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The fight over home rule moves to Texas House

Municipal control over activities involved in hydraulic fracturing has become a hot topic nationwide, with the small town of Denton, Texas, being one of the focal points of the conversation about local control of oil and gas regulations.

In Denton, the city passed legislation banning hydraulic fracturing, causing uproar in the industry and calling into question who has final say in regulating oil and gas activities. Denton enacted a frac ban under its authority as a home-rule city, but the Texas oil and gas industry responded saying that it is up to the state to regulate oil and gas.

“While home-rule cities like Denton may certainly regulate some aspects of exploration and drilling, The Texas Oil and Gas Association (TXOGA) does not believe that they may enact ordinances that outlaw conduct, like hydraulic fracturing, that has been approved and regulated by state agencies,” said Tom Phillips, a former chief justice of the Texas Supreme Court, and one of TXOGA’s legal representatives.

New House bill looks to limit municipalities’ ability to accept petitions

It is against this backdrop that the Texas House of Representatives introduced House Bill 2595 earlier this month.

According to the bill’s text, “A municipality may not: accept for verification, certification, or other approval a petition requesting the enactment or repeal of an ordinance or charter provision, if the proposed enactment or repeal would restrict the right of any person to use or access the person’s private property for economic gain.”

In a committee report, State Rep. Jim Keffer said, “Referendum procedures can create a tyranny of the majority and undermine minority interests while also allowing outside interests to influence policies without respect for Texas election laws. H.B. 2595 seeks to address this issue by ensuring that private property rights cannot be trumped via an initiative and referendum process at the municipal level.”

Proponents of the bill hope that it will protect the rights of property owners who wish to use their land for economic gain. “There are property rights that have to be protected, and that’s what Texas is all about,” Keffer told The Texas Tribune.

Opponents of the bill worry that it will strip control away from municipalities, making it difficult for them to address concerns. Those who supported the Denton ban said it was a last-ditch effort to deal with noise and toxic fumes from wells near their homes.

H.B. 2595 passed the House with no debate during a voice vote. It has no companion in the Senate, so it will need a sponsor and committee assignment to advance further.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.