Sunday, September 28, 2014

2 Cents: Fracking's Great Bounty

Here is some quick math on the latest hyperbole from the industry about the costs of Denton’s fracking ban. This all comes from their own numbers on the recent smiling school kids mailer.
They claim oil and gas contributed $1.26 billion to the Permanent School Fund last fiscal year. There are 304,000 active oil and gas wells in Texas. Clearly, oil wells will produce more revenue for this fund than natural gas wells – Denton doesn’t have oil wells. But let’s assume all wells produce the same returns. That would be $4,144 per well to this fund. That would mean Denton’s 281 gas wells contribute $1.16 million to the fund.
Now even after the ban, Denton’s gas wells will continue in production. New wells won’t be fracked and old wells won’t be re-fracked. Drilling can still occur. It’s hard to say how that will all work out in the future. But let’s take an extreme scenario and assume that lost revenue from fracking after the ban will be equivalent to shutting down all of our wells. Again, that’s extreme and it won’t happen…but let’s give them the benefit of the doubt to help inflate their numbers.
So, assume we lose that $1.16 million contribution to the state fund annually. That fund  pays out on its interest, which is about 10%. So, that’s $116,000. Now, that loss would be spread across the state’s 5 million school children. That amounts to an annual hit of 2 cents per student. The entire cost to DISD would be $540.
Now, the industry likes to talk in terms of ten year periods. So, that would be $5,400.
On their latest mailer, they claim the ban will cost DISD $28.6 million over ten years. That’s 5,296x higher than what even a generous reckoning seems to show. The mailer directs you to their website, but there is no mention there of this $28.6 million figure.*actually see below* 
Gosh, maybe they really don’t care about our children and are just using their smiling faces as a smokescreen to hide their total BS?
If oil and gas is such a windfall for our schools, why does Texas rank 49th in the country on per-student spending? If this boom is such a big deal, why has state funding DECREASED over the past two years by $1,000 per-student? And did you know that the two leaders of the opposition to the ban make more from mineral wealth than our entire school district? You can look that up here.
Could it be that this isn’t really about our schools or our children at all? Might it be that this is about highly concentrated profits for the very few and the very powerful?
After the confusion about their giant figure wore off, anger took its place. How dare they do this?! They are trying to scare us into voting against the health and safety of our children. They are saying that somehow toxic emissions and blowout hazards right next to our homes and schools is good for our kids. On balance, this is a positive thing!? All the pollution and risks are worth it?!
Denton parents and grandparents are the LAST people who deserve to get lectured about suffering for the greater good. Every child in Texas benefits from this school fund, whether or not they have oil and gas wells in their town – or in their back yards. We’ve got 281 of them. Many cities don’t have any. If you crammed all of Texas’ gas wells into the 7% of our land area that is metropolitan, Denton would still have 3x the number of wells as the average city.
We are doing far more than our fair share for this fund.
But here’s the beauty of it. Once we ban fracking and we start building home sites rather than frack sites, we’ll generate way more revenue for our schools. The fact that Texas is ranked 49th despite contributing oil and gas revenues to schools is a good indication that this is not a healthy model for school funding. It is far better to have a robust local economy with a strong tax base, which is precisely what the ban will help us achieve.

*I finally found the infamous $28.6 million figure buried in Appendix D of page 23 of the bogus Perryman Report, which is linked to their site. This appears to be a sleight of hand. This is their estimated increase in tax receipts for DISD from increased drilling activity. But it is NOT the figure they give for lost tax revenue for DISD from the ban. That figure - which is in bold and underlined in red up front on the executive summary is just $4.6 million. If they really thought the $28.6 figure was the cost of the ban, you can be sure they would have put that up front in bold and red.

As when they mistate the jobs numbers, they are again abusing and twisting their own report to cloud and exaggerate what is already a work of breathless and secretive hyperbole.

So, finally, once we clear through all the smoke, we can summarize the costs of the ban to DISD this way. There are three revenue streams that could be impacted. 1. Mineral wealth directly owned by DISD at about $140,000 annually; 2. Permanent fund at about $540 annually; 3. Tax revenues the industry estimates at $460,000 annually.

Even if we take the industry at their word, this all adds up to just $600,000 annually, which is 0.3% of DISD's current operating budget of $208 million. That's just 0.17% of what the DISD budget will be ten years from now (the horizon the industry loves to use).

That's $22.22 per student.

Most of their assumed losses from the ban are from property taxes. But their own figures show that every acre of fracked land generates less than 25% of the tax revenues of an acre of residential development. Plus homes appreciate in value over time. Frack sites depreciate.

If you want long-term, solid tax revenues for schools, fracking would be low on your list of choices.

Build home sites, not frack sites. Less pollution, more tax revenues for schools.

Sunday, September 21, 2014

Shame on the Chamber Board

The completely predictable has happened. The industry is trading on the Chamber of Commerce’s influence and credibility. They just sent out a huge flyer to Denton voters featuring the Chamber of Commerce Board’s decision to oppose the ban. Many people think the Chamber actually sent out that flyer. That’s the way the industry wants it – they want to dress the predatory wolf of their vicious practices in the sheep’s clothing that is the Chamber.
The Chamber Board has done an enormous disservice to local democracy. They let the industry wear the mantle of the Chamber’s reputation. They did it without consulting the actual members of the Chamber, let alone providing a mechanism for dissenting voices within their organization. They did it without conducting their own independent analysis of the issue. They did it without hosting a forum to air all sides of the issue. They just echoed the same one-sided analysis used by the industry.
They swallowed the industry’s report without any critical thought. Like the industry, they talked only about the costs of the ban. They didn't even think to consider the benefits. If they would have, they’d find that the industry’s own report proves that an acre of fracking generates ¼ as much tax revenue as an acre of residential development and only ½ as much economic activity as the average acre of land in Denton. There was no mention of air pollution or waste of water. They only talked about mineral rights, but not the rights of those suffering nearby fracking operations. They didn’t mention the fact that the ban does not prohibit operators from drilling to access minerals or that the ban is less restrictive than other valid ordinances in Texas.
They only parroted the newspeak of the industry about responsible drilling and “reasonable regulations.” They didn’t mention how Denton tried for years to craft reasonable regulations only to discover that it was all too late – the industry is grandfathered under old laws that allow them to frack as close as 200 feet from homes on 30% of our land area forever. Under those conditions, there is no other reasonable regulation than the ban.
We can debate whether a body that receives nearly a quarter million in taxpayer dollars should be weighing in on ballot initiatives at all.
But if they are going to take a political stance, there can be no question that they are obligated to do so in a way consistent with the basic values of democracy: participation, transparency, and critical thinking. We should expect the leaders of our business community to conduct a thorough assessment. We should expect a quasi-public body to be inclusive in processes that lead up to their political positions.
If you can’t tell, I’m angry at the Chamber’s Board. They have no right to go behind closed doors and with blinkered vision throw the weight of their organization behind the industry. It’s a betrayal of democracy and the good faith of the people who trust and respect the Chamber.
If I was a member of the Chamber – even if I opposed the ban – I’d be furious that the Board thinks they can speak for me without consulting me. If I was a taxpayer in Denton (wait, I am), I’d be furious that the Board stamped a special interest with the imprimatur of the Chamber without even so much as a public forum.
You can’t get much more sneaky and misleading. The Board owes us an apology. In fact, they need to mail an apology letter to everyone who got that flyer.

Wednesday, September 17, 2014

Fracking Ban Will Benefit Denton's Economy

 
Here is this blog in meme form:
 

 

In June, the industry released a report (by the Perryman Group) about the costs of the fracking ban in Denton. I guess they figured that no one would actually read the report.
But I did. And I found out that the industry’s own numbers prove that the fracking ban will be a net positive for Denton’s economy.
Now, at first I just pointed out the fact that the report confirms fracking is a miniscule part of our economy, comprising a puny 0.2% of Denton’s gross product and 0.5% of tax revenues. And that's taking their own numbers at face value even though they are doubtlessly exaggerated in their black-boxed methodology.
But now we can add to that assessment by putting their report in the context of Denton’s overall land use and economy as detailed in the new Denton Plan 2030.
You see, the industry report only looked at the costs of the fracking ban. Of course, all decisions have costs. You’ve got to look at the benefits too and see if they outweigh the costs.
Kevin Roden has already made a strong qualitative case that the fracking ban will bring a boom for our economy.  
But now I can add a quantitative case. The ban will bring significant, measurable benefits for our economy.
All I had to do was look at the industry’s own numbers and ask how much gross product and tax revenue fracking generates on a per acre basis. Then I looked at the Denton Plan 2030 to see how that compares to other forms of development.
It turns out that fracking is an embarrassingly UNPRODUCTIVE use of land. Every time we allocate an acre of land to fracking rather than other land uses, we forego significant economic benefits.
Fracking generates about $55,000 in gross product per acre. Not bad. That is, until you compare it to the $114,000 generated by the average acre of land in Denton (over 10% of which is undeveloped).
Fracking generates about $1,100 in tax revenues per acre. By comparison, residential development generates about $4,300 in tax revenues per acre, and that’s assuming today’s median-priced homes. (The figure for commercial is $9,600 per acre.) Plus, homes appreciate in value over time, meaning more and more tax revenue, whereas frack sites depreciate over time (eventually leaving a devalued, blighted brown zone). Oh, and fracking fouls our air, contaminates our water, and devalues neighborhing properties.
It turns out that fracking is one of Denton's least productive land uses. I can’t thank the Perryman Group enough for showing us how much stronger our economy will be once we ban this economic under-performer!

Tuesday, September 16, 2014

Chamber of Commerce or Industry Echo Chamber?

Tonight, City Council is going to consider giving the Denton Chamber of Commerce $227,467. This will provide continuing funds for the Chamber’s Office of Economic Development. Most of this money will go to pay salaries and benefits.
Now, I don’t doubt that there is much good to be had from this Office. But as a quasi-public entity, it creates some ethical grey areas. I won’t be at the Council meeting tonight (I’ll say why in a moment), but I think it would be good if Council aired some questions about this partnership – not in an accusatorial way, but rather in the spirit of public education.
A little while ago, the Chamber’s Board (with no notice given to their full membership) announced their opposition to the proposed ordinance banning hydraulic fracturing in the city limits.
Here’s my question: Is it right for an organization supported in significant measure by taxpayer dollars to advocate for or against ballot initiatives?
We have state laws that prohibit public employees from spending public funds to support or oppose ballot initiatives. City Council members can’t even use their public e-mail accounts to weigh in on ballot initiatives. But here is the Chamber with over a quarter million public dollars weighing in with a political position.
Now, the people paid for by the contract with the city are considered employees of the Chamber, which is listed as a private non-profit corporation. Nonetheless, they are paid for by the taxpayers. Grey area.

Or maybe not so grey...aren't non-profits supposed to stay out of politics? Shouldn't they form a PAC?
The Chamber may not be using city funds to directly take their political position against the ban (though maybe the Council can ask for some assurances of that fact). But they certainly are using their significant clout and cache in our community to leverage their position. And they would not have as much clout and cache if they didn’t receive large financial contributions from the city. Grey area.
And it doesn’t clear matters up to say that other entities might do similar things. As I tell my kids, just cuz she did it doesn’t make it right for you to do it.
Finally, the reason I won’t be at the Council meeting tonight, is because I will be at CafĂ© Loco (6 p.m. free and open to the public!) setting the record straight about how the fracking ban will benefit our economy in significant and measurable ways.
I am not sure if the Chamber should be picking sides on ballot initiatives. But I do know in this case they picked the wrong side. If they would have done their own independent critical thinking about the issue, they’d find what I have found: a ban on fracking will be a major net gain for Denton’s prosperity and welfare. It also respects everyone’s property rights. It protects Denton residents from toxic trespass and home devaluation, while allowing for development of mineral property using less offensive techniques.
Sadly, the Chamber has put its (publically-funded) weight on the wrong side of this issue. A full page and extremely dishonest ad yesterday quoted the Chamber, which in turn was quoting an industry report. Now our Chamber of Commerce has become part of an industry-spun echo chamber.  
That’s something the Council should consider tonight.

How about this? If the Chamber is going to take political positions, why not host a public forum first where all sides of the issue can be aired? Why do it behind closed doors with only the Board?

Thursday, September 11, 2014

The Costs of Fracking

The industry keeps trying to pretend that fracking is a big economic benefit to Denton. I used their own numbers to show how that just isn't so. In fact, the benefits are so puny that they are easily outweighed by all the costs associated with fracking. I spoke to some of those costs in an earlier post.


We can now get a peek at some more costs as outlined by the City of Denton in the draft of its new comprehensive plan. Not all of the costs identified in the comprehensive plan relate directly to hydraulic fracturing, but then again the industry's report about benefits rolled in so many economic multipliers that it strayed way far afield from direct economic impacts of hydraulic fracturing.


What we see in the comprehensive plan is just how much frack sites are going to be a drag on our future - they are going to increase the costs of Denton's development significantly. And they are going to significantly reduce the revenues that could otherwise be provided from more productive and sustainable land uses.


If you want tot do a real cost-benefit assessment (and not a cartoon, biased industry sham with a foregone conclusion), then here are just a few of the things you'd need to think about (from the comprehensive plan draft, pp. 46-48):


"• Future development costs for structures, new roadways, and utility extensions near gas wells, oil wells, and pipelines may incur unforeseen expenses due to the potential need to develop around Drilling and Production Sites or pipelines, relocate or bore utilities around existing pipelines, perform environmental testing if the property is identified as a prior Drilling and Production Site, or clean up and mitigate contaminated, inactive sites.



• There are a significant number of gas wells in Denton and its ETJ, mainly west of I-35. Structures cannot be built over a plugged well and building siting must follow Fire Code requirements to locate in the vicinity of an active well

 

 

• Since vertical construction cannot occur in a pipeline easement, future development potential is severely limited near pipelines...

 

 

• The operations performed at Drilling and Production Sites require heavy vehicle traffic to support the various activities. The increase in vehicle traffic can adversely impact associated roadways and traffic patterns around the Drilling and Production Sites. Dirt, dust, and debris associated with drilling and production activities can produce localized adverse effects which could make new development near them undesirable and unlikely.

 

While…setbacks serve to reduce risks to public safety, they also impact development and compromise land use efficiency. [This is exacerbated by] the wide scattering of isolated well sites throughout much of the western portion of Denton…



While regulations were enacted in 2010 to limit gas well development plats to a maximum of five (5) acres, a number of pre-existing platted production sites exceed one hundred (100) acres and even include residential and other protected uses within drilling and production site boundaries. Thus, development of adjacent properties for residential and other protected uses is restricted by the application of setbacks to these non-drilling sites, regardless of proximity to well locations."

 

 

Thursday, September 4, 2014

Denton Chamber Should Support the Ban


The Denton Chamber of Commerce's decision to oppose the proposed ban on hydraulic fracturing contradicts its vision of promoting “the general welfare and prosperity” of Denton. I respect the Chamber and admire all the good they do for Denton. But they have made a mistake here and I urge them to reconsider their position.

Had they taken an objective look at fracking, they would find that it is a drag on our economy and an obstacle to future development. Fracking poses severe safety and health risks to the Denton community in order to extract mineral wealth that is primarily exported to non-local businesses and absentee mineral owners. Only 2% of the appraised mineral value is owned by Denton residents. Gas wells rapidly deplete in value – 90% in five years. Denton will be stuck for the long haul stewarding hundreds of blighted industrial sites of diminished value.

Shockingly, the Chamber based its decision solely on an industry-funded report by a group with a known record of extreme hyperbole when it comes to estimating the economic impacts of the oil and gas industry. Yet even if we accept the industry’s numbers, they actually confirm the economic case against fracking. They show that it is a miniscule part of our economy: it accounts for 0.2% of our gross revenue, 0.25% of our labor force, and 0.5% of our tax revenues. Fracking accounts for 0.17% of DISD’s budget, while dozens of gas wells right next to our schools emit thousands of pounds of toxic chemicals.

How is any of this good for our welfare and prosperity?

City Council member Kevin Roden rightly notes that a ban on fracking will have “no perceivable impact on our local economy.” Indeed, the ban will bring about an economic boom. It will add value to properties that would otherwise be devalued by nearby fracking operations. It will bring the economic benefits of cleaner air and water and safer neighborhoods. Most importantly, the ban will make Denton more attractive to the skilled workforce we need to support higher-paying jobs and drive our economy forward. A city that allows a poisonous industry less than 200 feet from homes is not an attractive place to move. Without the ban, the workforce we need will find jobs, and spend their money, elsewhere.

It’s disappointing that the Chamber failed to consider the full picture. Like the industry they only thought about the costs of a ban and didn’t see how that flea is dwarfed by the elephant of economic benefits that a ban will bring.

The Chamber advocates “reasonable regulations,” but this too is just a restatement of an industry talking-point. The fact is that the City of Denton worked for three years attempting to craft regulations that would both permit fracking and protect the health, safety, and welfare of her citizens. Yet at every turn, the industry failed to compromise. They insist on fracking as many wells as they want closer than 200 feet from homes and schools on the 30% of our city’s land area already permitted for fracking. We actually have a reasonable ordinance on the books. The problem is that it doesn’t apply to anything, because fracking is vested under older laws. We were just closing the barn doors after the cows got out. Further calls for working on regulations can only shut the door tighter but not corral the herd.
 
Finally, the Chamber incorrectly claims that state law “guarantees” that property owners can access their minerals. Like most rights, mineral ownership is qualified, not absolute. Besides, the proposed ban is actually less restrictive than other valid ordinances in Texas, because it is only a ban on hydraulic fracturing, not drilling. An independent law firm has concluded that the proposed ban is legal.

The ban is the only reasonable option available to us. Without it, we will see the wholesale industrialization of Denton’s neighborhoods by an activity that pumps all the benefits out of town and dumps all the costs on us. On November 4th, we need to pass the ban on fracking in the name of promoting Denton’s welfare and prosperity.  

Sunday, August 17, 2014

They are still trying to fool us

At the City Council public hearing on July 15th, the industry representatives chose the following rhetorical strategy: “We recognize that fracking is a problem in Denton. But we don’t need to ban it. We promise to work with you to draft better regulations.” They are now saying the same thing in their national op-eds about the Denton fracking ban.
City Council members reminded them that we have worked for years on local policy to no avail – there is still fracking less than 200 feet from homes. Then City Council asked the industry representatives what ideas they had for improving our bad situation. They were silent. They just promised to help us come up with…something.
Now it is over a month later, and I’ve just heard from several city leaders that no one from the industry has lifted a finger to follow through on their promise. I know…it came as a shock to me too. You mean they were only blowing smoke?! They don’t care about us?! But they said…wow.
Actually, they are not just passively neglecting their promise; they are actively undermining it. The city has a moratorium in effect on new drilling permits while they revise the gas well ordinance. But that puts a crimp in the plans of Vantage Energy to get frackin’ now. So, rather than work with us (as they promised to do), they are going to work around us: on August 25th, Vantage is going to the Zoning Board of Adjustment to get an exemption from the moratorium.
So, they say they recognize the problem; they respect us and want to help us to revise our regulations. But when the rubber hits the road (and actual money is at stake), they have no patience for our processes and no respect for our rules.
That’s the story of fracking in Denton. It’s an old story. I don’t know who they think they are fooling anymore.