was to be regulated by Chapter 34 of the Code of Ordinances, not the Town’s zoning ordinances.

4. The Titan/Hilliard permit should not have been administratively approved because Town staff has made a mistake in its interpretation and there is no reason to repeat that mistake.

Response: While no one on Town staff accepts that premise, due to the pending litigation against the Town about the issuance of the Titan/Hilliard drilling permit, the plaintiffs in that lawsuit will have an opportunity to prove to a court that the Town staff misinterpreted Section 34-422(d)(2).

5. The Titan/Hilliard permit should not have been administratively approved because the minutes of the March 12, 2008, OGBOA meeting support the contention that tank batteries must be 1,000 feet from any residence, regardless whether a mineral interest is owned or not.

Response: A review of the March 12, 2008, OGBOA minutes in fact supports the Town’s position on the interpretation of the tank battery setback. That interpretation is supported by the comments from the applicant, Town staff and OGBOA members. A multitude of other Town records, referenced above, supports the Town’s position on tank battery setbacks.

6. The Titan/Hilliard permit should not have been administratively approved because the November 19, 2009, letter from the Town to Titan stated “the proposed tank batteries do not meet the required setbacks of 1,000 feet from any residence.”

Response: The initial gas drilling submittal by Titan was deficient in many areas, including the listing of setback variances that might be needed and the measurements of distances. Since inadequate supporting documentation was provided to the Town, Town staff estimated the distance and had not been provided any documentation that reflected the owners of impacted residences with mineral interests in the project. Ultimately, that information was provided to Mr. Bammel and his second set of comments reflected the corrected information provided by Titan to the Town.

7. The Town Attorney’s August 26 legal opinion supports Ms. Rogers’ belief that a 1,000 foot tank battery setback is mandated.

Response: Other than Ms. Rogers’ concluding that the August 26 legal opinion supports her contentions, nothing contained therein suggests that to be the case.

8. In reviewing Section 34-422(d)(2), the Town Attorney is “discounting the first sentences [of that section] to reach his conclusion.”

Response: As noted in this memorandum, there appears to be an effort by some to discount the last sentence of Section 34-422(d)(2), thus rendering it meaningless and surplus language. Legal principles in interpreting legislative enactments are in fact the opposite of what Mr. Rogers proposes.

9. The Town is somehow “discounting our very valuable variance process.”

Response: The Town simply is following its own ordinances. Variances will not be imposed or mandated unless the oil and gas ordinance so provides. A variance process cannot be added or required simply because some wish to do so. There must be specific authority for such a process in place at the time the application for a permit is submitted, and that was not the case with the Titan/Hilliard drilling permit.

Based on the foregoing, not only is it clear, but we believe overwhelmingly compelling, that the conclusion by Ms. Rogers that a 1,000 foot tank battery setback variance from a residence is needed before drilling may commence on the Hilliard/Titan site is the result of an extremely selective reading of certain ordinances, Town Council minutes, Town staff correspondence and OGBOA minutes. It also should be noted that during the OGBOA’s consideration of the Titan variance requests at the May 19, 2010, OGBOA meeting, not one single person—either a member of the public (including Ms. Rogers, who spoke at that meeting), OGBOA member, the applicant or Town staff member—ever made any reference to the necessity of a tank battery setback variance from a residence.

We hope the foregoing is responsive to any questions you may have about this matter. Should you have any further questions, please do not hesitate to contact any of us.

Thank you very much.

[1]Please note that the OGBOA Minutes on the Town’s website are based upon the court reporter’s transcript of the meeting, and page numbering is inconsistent when placed on the Internet: there is a page number located approximately half way up every page of the Minutes and a page number at the bottom of the page. For the sake of consistency, I am utilizing the page number at the bottom of the page.

[2]The 2007 amendments to the oil and gas ordinance were adopted on March 15, 2007, not in May 2007.

[3]It appears, though it is very unclear, that one of Ms. Rogers’ arguments is that since a caretaker’s quarters nearby the Armstrong-Huggins wells received a setback variance of 510 feet, this somehow implied that a 1,000 foot setback is mandated in all instances involving residences, whether a mineral interest is possessed or not. This overlooks a key (and very practical) issue: since the caretaker’s residence was attached to the western side of a stable making its closest exterior wall difficult to pinpoint, and estimated at being slightly more than 500 feet away from a well, and due to the proximity of the well and considering there could have been possible errors in measurement, it could be presumed prudent to receive a variance in the event the measurement eventually could have been determined to be less than 500 feet. Even a slight error in measurement could result in many months’ delay of drilling activities while another setback variance was sought.

[4]It is interesting to note that several individuals have questioned any reliance upon statutory construction principles in determining Section 34-422(d)(2)’s meaning. We agree that reliance upon such principles is not necessary since that section is and always has been clear; however, for those attacking the Town’s interpretation of that section, the only means by which to do so is by contending that section does not mean what it appears to state—which can only be accomplished through the application of statutory construction principles.

Posted 09/11/2010.