Trinity East's Vapor Chase

Drilling thousands of feet into the earth is a cakewalk compared with dealing with City Hall.

But a janky hole revealed more than just the difficulty of drilling down into the variegated, layer-cake crust of the earth under Dallas County. The financial turmoil and the flurry of liens and lawsuits it prompted evidenced the risks of the high-stakes exploration game, where small outfits like Trinity East make expensive gambles on wells that don't always come in. When they don't, the indies can't shake off those hits, that inevitable cost of doing business in the shale, quite as easily as the deep-pocketed majors.

And that was the difference. That was why you'd see Blanton's bald head down front at every meeting and not, say, his counterpart at XTO Energy. XTO was the other natural gas producer that paid the city $15 million to lease acreage around Hensley Field, the old naval air base near Grand Prairie. Of course, bear in mind that XTO was also a wholly owned subsidiary of ExxonMobil, a multinational with nearly $45 billion in revenue last year. XTO was ExxonMobil's $41 billion bet on fracking, purchased in 2009 when natural gas was at a third of its 2008 high. That bet hadn't panned out yet, but the company was known for taking the long view, years and even decades into the future. Point was, its lease with the city was caught up in the debate currently being waged at City Hall surrounding urban drilling in Dallas. The council had displayed no interest in renewing its contract. Meanwhile, gas prices were rebounding but still fetching a fraction of their heyday. So, XTO left $15 million on the table and walked away. Maybe it was tired of the hassle. Maybe the price of natural gas wasn't worth the expense of producing it, and XTO decided to cut its losses (we never heard back from them on that question).

Trinity East faced the same challenges.

City Council members Angela Hunt and Scott Griggs, opponents to drilling on parkland.
Mark Graham
City Council members Angela Hunt and Scott Griggs, opponents to drilling on parkland.
City Manager Mary Suhm made secret promises to Trinity East, but that was just fine with most City Council members.
Sam Merten
City Manager Mary Suhm made secret promises to Trinity East, but that was just fine with most City Council members.

But what Blanton's presence communicated at these meetings and hearings, large and small, was that Trinity East could not walk away from that kind of money. "Nineteen million means far more to us than it would to Chesapeake or Range Resources," Blanton said, leaning into a high-backed, leather chair at the head of a heavy granite conference table in Trinity East's offices, his suit traded for a tucked-in button-down and jeans. "You've seen our operations. We're one floor. We're a few people. [Our well operator] Expro is here."

And so, on a recent afternoon at their office in downtown Fort Worth, he and company President Steve Fort were clearly miffed, and seemed more than a little worried. That was because the day before, the Dallas Plan Commission voted down their drilling permits for the second time. That meant the City Council would need a supermajority to approve them, and no one seemed entirely comfortable with the odds of getting that many votes. If that wasn't enough to make them antsy, the contracts they'd signed not just with the city but with landowners across Dallas County sure would. Contracts are like milk. Eventually, they expire. Trinity East's leases — its many cartons of milk — were going bad, and they didn't come with refunds.

Looking back on how this all began, Fort couldn't do much more than shake his head. "This outcome is really absurd if you think about it."

You do have to wonder, though, what Blanton and Fort were thinking when they looked to the city for cues back at the beginning. Perhaps they didn't see the scale and intensity of the fight coming their way. But it wouldn't have taken a reading of the tea leaves to figure out that the path to Dallas' vaporous riches was treacherous.

It isn't like Blanton and Fort showed up at City Hall, hats in hand like pitchmen carpetbagging from town to town. Back in 2007, when Trinity East and XTO approached with open wallets, it was no happy accident that the city also happened to need the money. City Manager Mary Suhm was out scrounging for cash because the city was looking to hire 200 new cops and shore up its budget against a $1.35 billion bond package whose debt service was lightening city coffers. A request for bids on the ribbon of theoretically producible shale was one solution to a looming budget crunch. And here were Trinity East and XTO, eager to inject a little liquidity into the problem.

The companies would pay $34 million, the equivalent of a 5 percent tax increase, and cut the city a share of whatever royalties their gas wells produced. Fort has said the figure, depending on prevailing gas prices at the time, could reach into the billions. With natural gas prices hovering at around $9 per million BTUs by the time the city picked the winning bids, that cut was shaping up to be substantial.

Trinity East had big plans for the land. The city of Dallas was by far the company's largest mineral owner, and it was that city land that formed the centerpiece of Trinity East's design. It wasn't just the total acreage. The land the city offered was contiguous and the ownership uniform — a driller's dream. That also meant, on just three tracts, the company wouldn't be drilling one or two wells per pad site, the way it did in Tarrant County. With this kind of elbow room, it planned to drill more than 50 wells, fracturing more shale, releasing more gas, making a hell of lot more money.

« Previous Page
 |
 
1
 
2
 
3
 
4
 
5
 
6
 
All
 
Next Page »
 
My Voice Nation Help
13 comments
fracquestions
fracquestions like.author.displayName 1 Like

Brantley, you did a pretty good job of describing the whole enchilada and detailing why TE has no legal RIGHT to drill in parks and floodplains, but you missed the one key element that set the stage and brought us to where we are today. It is important to recognize who, among us, stood up in defense of clean water, clean air, clean soil, our health, our safety, our property values

The massive efforts of key environmental leaders including Raymond Crawford, Jim Schermbeck, Molly Rooke, Rita Beving, Peter Wilson, Jenny Land, Marc McCord, Jeff Jacoby, Cherelle Blazer, and others starting in mid-2010, who had educated themselves on the legal and technical merits of the issue of urban gas drilling, were the only impediment to drilling being allowed in Dallas. Without their monumental efforts drilling would have been approved and Dallas would already be reaping the same environmental degradation, health problems and descreasing property values that our neighbors to the west are experiencing today.

dallasdrilling.wordpress.com
dallasdrilling.wordpress.com like.author.displayName 1 Like

@fracquestions There are many Dallas citizens who spoke at countless planning commission hearings and city council meetings. While one or more may start the ball rolling, "it takes a village"to change their universe.

Vndallas
Vndallas like.author.displayName like.author.displayName 2 Like

jeez, fort worth has a shitty skyline.

WCGasette
WCGasette like.author.displayName like.author.displayName like.author.displayName like.author.displayName 4 Like

Interesting this:

[...]"They can make a profit, they say, but not if wells haven't been spudded by the expiration dates. There are ways, Blanton says, of "throttling down" production on a well, to extract less gas and wait for the prices to come back up. He knows they will. They always do. "But that's our decision," he said. "It's no one else's decision. Let us make those choices. It's not them with the money in it. It's not them with the exposure."[...]

The more we hear Mr. Blanton pontificate, the more we realize that it's quite possible he has no idea what he's talking about.  He told the Irving City Council on (March 20, 2013) during a round of questioning that the gas from the University of Dallas-City of Dallas Lease at 3400 Tom Braniff was going to the Dr. Pepper Bottling Plant in Dallas. We think maybe he is throwing up a lot of the smoke and the mirrors. 


And since when are drilled, producing wells "exploratory"?  The smell of rotten eggs is not coming from the gas.

Katarina
Katarina like.author.displayName like.author.displayName like.author.displayName 3 Like

Trinity East needs to diversify.  The rest of the world is going solar, and very successfully.  Since this area of the country has more than 200 sunny days a year, it's time to forget about fracturing and start building solar panels.

cjbwalton
cjbwalton like.author.displayName like.author.displayName like.author.displayName like.author.displayName 4 Like

Great article, but may I point out one statement which I very much doubt has any basis in fact?

"Trinity East spent planning, preparing, consulting, chasing down a paper trail at the appraiser's office and leasing more than 10,000 acres of private and public land in Dallas County, from Irving to Farmers Branch — a mosaic of mineral rights in which Dallas city property was simply a large piece of a much greater whole — the figure was easily four times $19 million."

$76 million? Really? With 25 years of experience in oil and gas work, I have to wonder where that money was spent. Not into personnel with only one floor of employees. Not into title work as what could be cleaner and easier title than municipally owned minerals? Not into well site preparation, no well sites have been approved. Likely not into environmental site assessments as the possibility of drilling has never been near. Perhaps there were suhm city kickbacks, but with the frequency that Trinity East threatens litigation, I'd better not suggest that.

It sounds like they are big gamblers over at Trinity East. Not all gambles pay off - this is especially true in the oil and gas business. This was a questionable $19,000,000 gamble. At $76,000,000 it just looks like idiocy. 

By the way, if the company is out of money and experiences any more well casing failures, will they be well enough funded to handle the clean-up? 



fracquestions
fracquestions like.author.displayName 1 Like

You raise a very important question - if TE does have a major problem will they be financially able to handle it, or will they simply bankrupt that small part of Keystone, walk away from the cleanup and let citizens pay for their mess?

I, too, wonder if they really have spent $76 Million because I doubt they ever had that much money available to spend, but that would depend upon how many acres of private land they leased and at what price. No doubt they spent well over $19 Mil, but $76 Mil does not sound plausible to me, either.

cjbwalton
cjbwalton

Trinity East is an LLC for just that reason.

cjbwalton
cjbwalton like.author.displayName 1 Like

Trinity East is an L.L.C. for a reason. The reason is to limit their liability.

fracquestions
fracquestions

@cjbwalton Exactly, and they will not hesitate to use that out if they deem it necessary, just like H. Ross Perot did on that $19 Million office tower he was building on Cole or Travis several years ago. Corporations are always willing to let the common people subsidize and socialize the costs of their failures.

director21
director21 like.author.displayName like.author.displayName like.author.displayName 3 Like

Part 3 of 3

Trinity East gambled that they would get their permits and drill without citizen opposition. They were wrong. CEO Blanton and President Fort are both attorneys, and they are aware of the language of the leases they negotiated and signed. They KNOW that drilling is prohibited in parks and floodplains. If they chose to pay the money and risk being denied permits to drill, then they did so knowingly and with forethought of action. Their timing was very bad! They ran into an obstacle that did not block drillers in Fort Worth, Arlington, Grand Prairie, Mansfield, Colleyville or other places across the Barnett Shale.

Unfortunately for Trinity East, neither the City Manager nor the Mayor has the right to sign away the police powers of the City of Dallas. Sadly, our inept City Attorney, who has already tendered his resignation (or retirement, as it were) has failed to so advise the City Council and City Manager of that fact. He is up to his neck in this charade, and he is trying to save face by siding with the Mayor and City Manager. The fact is, they ran into citizen opposition that was (and still is) far more knowledgeable about this matter than they were, are or ever will be because we chose to take the time and make the effort to educate ourselves and understand the issue inside and out. THAT is the difference!

director21
director21 like.author.displayName like.author.displayName like.author.displayName like.author.displayName 4 Like

Part 2 of 3

At the time those leases were signed there was almost zero public opposition anywhere and absolutely no opposition in Dallas because we knew little or nothing about the matter. It had not even been considered. Once we heard about it a rather literate group of us formed to educate ourselves, educate our fellow citizens, educate our elected and appointed leaders and mount a formidable opposition to drilling in Dallas. Regardless of what anybody else says, we have been successful specifically because we HAVE learned the facts and we HAVE told the truth, which is much more than can be said for industry or city government officials. And, because of our knowledge and preparation we have prevailed without the benefit of funding, support or organization. Ours has been truly a grassroots campaign to defend ourselves, our fellow citizens and our city against the invasive and destructive practices of gas exploration and production in a densely populated urban area.

What started as just a few concerned citizens has grown to several hundred concerned citizens in Dallas, and now we are being joined by hundreds of concerned citizens in neighboring communities who also want to protect their environment and the health and safety of themselves and their children. Drilling in parks is insane. Drilling close to a school is unconscionable. Only people lacking integrity and humanity would even consider doing that - or allowing that!

director21
director21 like.author.displayName like.author.displayName like.author.displayName 3 Like

Part 1 of 3

Great article detailing what has transpired on this issue over the past 5 years! Thanks, Brantley, for doing your homework. The key element that people need to take from this story is found on page 4, and is cited below:

"The contract said Trinity East understood that it had to get a special-use permit from the City Council to drill — a "police power that cannot be contracted away." The contract hedged the same way about drilling the Trinity River floodplain, which would first require an amendment to city ordinance. The contract Trinity East signed said, at root, that they did not have an unequivocal right to drill."

Texas law says that a person cannot legally sign away their rights under the law, even willfully. By the same token, a city cannot sign away its police powers, even if the City Manager wants to do it, and so the right of the city to establish restrictions and limitations on what a business is allowed to do within city limits is established in law, and cannot be signed away. Signing a contract that attempts to sign away the police powers of the city results in a contract that is null and void or voidable, in part or in whole, when challenged in court.

 
Loading...