Planning — August/September 2014

What to Do When the Drillers Come to Town

Lessons from Santa Fe County's encounter with fracking.

Text and photography by Kim Sorvig

Recent U.S. oil and gas development has been volatile, controversial, and disruptive. Driven by fracking (hydraulic fracturing), it has impacted local jurisdictions across the U.S. With frackable geology in at least 29 states, this juggernaut could be coming to a county near you.

It's tough to balance the presumed economic benefits of drilling, the industry's legal and financial power, and protection of existing communities. Many planners feel unarmed, even defenseless. Yet planners do have tools that can help ensure oil and gas development is done right, or not at all.

Few communities see oil and gas development coming before it is upon them. Take what happened in Santa Fe County, New Mexico, in 2007. A wildcat drilling corporation had acquired leases on more than 60,000 acres before the citizens living on that land heard anything more than rumors. I was one of those citizens.

After a turbulent, year-plus process, Santa Fe County passed an oil and gas ordinance, one of the most comprehensive — and most copied — in the nation. I was involved as a citizen, activist, and expert in ecological planning, design, and construction issues.

This brief story of that process, based on my experiences and interviews with participants, summarizes resulting regulations, and notes some alternative approaches. Our experience may offer strategies and tools for successful proactive regulation of a powerful industry.

One oil well generates an average of 1,000 extra-heavy truck trips over its lifetime, resulting in increased traffic and wear and tear to roads

Blindsided

"In 2006, we started hearing that mineral leases were being acquired for a huge area," says Jack Kolkmeyer, the county's director of land use at the time. "Someone would call and say, 'How can they do this? I own the property! How come I didn't know that I don't own the mineral rights?'"

Such confusion usually rides into town along with the drillers. Rights are owned and leased in ways that pit neighbor against neighbor, even in communities that welcome drilling in hopes of an economic boost. Secrecy is rampant because drillers want to elude competitors. In many areas, especially the western U.S., mineral rights are owned separately from surface rights, often by absentee or corporate owners. (This situation, less common in the East, is called "split estate" or "severed" rights.)

In New Mexico, mineral ownership (unlike surface ownership) is not publicly recorded. Further clouding the issue, most oil companies lease the right to drill, then pay the owner royalties on production. Trying to find out who's in the market and where can be nearly impossible.

"Landmen," specialists in ferreting through historical documents, spend hours researching mineral ownership. Unlike real estate agents, landmen are usually unlicensed, and they use their research to divide and conquer in negotiations. Surface-owning neighbors are deliberately kept in the dark, and adjacent mineral owners are enjoined not to discuss any offers (which prevents comparing notes and bargaining for better lease rates). The drillers' ideal is a planner's nightmare: Nobody knows a thing until all deals are final.

Before the wildcatters arrived, Santa Fe County's geology was considered marginal for petroleum, at best. There had been a handful of wells, decades ago, most of them dry or uneconomical. Fracking, though, can release new production from played-out fields, and make previously impractical rock types drillable. (Called "tight" or "unconventional," these are often termed oil shales).

What is worth drilling also depends on global prices. With easily extracted reserves declining, drillers are anxious to exploit unconventional deposits, on which millions of unsuspecting home and business owners have settled. The results are potentially explosive.

Arnie Valdez, a county planner, recalls that in 2007 "the county didn't have anything to regulate oil and gas other than the existing land-use code," which scarcely mentioned drilling. The big question, adds Kolkmeyer, was how to define the county's authority.

At this point, in October 2007, the wildcatters called a public meeting to present their done deal. As then-county attorney Steve Ross puts it, "They couldn't have poured gasoline on a fire any more effectively."

Storming and Informing

"I first heard about it in a casual hallway conversation with the county attorney," recalls Virginia Vigil, a former county commissioner, and for part of the crucial period, the board's chair. "I don't think I knew at the time that mineral rights were separate, and I said, 'What the frack is fracking?'" Like most of us, she began seeking information instead of opinions, fears, and threats.

Citizens groups started to form. Almost everyone, myself included, initially hoped to ban drilling outright, but the more we learned, the clearer it became that the law would not permit that: Mineral rights are dominant over surface rights, which means that drillers usually ignore surface owners or local governments.

The county commission held public hearings; one drew 800 people. Testimony went on for hours — with people telling stories about how drilling had ruined property values, polluted, sickened, endangered. "Some of the testimony was heart-wrenching," Vigil recalls. "I went home exhausted." Neither the public nor officials had any concrete alternative to banning or giving in.

"The public wanted information we didn't have," says Vigil. Lack of hard information, plus the exploratory reopening of an existing well, raised suspicions to fever pitch: People thought the county was selling out, says Kolkmeyer. Ross, formerly a state oil and gas regulator, was accused of being "part of the industry." Citizens groups worried about other citizens groups. Meanwhile, the industry was threatening to sue the county for unconstitutional takings if it interfered with their plans in any way.

Ultimately, the impasse was broken by two streams of information: one from citizens, the other from county staff. The county's open-door approach to citizen input was also critical.

Educating ourselves

Santa Fe is demographically diverse, but it has a high percentage of educated, self-employed, retired, and wealthy people who can devote time to public causes. A small group coalesced, including a "recovering oil executive," two land-use lawyers, a couple of seasoned business negotiators, and me. It was the business people who suggested offering our collective expertise to the commissioners, instead of assuming they were omniscient or opposed.

We met with each official, presenting four key concepts:

  1. How "unconventional" extraction works.
  2. The U.S. Supreme Court's repeated ruling that unless government prohibits more than 90 percent of possible development of a property, there is no "taking."
  3. Drilling technology, once limited to boring straight down, can now be located several miles from an oil reservoir.
  4. The ability to drill sideways allows rational planning to site pads away from wetlands or homes.

These factors, we argued, meant that the county could regulate drilling without getting sued back to the Stone Age.

For their part, Ross, Kolkmeyer, Valdez, and the commissioners determined that counties had authority (police powers, nuisance, and zoning) to regulate drilling's surface impacts. The State Oil Conservation Division regulates underground technical aspects, but the OCD's director, Mark Fesmire, supported counties' right to regulate surface conditions.

Based on this research, the commissioners took two critical steps in December 2007: They passed a three-month moratorium, and hired a consultant, Robert Freilich, author of APA's 21st Century Land Development Code.

Multiple moratoria

A moratorium may be local government's best friend; drilling moratoria have recently been enacted from New York to New Mexico. On receiving an application for which no regulations, or inadequate or outdated ones, are on the books, most jurisdictions can declare a moratorium to prepare an adequate ordinance with which the applicant must comply. A moratorium must have finite duration, and the resulting policy must be broadly applicable.

Here luck came into play: New Mexico Gov. Bill Richardson, formerly head of the U.S. Department of Energy, declared a year-long moratorium on state drilling permits, citing two reasons: a long-standing federal proposal to designate early Puebloan archaeological finds near proposed drilling sites, and naturally fragmented geology through which fracking chemicals might migrate to groundwater. Richardson ordered state agencies to provide Santa Fe County with data about potential drilling impacts.

The county extended its moratorium to coincide with the state's, but even with this time-out, pressures and conflicts were intense. "It's like doing surgery in a war zone," says Frank Herdman, one of the land-use lawyers in our citizens group.

Santa Fe County was able to get ahead of the fracking curve, but not all communities have regulated for it. This Pennsylvania village has more fracking infrastructure than homes

Planning on steroids

Examples of spatial planning for petroleum development were nearly nonexistent in 2007. Because old technology had to bore straight down, surface locations were inflexible. To respond to new technologies of "steerable" or "directional" drilling, the county had to be creative.

What Freilich did, aided by county staff and Planning Works of Kansas City, was to take accepted zoning techniques and "put them on steroids and apply them to oil and gas," says Herdman.

The county ordinance, adopted in 2008, combines common planning devices that are normally used alone. Two of the most important are adequate public facilities provisions and impact fees. Together, they address a core problem: Many costs of drilling are born neither by the company nor the state, but passed along to local taxpayers. Economists call this concept "externalization"; it is a key argument for regulation.

"In North Dakota, Colorado, and Texas," says Freilich, "the state is stripping all the revenues off drilling activities through severance tax, and then distributing it however they like. It doesn't [necessarily] go back to the communities impacted by oil and gas."

So despite workers pouring into communities, "nobody is building any roads, or the housing necessary for them, or providing for police, fire, emergency protection," Freilich adds. Existing facilities are overwhelmed; vice, drugs, and crime often follow dangerous, exhausting, isolated oilfield jobs.

Some states allow companies to create man camps — substandard housing that may be sited, without compensation, on surface-owners' property. In Pennsylvania's Marcellus Shale region, travelers can't find motel rooms because they are being used for worker housing and even corporate offices. Such demands overwhelm permanent residents and planning efforts.

Ordinance tools

An adequate public facilities ordinance establishes per capita levels of service: How much peak traffic capacity, or affordable housing units, is enough? A mall that increased traffic might be charged an impact fee to ensure continued sufficient level of service. Drilling-related impact fees might be for upgraded roads (one oil well, on average, sees 1,000 extra-heavy truck trips over its lifetime), added fire equipment or personnel, or public health employee training.

If studies are required to determine projected impacts, the applicant pays. Proof of sufficient water rights for proposed uses is also required.

A second key provision limits the land surface area that can be cleared for well pads, storage tanks, and access roads. Typically, the industry wants five acres per well. Newer technology, clustering many wells per pad, uses as little as one-tenth of an acre per well; the Santa Fe County ordinance allows a maximum one-half acre.

Clearing is also restricted cumulatively, per square mile; more wells than fit the maximum area must be phased over time, a restriction that does not risk takings litigation. These limits encourage clustered drilling, which many larger companies do voluntarily. By centralizing operations, clustering saves money on spill containment, access roads, maintenance, storage, and tanker trips.

The Santa Fe County ordinance, Freilich says, is linked to McHargian spatial planning — not just a general plan statement, but a map showing high, medium, and low sensitivity based on environmental capacity. Although applications are reviewed case by case, the presumption is that applications would be denied in high-sensitivity areas. The more sensitive the zone, the less allowable disturbed surface.

In addition, transfer of development rights allows drillers to transfer surface disturbance acreage from high-sensitivity zones to encourage clustering of wells in low-sensitivity zones, from which directional drilling can reach deposits several miles away.

The whole ordinance was written with an eye toward avoiding takings claims. If an application is denied, a required process of arbitration occurs, with a number of remedies. Only if that process is exhausted can a takings lawsuit be brought.

The ordinance also includes a range of setbacks, visual and noise screening, hours of operation, and similar provisions. In many U.S. jurisdictions, these comprise the entire ordinance.

After many drafts and hours of input from citizens and professionals, the Santa Fe County ordinance was passed unanimously by the board in early 2008. The full text is online (see Resources).

Eternal vigilance

In the six years since its passage, the Santa Fe County ordinance has attracted no lawsuits nor applications to drill. There have, however, been attempts at punitive state legislation. Some bills threatened that any county passing stricter regulations than the state's minimal, 1930s-vintage rules would lose state funding. "There's a lot of biases associated with oil and gas drilling," says Vigil. "Counties that have bought into it think we should have to, too."

Another threat is preemption — the state declaring that counties have no power to regulate drilling. (In western states, counties derive powers solely from state government.) Despite several attempts, the legislature has so far declined to take this step.

A related threat has arisen because a neighboring county has banned drilling outright (see sidebar). This could lead to a scenario Frank Herdman has seen before: using lawsuits to establish precedents favorable to industry. What conservatives like to call an "activist court" could not only strike down the adjacent county's ban, but rule against all local regulatory authority.

In pro-drilling counties, Vigil says, "their perception of our ordinance is that we've made it so difficult for the industry that they're not going to drill. I say to them, 'We made them accountable, and require them not to do the damage that the industry is known for from the past. What's wrong with that?'"

Proactive lessons

Drilling, says Herdman, "is so much more destructive [than normal zoning targets], why would you not create zoning that includes it?" Jurisdictions that have no drilling ordinance, he says, should adopt a brief one, requiring a special use permit that meets basic criteria, so no one can simply start drilling without oversight. "Don't wait until the house is on fire; get smoke alarms and fire extinguishers," he says.

"The communities that have most problems," say Ross, "have never faced oil and gas production. [They are] smaller communities that can't afford to hire people to advise them." As Valdez points out, Santa Fe County had staff planners, GIS capability, a knowledgeable staff attorney, and strong citizen support. "If you're a two-person planning department, how do you deal with this? This is a monster of an issue," he says, urging regular reminders to staff and residents about the ordinance's importance.

Drillers tend to look for low-hanging fruit, Freilich says. "If oil companies have easy targets, where they don't have to pay their fair share," he says, "they're going to locate to those areas." Even counties that want drilling for revenue must push back, or face secretive and inequitable lease dealings.

Larger issues affect local ones, like so-called "energy independence" (a bogus excuse to drill, since global markets determine prices). Ultimately, to bring resource extraction into a sustainable economy, the U.S. is going to have to reform split estate. The biggest issue is cutting fossil fuel use, even, as the Intergovernmental Panel on Climate Change recently suggested, leaving crude in the ground. In the absence of national or global progress, local efforts seem a stopgap, but remain important.

The federal government, says Ross, has "abdicated responsibility for reasonable oil and gas regulations. It's put local governments under pressure to do things that local governments really don't have resources to do." Creating meaningful community-based regulation, says Freilich, "is the role of the planner, not the role of the lawyer. It's got to be the role of the planner to take the policy lead in this thing."

Kim Sorvig is a research associate professor and G. Pearl Fellow in the School of Architecture and Planning at the University of New Mexico.

No Cookie-Cutters

By Kim Sorvig

Two neighboring counties offer contrasts to the Santa Fe County approach. Mora County, northeast of Santa Fe, voted in June 2013 to ban drilling and fracking. Like communities in Colorado, Pennsylvania, and New York that have tried outright bans, Mora is under heavy legal attack. Under current law, regulation and limitation of oil and gas development is well supported, but bans have been ruled to violate the U.S. Constitution's takings clause, rights of mineral owners, status of counties as dependent on the state, and powers of the state Oil Conservation Division (concerned with conserving oil, not ecosystems).

Mora County argues that local rights to determine economic patterns and protect air and water should trump such corporate and federal rights. Making one's county a test case is risky, though: Industry, as one observer commented, "can litigate forever." Unless a David-and-Goliath story catches public favor, Mora could lose in court and be left without protection.

One lawyer with whom I spoke called the Mora ordinance, originated by Community Environmental Legal Defense Fund of Mercersburg, Pennsylvania, "a rant against corporations" by an organization that considers mere regulation a sellout. CELDF stresses keeping distant corporations out of extractive industry — possibly a wise policy in the age of Citizens United, but illegal without reform.

Rio Arriba County, north and west from Santa Fe County, adopted an ordinance under entirely different conditions. Frank Herdman represented the county. The arid western half of the county has seen long-term drilling, he says; the community has a financial stake, and approves. It wanted to protect the mountains of the eastern county, headwaters and aquifer recharge zones, and scenic resources.

The threat of adopting a Santa Fe-type ordinance got industry to negotiate instead of sue. The result in Rio Arriba County is an ordinance that keeps drilling within areas acceptable to the citizens. An outright ban could not satisfy such a community, and for a sparsely populated area, a full-fledged Santa Fe ordinance would be overkill. "The lesson for me," says Herdman, "was this is not cookie cutter."

WEB-ONLY SIDEBAR: Oil and Water Still Don't Mix

By Gabriela Worrel

California's Monterrey Shale formation is a hot spot for fracking, with an estimated 600 million barrels available for production. Water is an increasing concern, however, especially during drought years. Some 96 percent of the state's fracked wells are in areas with high or extremely high water stress — places where agricultural, industrial, or municipal demands already claim 80 percent of available water.

The California Department of Water Resources reports that 2013 was the driest year in recorded history for much of the state; Gov. Jerry Brown announced a drought state of emergency in January. In addition, the state legislature passed SB 4 in 2013, which takes effect in January 2015. This new law requires oil well operators doing any well stimulation, such as fracking, to obtain permits from the Division of Oil, Gas, and Geothermal Resources while the state conducts a scientific study of fracking to assess its environmental and health impacts.

SB 4 is not a moratorium, as some had hoped it would be, but the fights for moratoria continue. Thirteen California municipalities and dozens of cities nationwide have banned fracking, many citing concern over water overconsumption. In February, state senators Holly Mitchell and Mark Leno introduced SB 1132, which would implement a moratorium on all types of well stimulation, including acid well stimulation — whereby acid is injected into a well to dissolve rock and release hydrocarbons. SB 1132 would also expand SB 4's scientific study to consider how fracking and acidizing might deplete water resources.

State regulators currently can't do much to control how much water oil companies use. Don Drysdale, information officer at DOGGR, says that SB 4 "does not give the Division of Oil, Gas, and Geothermal Resources the authority to limit the amount of water used for well stimulation activities."

As SB 1132 works its way through the California legislature and SB 4 is implemented, farmers, residents, and regulators will still feel the pinch of the ongoing drought. Already, some counties have announced water restrictions, and some water-intense crops may be in jeopardy, says Erin Steva, environmental health policy analyst at the Community Health Councils (a nonprofit health policy organization based in Los Angeles). CHC is also a stakeholder in the Inglewood oil field, the nation's largest urban oil field and the site of recent fracking test wells (now discontinued). This parched state must now "decide on a vision" for what it produces, Steva says.

Gabriela Worrell is a freelance writer based in Los Angeles.

Resources

Images: Top — One oil well generates an average of 1,000 extra-heavy truck trips over its lifetime, resulting in increased traffic and wear and tear to roads. Bottom — Santa Fe County was able to get ahead of the fracking curve, but not all communities have regulated for it. This Pennsylvania village has more fracking infrastructure than homes. Photos by Kim Sorvig.

Full text of the Santa Fe County ordinance: www.santafecountynm.gov/userfiles/SFCOrdinance2008_19.pdf

Earthworks' Oil and Gas Accountability Project: www.earthworksaction.org/reform_governments/oil_gas_accountability_project

Research that disputes drillers' claims of huge economic benefits to communities and tax coffers: http://headwaterseconomics.org/energy

A collaboration between Yale and Pace Law School: http://environment.yale.edu/envy/stories/fracking-outpaces-science-on-its-impact

In-depth reports on fracking and "fraccidents" nationwide: www.propublica.org/series/fracking

The New York Court of Appeals has upheld local bans on fracking-related uses. APA filed an amicus brief supporting local efforts: www.planning.org/amicus/briefs.htm

Kim Sorvig, "Welcome to Frackville," Landscape Architecture, June 2013.

A detailed explanation of the Santa Fe County ordinance is available in R. Freilich and N. Popowitz's "Oil and Gas Fracking: Examining the Santa Fe Oil and Gas Plan as a Model," The Urban Lawyer, Summer 2012.

Seamus McGraw, The End of Country: Dispatches from the Frack Zone. Random House, 2012.

Walter M. Brasch, Fracking Pennsylvania: Flirting with Disaster. Greeley & Stone, 2014.