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Rodolfo Gonzalez, Austin American-Statesman

HB 40 signed into law

Profile image for By Peggy Heinkel-Wolfe
By Peggy Heinkel-Wolfe

Abbott gives approval to new limits on oil and gas rules

Gov. Greg Abbott signed House Bill 40 into law Monday afternoon in Austin, putting unprecedented restrictions on the ability of cities and other local governments to regulate the oil and gas industry.

Abbott said Texas could avoid a patchwork quilt of local regulations with the new law.

“HB 40 does a profound job of helping to protect private property rights here in the state of Texas, ensuring those who own their own property will not have the heavy hand of local regulation deprive them of their rights,” Abbott said in a news release.

HB 40 requires that any local regulation of the oil and gas industry be “commercially reasonable,” a sweeping and unprecedented standard in state law, legal experts say. The law defines commercially reasonable as “a condition that would allow a reasonably prudent operator to fully, effectively, and economically exploit, develop, produce, process, and transport oil and gas.”

The law would have gone into effect without Abbott’s signature. The Texas Constitution gives the governor 10 days to either sign or veto a bill. Absent such a veto, the bill becomes law.

Both the Texas House and the Texas Senate passed the bill with more than a two-thirds majority, which also means HB 40 goes into effect immediately.

Locally, attorneys expect some fallout from the legislation in court, as both the state and the oil and gas industry have sued to block Denton’s ban on hydraulic fracturing. Voters overwhelmingly approved a citizens’ initiative banning the technique in the city limits in November.

HB 40 prohibits the enforcement of such bans. HB 40 also goes after other local regulations that industry representatives have said increasingly threaten oil and gas development in Texas.

In prepared statements, both the Texas Independent Producers and Royalty Owners Association and the Texas Oil and Gas Association said the new law is good policy with broad, bipartisan support. Ed Longanecker, of TIPRO, said the law protects reasonable regulation by cities and offers “regulatory certainty” for industry.

In another prepared statement, local activist Adam Briggle and others who campaigned for Denton’s ban said the new law puts industry profits ahead of a community’s health and safety.

HB 40 could face a challenge under the state constitution, legal experts say.

Meanwhile, cities, environmental groups and others are watching another fast-moving bill that also appears to be written in response to Denton’s ban.

House Bill 2595 would prohibit local voters from using initiative or referendum to restrict property rights. (The Texas Constitution does not provide for statewide initiative or referendum.)

The legislation ostensibly protects a property owner’s right to make money with their property. How such a law could work is unclear, according to Denton Mayor Chris Watts, because cities have the authority to restrict property uses through zoning laws.

The authors of HB 2595, state Rep. Jim Keffer, R-Eastland, and Rep. Pat Fallon, R-Frisco, make an exception for cities in the bill. In other words, a city’s voters would not be allowed to initiate a local rule that a city council itself could write.

Should HB 40 be found unconstitutional, HB 2595 could prevent another Texas city’s voters from using initiative to ban fracking.

While Watts didn’t know the intent of HB 2595, “it does seem that they are trying to stop something else [like Denton’s initiative] from coming up,” he said.

The Texas House passed HB 2595 on May 11. The Senate Natural Resources Committee holds a hearing on HB 2595 today.

Watts said neither piece of legislation addresses the original legal and public policy problems that led to Denton’s ban. He said he’s disappointed legislators didn’t have broad public policy discussions about the problems of urban drilling beyond the required public hearings for the bills.

“The ban brought the issue to the forefront,” Watts said. “I’d hoped there would have been a little more substantive discussion.”

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881 and via Twitter at @phwolfeDRC.