Shale Math: Half Full or Half Empty

Cathy McMullen, leader of the Denton Drilling Awareness Group, who spearheaded collection of the 2,000 signatures necessary to get the initiative on the ballot, said that her supporters made the case to voters that the city’s land would be best used for development, not gas drilling. Homes and businesses cannot be built on top of pipelines or gas wells, she pointed out.

“Denton is expected to double or triple [in population] by 2030,” she said. “We will not be able to grow. If you look at where the wells are now and the pipeline system, we’re going to be in big trouble trying to build subdivisions and shopping centers. If it gets worse, that would cripple Denton’s growth.”

In June, just days before the Denton City Council put the ban on a citywide ballot, the Perryman Group released a second study, also commissioned by the Fort Worth Chamber of Commerce. That study detailed what it called the “adverse impact” of the ban in Denton.

The report concluded that Denton could lose up to $251.4 million, including $4.6 million in taxes that would go to the Denton school district, and $17.1 million to the state. The county as a whole stands to lose $354.8 million, the study said.

McMullen called the Perryman study “a joke,” saying the numbers were generated in an effort to defeat the ban and that it backfired.

“The numbers were twisted to make it look favorable to the industry,” she said. “All that study did was help us with the ban. If it had been a little more realistic, they might have gotten away with it.”

The numbers provided by the City of Denton paint a drastically different picture from the Perryman Group’s. Denton residents own 2 percent of the city’s minerals, and royalties paid to the city account for less than 1 percent of the city budget. Taxes collected from wells amount to about half of 1 percent of all city property tax revenues. Out-of-town companies and absentee mineral owners have benefited the most from fracking in Denton.

Fans of the ban point out that houses and shopping centers produce four times as much tax revenue per acre as fracking.

“Only 1 percent of our tax revenue comes from energy production, and yet we’re getting all of the pollution, all of the truck traffic, all of the roads torn up,” McMullen said. “It’s not worth it.”

Perryman’s calculations aren’t trustworthy because they can’t be double-checked, she said –– the company uses a proprietary formula to arrive at them.

“How can you tell whether it’s right or wrong?” she said. “I know, having dealt with the gas industry for the past five years, if they’re telling me something is proprietary, to me that means they want to hide something.”

Ray Perryman, president of the Perryman Group, said his model has been peer-reviewed and used in hundreds of studies nationally. He denied that his numbers were skewed to favor oil and gas drilling or that his study misrepresented how many jobs gas drilling would generate in Denton.

“Impact models are geographically specific,” he said in an e-mail. “We analyzed the results for the city of Denton. The effects of drilling in Denton on the region and the state would be larger, as clearly some of the benefit accrues elsewhere. The numbers that we computed and reported were specific to the city of Denton.”

Roden was the only city council member to support the ban initially. But several other members came around on the issue once the city released a draft of its comprehensive plan for 2030, which outlines the various ways the city will deal with its growth over the next 15 years.

“Any time you make the discussion around economic development, it’s hard to fight,” he said. “Its hard for politicians to speak out against that, because no one wants to appear to be anti-jobs or economic development.”

Texas Railroad Commission Chairwoman Christi Craddick has vowed to ignore the ban and continue issuing permits to drillers in Denton. And, true to their word, the Texas Oil and Gas Association and the Texas General Land Office filed lawsuits to prevent the city from enforcing the ordinance.

McMullen said she’s seen a shift in people’s thinking on the issue once they were confronted with the full scope of fracking’s impact.

“Maybe this [the benefits of drilling] is not everything they promised us,” she said. “It’s a quick fix. If your city needs a quick infusion of cash, it’s great when they come in and promise all of these things. Then when you start looking five years down the road, 10 years, and 15 years, you’re like, ‘What have I done to myself?’

“I’m not sure how much revenue Fort Worth has received,” she said. “But I have a sneaking suspicion that in 10 or 15 years they’ll regret some of this.”