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Five Months After City Extended XTO's Gas Drilling Lease, Trinity East to Get Same Deal

First, a programming note: Plans are to liveblog, yet again, today's 2 p.m. meeting of the council's Ad Hoc Gas Drilling Task Force Nominating Committee, if only because last week's was such a humdinger as the council struggled to add someone -- anyone -- from the Oak Cliff area affected by XTO's lease.

Speaking of: Maybe you recall, but back in January the council renegotiated terms of XTO's lease to drill near Hensley Field. The city really had no choice: As officials attempt to figure out how to deal with issuing specific use permits allowing for gas drilling within the city limits, the clock was running out on XTO's lease agreement signed in 2008.

So the city extended the lease for another 30 months. Also listed among the terms of the redo: XTO has to "provide an accurate inventory of chemicals to be injected into the well bore for the purpose of drilling or hydraulic fracturing, or related well bore activities."

XTO officials negotiated that deal with the city. Now, it's Trinity East Energy LLC's turn. In August '08, Trinity East paid the city of Dallas $19 million for the right to drill on some 3,000 acres on city-owned property in Northwest Dallas, not far from Love Field Airport. But its agreement is also about to expire, which is why Trinity East and city officials have also been discussing how to extend the terms, according to folks with whom I've spoken at City Hall.

Which is why the council will vote tomorrow on extending Trinity East's lease, using almost the same language in the XTO agreement OK'd earlier this year. Which is to say: Not only will Trinity East get another 30 months, but if and when it does get its SUP there will be a provision added to both leases that says Trinity East "will provide a list of chemicals to be injected into the well bore for the purpose of drilling or hydraulic fracturing or related well bore activities and the disclosure shall include every chemical to be used along with the data sheets of the chemicals to be used."

The entire resolution follows. But expect this to become an issue tomorrow, as at least one council member, Angela Hunt, is against the 30-month extension. She explains why on the other side.

Hunt, as you may recall, was against extending XTO's deal by 30 months -- she thought maybe it oughta get 10. Trinity East, she tells Unfair Park, deserves maybe eight more months on its lease -- because, for starters, it turned in its request for permits later than XTO. And while it too is offering to return some land to the city, it's "not valuable, not accessible and near residential," she says, meaning that if and when the city redoes its permitting process following whatever the task force cooks up, that land probably wouldn't be drillable anyhow.

"There's absolutely no reason to extend their lease for such a long period of time, because extending the lease for 30 months gives them unnecessarily about 22 months that they don't deserve," she says this morning. "At the very most they deserve an extension of eight month to accommodate the fact the city is currently conducting an investigation into how we want to move forward on gas leases. They best-case delay for them is eight months. They were not in the same situation as XTO. They had a different set of circumstances, and I thought their extension was too long.

"Now, XTO filed earlier for their permit requests than Trinity East had. But regardless, don't think I am defending a 30-month extension for XTO. But this idea that we gave one party that has gas leases one deal therefore we must give another party the same deal is, I think, unreasonable. It's a mistake."

More to come.

Now, Therefore,

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DALLAS:

SECTION 1. That the City Manager is hereby authorized, upon approval as to form by the City Attorney, to execute an amendment to Lease 1 and Lease 2A, each dated as of August 15, 2008, with Trinity East Energy, LLC, as Lessee, and the City of Dallas, as Lessor.

SECTION 2. That the modifications to the leases are:

(1) Section 2 of each lease is modified by extending the primary term by 30 months, from 36 months to 66 months.

(2) Exhibit A of Lease 1 is modified by eliminating 62 tracts containing approximately 627 acres of land, which reduces the Land covered by the lease to 75 tracts for a total acreage of approximately 1,439 acres of land.

(3) Exhibit A of Lease 2A is modified by eliminating 5 tracts containing approximately 480 acres of land, which reduces the Land covered by the lease to 16 tracts for a total acreage of approximately 1,132 acres of land. (4) Subparagraph 21(p) of each lease, titled "Extension Option", is deleted.

(5) Adding a provision to each lease that the Lessee will provide a list of chemicals to be injected into the well bore for the purpose of drilling or hydraulic fracturing or related well bore activities and the disclosure shall include every chemical to be used along with the data sheets of the chemicals to be used.

(6) Add a provision to each lease that the Lessee understands that a Specific Use Permit is required before the Land can be used for oil and gas drilling and a gas well permit is required to conduct oil and gas drilling.

(7) Add a provision to each lease that the Lessee understands that the proposed drill sites are on park land and that the city council must authorize the oil and gas drilling use on park land.

(8) Add a provision to each lease that the Lessee understands that the proposed drill sites are within the flood plain and that city council must make a decision to amend the Dallas Development Code to allow the use within the flood plain or the Lessee must obtain a fill permit.

SECTION 3. That this resolution shall take effect immediately from and after its passage in accordance with the Charter of the City of Dallas, and it is accordingly so resolved.

APPROVED AS TO FORM:
THOMAS P. PERKINS, JR.
CITY ATTORNEY


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