Updated: Titan Seeks Rule 37 Exemption on Lewisville ISD Property

Titan Operating, LLC. has filed an application for an exception from the state's Rule 37 to allow it to extract natural gas within 47 feet of the property line for Lewisville High School's Killough 9th and 10th grade campus in Northern Lewisville. Lewisville ISD had not been aware of the application, which was mailed to the district's P.O. Box in Lewisville, until today when Lewisville Planning and Zoning Commissioner Neil Ferguson spotted the letter while reviewing Railroad Commission documents on Lewisville gas wells.

Titan's Prologis SE 1H well has already been drilled, but Titan is waiting for the exception so they can frack the well and begin producing. Titan's initial permit from the Railroad Commission was for a bore path that was not within the 330 feet distance the state requires for unleased properties. But that path took the well bore within 3,000 feet of the Lewisville Lake dam, and the U.S. Army Corps of Engineers objected, based on worries that underground activity could affect the dam's integrity.

The bore path of the well, shown in the attached plat, puts the well at its closest point 47 feet from LISD property, and would drain natural gas from underneath the property.


View Lewisville Gas Wells in a larger map

Titan VP of Operations Chris Hammack says the company worked in good faith, talking with LISD Superintendent Dr. Steve Waddell and Chief Financial Officer, Dr. Quentin Barnett, and offering the district a lease worth $1.5 million* plus a 25% royalty for all of the district's properties within the Prologis tracts, and the B&H and Ingram areas in Southern Lewisville, as well as the district's properties in Flower Mound adjacent to the Hilliard well site. When Titan felt like it wasn't getting anywhere in the negotiations, it filed the rule 37 exception request to ask the Railroad Commission to let it perforate along the section of the bore that is closer than 330 feet to unleased properties.

Hammack said that he still had hopes that Lewisville ISD would sign a lease. "I know that school districts are dealing with funding cuts, and this is a source of funding for them that is not subject to Robin Hood," said Hammack; "We're still willing to work with them, and we can do a lease on just one property, or all of them, or we can take out the Hilliard property from the deal if that would make it easier."

When we contacted Lewisville ISD Information Officer Karen Permetti, she was not aware of the application, which has a deadline of Monday, October 3rd at 5 p.m. for filing a protest. According to a mailing list filed with the Railroad Commission, Titan mailed the request by U.S. Mail to "LEWISVILLE ISD; PO BOX 217, LEWISVILLE TX 75067". Permetti said that normally legal mailings to the district are sent via registered mail. Permetti later said that Waddell and Burnett had searched their offices and Permetti's for the letter, but were unable to locate it. WhosPlayin forwarded LISD the copy of the notice provided by Ferguson, who was also making phone calls to ensure the district didn't miss its deadline to protest.

This evening, Permetti said that the district would file a protest first thing Friday. By protesting the application, LISD forces the Railroad Commission to schedule a hearing, and buys more time to reach a deal that would provide LISD with some proceeds from its minerals. Hammack was confident that the commission would grant his request. "We can put on a very compelling case in Austin as to why we had to drill this way," said Hammack, after explaining the changes required by the USACE due to the proximity to the dam.

All of the Prologis wells are drilled from Titan's pad site on McGee Lane, just South of F.M. 407. The site was not opposed by residents, and easily received its drilling permit from the City of Lewisville. The pad site is approximately 2,340 feet as the crow flies from the nearest edge of the Killough campus building. Hammack says that 8 to 10 wells will be drilled in the Prologis SE unit, which is about 590 acres. If LISD doesn't lease, the district's acreage would be excluded from the calculations for the life of the unit, and the royalties it would have received on any well drilled within the unit will be split proportionally by the leased mineral owners in the unit.

Permetti expressed gratitude to Ferguson for bringing the notice to the district's attention in time for the district to take action. Ferguson said he was just researching the status of local gas wells as he does on a fairly regular basis. "This is kind of a lucky find," said Ferguson; "It's important because there is a lot of money involved."

Ferguson also serves as president of Lewisville Neighbors for Responsible Urban Drilling, a group that just successfully fought against Titan's proposed placement of wells in close proximity to neighborhoods in Southern Lewisville. The group is sometimes misunderstood by drilling advocates as being "anti-drilling", but Ferguson (who is retired from ARCO Petroleum) points out that the group only wants to ensure that drilling happens in the appropriate places, and not in neighborhoods near homes and schools. Ferguson said he thinks that LISD should go ahead and lease at this point, since the drill site is already established, and there is nothing to gain by holding out. "You've got to strike a balance; which solution puts more people in the 'wins' column? In this case, clearly it is not a win if the wells are drilled anyway, and LISD misses out on the revenue. It wouldn't be fair to the taxpayers," Ferguson added.

Update 10/3/2011:
The Railroad Commission has placed this case in the queue for Docket Services for a rule 37 hearing. LISD's protest is attached.

* Other news stories published after this post said $1 million. Hammack was going by memory and wasn't certain about the number when we talked to him.

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