Chestnut CEO: Better Communication Might Have Prevented Denton Ban

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On election night, voters in Denton, Texas, a city of about 113,000 people northwest of Dallas, voted to ban fracking within the city limits. Appeals were immediately filed; Denton is in oil and gas country – in the Barnett Shale – where fossil fuel resources are not only creating significant growth for the industry, but also lining the coffers of local municipalities and governmental entities within the state.

To find out more about what the ban, and what lies ahead, Rigzone interviewed Mark A. Plummer, CEO and owner of Chestnut Exploration Companies, headquartered in Richardson, a suburb of Dallas, Texas. Plummer has held numerous engineering positions within the industry, where he served as a production engineer, a senior engineer managing upper-Gulf Coast properties and an offshore operations, exploitation and completion engineer. 

Rigzone: What is the likely result of the ban, and could it spread to other municipalities?

Plummer: This ban is interesting. I’ve been in the industry over 30 years, and I’ve seen a lot of tactics by opponents of hydrocarbon companies as they’ve tried to slow down the progress of America’s energy independence. This is one more example of it. A town mainly got irritated at one operator, so they decided to take matters into their own hands and tried to ban fracking.

Rigzone: The ban seemed to be prompted by a disagreement about setbacks. New wells were subject to a 1,200-foot setback, but older wells that were drilled again using horizontal drilling were much closer to residences, and were not subject to the setback. How did this happen; how did it come to this?

Plummer: The Denton area is on the eastern edge of the Barnett shale, and heading west from Denton, the area is highly drilled and highly explored. There are a lot of wells up there now, and there have been a lot of wells up there for some time.

Before the economic downturn of 2009, when the price of natural gas was high – at $10-plus per million cubic feet (MMCF), North Dallas saw an explosion of economic growth. When there is economic growth, you need new places for people to live, and the cheapest places to live are the outer edges of the suburbs, and that’s where Denton is. So, Denton is growing at a time when people use new technologies to develop and frack the Barnett Shale. And finally, the two met, just like the surf up against the coast. And sometimes, because of that friction, you get some erosion.

Rigzone: So, the development and the success of the Barnett Shale led to the very growth of the subdivisions that are now against fracking – is that right?

Plummer: Exactly. If you took Texas and made it into its own country, it would still be one of the largest economies in the world. A lot of that has to do with oil, which has created, and continues to create, an economic boom. That drives a lot of people to come down, and they don’t think of their new jobs as being tied to the oil and gas industry. The jobs created might be in banking or in insurance, so they are a step removed from the industry, and therefore not a direct part of the energy boom. If someone is not familiar with something, the industry can be somewhat daunting, or even a little scary. Say you’re from some area that has no oil and gas industry, and you graduate from college and you start a family and then move to Texas – to Denton – because of a job. And then you see a well drilled, and then there are 30 Halliburton trucks on location, and it’s noisy, and they’re pumping, and you don’t really know what’s going on. It looks like a huge event.

It’s kind of like when cavemen discovered that their fires kept bears from going in the caves. It’s a good thing that government didn’t outlaw the use of fire, or we would never have made it out of the cave.

Rigzone: Are you referring to the multiplier effect of energy industry jobs on the overall economy? High-paying energy jobs that create jobs in other sectors of the economy that at first blush may not appear to be related to oil and gas, but which were an outgrowth of job growth?

Plummer: That’s absolutely correct – the multiplier effect. Because of it, lots of people have jobs here that are indirectly tied to a major oil producer, and most of them don’t even know it.

Rigzone: Earlier this year, the New York Court of Appeals upheld the right of two state municipalities – Dryden and Middleton – to use zoning ordinances to ban fracking within their city limits. Others have pushed for this in some Colorado municipalities before Governor Hickenlooper got people on both sides of the issue to withdraw competing voter initiatives and let a task force decide the issue in the state. What is the likelihood that what happened in Denton could set a precedent, or is it likely to be overturned?

Plummer: Well, the Texas Railroad Commission came out and said that if someone has a legitimate lease in the boundaries of Denton, and has dotted all their “I’s” and crossed all their “T’s” in the permitting process, they are going to issue a permit and allow them to drill and frack a well.

New York is a little different in that New York as a state has banned fracking, even though right across the border in Pennsylvania, they are fracking the same formations (the Utica and the Marcellus) that are in New York. The Pennsylvania economy is booming, and the rural New York economy is not.

I was in rural New York talking to someone with a small farm, and he said that the rich guys in New York City are dictating what the rural people in the state get because they can’t lease their minerals and have an oil company come out and frack a well because it has been banned. He said that the majority of the citizens in the areas where there is oil and gas are being dictated to by the rich people in the city who have weekend houses in the rural areas and don’t what their view of the countryside tarnished by a drilling rig, or more development, or more houses, or any of the things associated with mankind moving forward.

Anything that moves the economy forward – the local or the state or the national economy – is generally better for society as long as environmental rules are observed.

Rigzone: What do you see going forward? Is the Denton vote likely to set a precedent?

Plummer: I doubt it. What I see from having worked my whole career in Texas, Louisiana and New Mexico is that these states like oil production. [On] every barrel I produce, the state takes a cut off the top in production taxes, which helps the local economy and helps the state. They want to see me produce more oil.

There will be legal issues. There will be legal challenges, because someone will get a permit, and they will see it work its way through the courts. But the Texas Railroad Commission, and of course the legislature, rule oil and gas in Texas. A town like Denton will be overruled, because they haven’t been given authority to regulate oil and gas.

Rigzone: Do you think oil and gas companies might do a little better at getting out in front of something like this and communicating accurate information to people ahead of time, and perhaps forestall some of these differences of opinion, or controversies?

Plummer: I agree, except that where you say a little better, I think oil companies can do a lot better in communicating with the local communities that they operate in, and with the public in general about the benefits of oil and gas.

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