Exxon Chief Joins Lawsuit Raising Ruckus Over Fracking
Wall Street Journal
BARTONVILLE, Texas-One evening last November, a tall, white-haired man turned up at a Town Council meeting to protest construction of a water tower near his home in this wealthy community outside Dallas.
The man was Rex Tillerson, chairman and chief executive of Exxon Mobil. He and his neighbors had filed suit to block the tower, saying it is illegal and would create “a noise nuisance and traffic hazards,” in part because it would provide water for use in hydraulic fracturing. Fracking, which requires heavy trucks to haul and pump massive amounts of water, unlocks oil and gas from dense rock and has helped touch off a surge in U.S. energy output.
It also is a core part of Exxon’s business.
While the lawsuit Mr. Tillerson joined cites the side effects of fracking, a lawyer representing the Exxon CEO said he hadn’t complained about such disturbances. “I have other clients who were concerned about the potential for noise and traffic problems, but he’s never expressed that to me or anyone else,” said Michael Whitten, who runs a small law practice in Denton, Texas. Mr. Whitten said Mr. Tillerson’s primary concern is that his property value would be harmed.
An Exxon spokesman said Mr. Tillerson declined to comment. The company “has no involvement in the legal matter” and its directors weren’t told of Mr. Tillerson’s participation, the spokesman said.
The dispute goes beyond possible nuisances related to fracking. Among the issues raised: whether a water utility has to obey local zoning ordinances and what are the rights of residents who relied on such laws in making multi-million-dollar property investments. The latter point was the focus of Mr. Tillerson’s comments at the November council meeting.
The tower would be almost 15 stories tall, adjacent to the 83-acre horse ranch Mr. Tillerson and his wife own and a short distance from their 18-acre homestead. Mr. Tillerson sat for a three-hour deposition in the lawsuit last May, attended an all-day mediation session in September and has spoken out against the tower during at least two Town Council meetings, according to public records and people involved with the case.
The Exxon chief isn’t the most vocal or well-known opponent of the tower. He and his wife are suing with three other couples. The lead plaintiffs are former U.S. House Majority Leader Dick Armey and his wife, who have become fixtures at Town Council meetings. Mr. Whitten, who also represents the Armeys, said they declined to comment.
The water tower is being built by Cross Timbers Water Supply Corp., a nonprofit utility that has supplied water to the region for half a century. Cross Timbers says that it is required by state law to build enough capacity to serve growing demand.
“We’re a high water-usage area, said utility President Patrick McDonald. “People have large lots, lawns, horses, cattle, goats, swimming pools, gardens,” he said.
Cross Timbers said it would sell leftover supplies to energy companies during months when overall demand is low. Bartonville’s population has increased almost 50% since 2000, to about 1,600, according to U.S. figures.
Mr. Tillerson, 61 years old, moved to Bartonville in 2001 and became CEO in 2006. Since 2007, companies have fracked at least nine shale wells within a mile of the Tillerson home, according to Texas records. The last to do so was XTO Energy Inc., in August 2009, according to Texas regulators. Mr. Tillerson had just begun talks for Exxon to acquire XTO. Four months later, Exxon swallowed its smaller rival for $25 billion, becoming America’s biggest gas producer. XTO drills and fracks hundreds of shale wells a year, and the Exxon unit has said it recycles water and ships it on pipelines where feasible, in part to reduce truck traffic.
In 2011, Bartonville denied Cross Timbers a permit to build the water tower, saying the location was reserved for residences. The water company sued, arguing that it is exempt from municipal zoning because of its status as a public utility. In May 2012, a state district court judge agreed with Cross Timbers and compelled the town to issue a permit. The utility resumed construction as the town appealed the decision. Later that year, the Armeys, the Tillersons and their co-plaintiffs sued Cross Timbers, saying that the company had promised them it wouldn’t build a tower near their properties. They also filed a brief in support of the town’s appeal. Last March, an appellate judge reversed the district judge’s decision saying he had overstepped his jurisdiction and sent the case back to the lower court, where it is pending.
Meanwhile, the utility has reached out to Bartonville voters, who in November elected two members to the council who criticized the town’s fight against the tower. The council is currently evaluating all options, said Bill Scherer, Bartonville’s mayor pro tem.
In the wake of the election, Mr. Tillerson was among those who lined up in a windowless hall to address the council. He told officials that he and his wife settled in Bartonville to enjoy a rural lifestyle and invested millions in their property after satisfying themselves that nothing would be built above their tree line, according to the council’s audio recording of the meeting. Allowing the tower in defiance of town ordinances could open the door to runaway development and might prompt him to leave town, Mr. Tillerson told the council. “I cannot stay in a place,” he said, “where I do not know who to count on and who not to count on.”
So said Texas Supreme Court Justice, Paul Green when talking about a case involving a farmer who alleges that a well operator has contaminated his groundwater that lies underneath his rice farm. Read the entire story that the gas industry is watching while you and I continue to surf Facebook and watch The Bachelor.
Texas Supreme Court Weighs Underground Trespassing Case
Just how far below the earth’s surface do property lines extend? And can someone trespass on another’s property — more than a mile underground?
The Texas Supreme Court grappled with those questions on Tuesday as it heard oral arguments in a groundwater case that the state’s surging oil and gas industry says could significantly impact production.
The dispute pits an injection well operator in Liberty County, Environmental Processing Services, against a nearby rice farm, FPL Farming, whose representatives say wastewater from a well that plunges 8,000 feet below ground has migrated into a saltwater aquifer beneath its land. The farm says the waste has polluted its groundwater, amounting to trespassing for which it should be compensated.
The case, which reached the state Supreme Court in 2011 but was remanded to a lower court, has largely flown under the radar of environmentalists and property rights advocates. But oil and gas representatives have been following it closely, saying a ruling in the farm’s favor could threaten production.
A jury originally sided with the well operator. An appellate court in Beaumont later reversed that decision, ruling that the operator should be held liable for trespassing.
At the sparsely attended hearing, the justices did little to reveal any leanings, but at least one justice, Paul Green, said he struggled to understand how a court would penalize a well operator for a trespass that’s hidden under tons of earth and rock.
“I’m having a hard time wrapping my head around the issue of how much would be owed and when it would be owed,” he said, adding that it would prove difficult to determine when exactly the trespass took place and how much of the farm’s property — its groundwater — was damaged.
“We don’t really know, 8,000 feet below, where [the waste] goes,” Green said.
In 1997, Environmental Processing Services finished drilling an injection well about 400 feet from FPL Farming’s land, which the farm contested early on. Since then, the company has injected more than 100 million gallons of wastewater, gradually expanding the well’s underground footprint.
The well in question is labeled Class I and used for nonhazardous industrial waste. It is not one of the 50,000 Class II wells that drillers typically use. But lower-court opinions have drawn no distinction between the wells. That has stirred concerns among oil and gas producers that a ruling in the farm’s favor would complicate efforts to dispose of drilling waste, thereby stalling production.
“Because the ability to produce oil and gas is inextricably tied to the availability of injection wells,” the Texas Oil and Gas Association says in a brief, “a new common law cause of action that threatens operation of injection wells likely threatens oil and gas production.”
Justice Eva Guzman cited the those concerns when asking, “Should [a trespassing right] be absolute, or do we need to engage in an inquiry because of [the industry’s] impact on the state?”
The farm’s representatives say they worry that the waste, which includes the flammable liquid acetone, will contaminate its groundwater and erode the value of its property. Though the water is too salty to drink, those on the farm’s side contend that it is valuable because desalination technology could make it drinkable.
“It is polluting the groundwater,” Claudia Wilson Frost, FPL’s attorney, told the justices. “We have a real property right … and it’s being transgressed.”
Environmental Processing Services and its supporters maintain that the waste will make the groundwater no more polluted than it naturally is.
“What flows beneath FPL’s property is crud. You can’t drink it,” Craig Enoch, the well operator’s attorney, told the court, adding, “There’s no evidence that it’s polluted.”
The attorney argued that nothing is keeping FPL from using its surface property. In his argument, he did not address the farm’s contention that it could later use technology to clean up the water. But in an interview, he suggested that future technology could, perhaps, also filter out the industrial waste.
It may be impossible to observe the pollution first-hand, but environmental experts can predict whether and when it has occurred.
In a previous hearing, according to court documents, Bob Kent, a former Texas environmental regulator and FPL Farming’s expert witness, testified that the waste plume had probably traveled across the property lines. He based those conclusions on a formula widely used by state and federal regulators.
When evaluating a drilling application, state regulators generally calculate where the waste might migrate 10 and 30 years into the future.
“Proof in this case is a lot easier than you think,” Frost said. “Once [the waste] is there, the trespass has occurred.”
The well operator’s supporters do not dispute that migration has occurred, but they say predicting the precise path of the mirgration is difficult if it’s to be used in a trespassing claim.
But Frost argued that state’s trespassing law does not require proof of harm anyway, and that that the court — in its historic 2012 ruling in the Edwards Aquifer Authority v. Day case and others — has already confirmed the Legislature’s intention to deem groundwater private property.
“Established Texas statutes and law support each and every one of FPL’s claims,” she said.
The court should consider the mere storage of waste below another’s property — akin to storing items in a neighbor’s garage without asking — as a trespass, Frost argued.
The Supreme Court has previously weighed the idea of underground trespassing, but in the context of mineral rights, not land rights.
In 2008, it ruled against a group of mineral owners who sued Coastal Oil & Gas for trespassing, saying that the company, which had lawfully drilled a nearby well, had drained some of the gas beneath the group’s adjacent property through the fracking process. The court said Texas’ “rule of capture” — mineral owners’ nearly unfettered right to the oil and gas produced by wells on their property — barred neighboring mineral owners from recovering royalties on any gas they lost.
But had fracking been found to damage the neighboring property in other ways (in that case, it had not), the court said the owners could be liable for trespass.
The groundwater case has drawn little attention from property rights advocates. The Texas Farm Bureau, which traditionally supports those interests, filed the lone brief in support of the farm, but didn’t do so until Jan. 2.
Regan Beck, assistant general counsel for the Farm Bureau, told The Texas Tribune in December that the group had only recently learned that the case had returned to the Supreme Court.
For quite a while, the topic of gas drilling in the urban city and it’s affect on property values has been difficult to report. Hard data has not been made available, and individuals have been reluctant to come forward to admit that shale gas drilling is not a boon but instead a possible drain on a community’s assets.
It appears that the news itself is beginning to seep out as quickly as Tarrant county’s tax dollars flow out the back door.
Kim Feil and her family reside in a sweet little vintage farm house located in the heart of Arlington, Texas. Since 2009, the house located at 409 North Elm Street has lost 31% of it’s property value. Kim protested her property value determination by Tarrant County due to the close proximity of the pad site in her neighborhood, and won. She posted the news on her blog page dated August 23, 2013 and no one paid attention, until now.
Since Kim was successful in this process, we encourage others in Ft. Worth, Grand Prairie and any community with shale gas drilling in their neighborhood to follow her lead and protest the value of their property. That giant sucking sound city coffers are beginning to hear is the money going out the back door due to gas drilling in urban settings.
Need more info? Check out Kim’s blog by clicking HERE