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7/29/2019 Trinity East Gas Lease memo and briefing Feb 2013
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Trinity East Gas Lease
Dallas City Council
February 27, 2013
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Purpose of Briefing
Provide a chronology of Citys leasing of mineralrights
Explanatory Notes (shaded slides) within thechronology
Review identified issues: Radio Tower site (22 acres) as part of Trinity East lease
Trinity East letter (August 2008) acknowledged by CityManager
City Managers Authority
Surface/subsurface activities in parkland 90-day period to conduct title work
Appendix
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OverviewDates Actions
Fall 2006 Direction to explore leasing of mineral rights
Fall 2006 Fall 2007 Revenue Strategy- Lease Mineral Rights
Jan Sept 2007 07/08 Budget Process
May/July 2007 Development of lease form
July 20, 2007 Issuance of RFP
September 12, 2007 Adoption of Drilling Ordinance
November 2007 January 2008 Selection of Proposers
February 27, 2008 Council authorization to execute
August 15, 2008 Execution of Lease
Refinements of attachments
March 17, 2011 SUP application
June 22, 2011 Lease extension
August 10, 2011 Chapter 26 Hearing deferred 3
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Timeline Beginning in 2000, numerous cities/counties
throughout the Metroplex (also DFW Airport)were leasing mineral rights receiving significant
payments
Barnett Shale was being drilled for natural gas Approximately 11,000 gas wells in Dallas, Denton,
and Tarrant counties currently
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Timeline As 2007-08 budget was being developed:
projected costs to meet the Councils Key Focus Areagoals growing: $40M increase in Public Safety(including adding 200 officers)
other anticipated costs included:
Increases for Public Safety compensation and equipment
Debt service increase for 2003/2006 Bond programs
2006 Bond program implementation commencing
Community prosecutors
Full year funding for new Animal Shelter Plus numerous program and service enhancements
initial projected gap approximately $90M
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Timeline
City staff was charged to aggressively develop new
sources of revenue--
all ideas from council members to be evaluated less traditional revenue sources pursued:
Pouring Rights/Beverage Service Contract
Advertising Kiosks DFW tax sharing revenue
Leasing of mineral rights on City property
September 5, 2006: Eco Dev & Housing Committee
discussed available property for drilling operations
and attracting exploration companies to the City
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Timeline
September 12, 2007, Council adopted (11- 1, 3 Absent) agas drilling ordinance (amending the Development Code)that required SUPs and other controls specifically for
drilling New ordinance included the latest in requirements and
controls
Removed prohibition of drilling on parkland
Still in effect today From June 2007 to June 2010, Council approved five
SUPs for gas drilling and production on private property(Attachment B)
September 26, 2007, Council approved (14-1) 07- 08General Fund Budget, including projected revenues of$20M from gas drilling leases
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Timeline
Fall 2007, in order to achieve budgetedrevenues from gas leases, staff:
identified City properties located over theBarnett Shale for possible mineral rightsleasing
Bundled into packages (Attachment C) Included parkland
One package was called the Dallas North Propertieswhich surrounded a site called the Radio Tower Tract
(Attachment D) hired an attorney experienced in mineral
rights leasing throughout the Metroplex
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Explanatory Notes
Radio Tower Tract is a 22.4 acre tract originallydonated to the City in 1963, subject to a 30-year
lease and purchase option to a third party for aradio tower
City and lessee disputed terms of agreements,
Lawsuit was filed, but settled (in 1970) by Cityconveying fee title to the tower lessee, subject to areverter back to the City, if tract not used for radiotower
From the time of the settlement to 2007, theproperty was not owned by the City
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Explanatory Notes
In April 2007, reverter was triggered and the tract
was conveyed back to the City by quit claim deed In May and June 2007, staff compiled lists of city-
owned property to be included in the Gas Lease
RFP,
Included was a general area referred to as the
Dallas North Properties which included:
approximately 2,100 acres,
parkland and non-parkland (Attachment D)
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Explanatory Notes
Because there is typically a lag in updating real
estate data bases and inventory lists, the Radio
Tower tract was not on the City inventory list nor
on the accompanying map generated at the time
by Citys mapping staff for the Gas Lease RFP
But for the lag in a data base update, this
property would have been included in the RFP
property list and agenda information sheetattachment
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Timeline
July 2007 issued a Gas Lease RFP
Included was the form lease containing all terms requiredby the City
Final acreage was to be finalized after title research Final Title search is a cumbersome, difficult and expensive process
Industry standard process is that Lessees will not complete this processuntil they have a deal
Feb 6, 2008, Council was briefed on the results ofthe Gas Lease RFP
Staff recommended/stated several times the intent not to
drill in parkland, but mention steps required, if Councilwished to do so
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Timeline
Feb 27, 2008, Council discussed and authorized (12- 2,1 Absent) execution of 36-month leases with XTO Energy for Hensley Field and nearby properties
Trinity East for Dallas North/Trinity River properties All material lease provisions were agreed upon and did
not change before/at execution
At this point, the title research was initiated to confirm: property descriptions and ownership ownership of mineral rights
Because the Trinity East leases included parkland, CityCouncil was required by state law (Chapter 26) to holda public hearing regarding subsurface mineral rights onthe parkland.
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Timeline
On June 25, 2008 City Council : unanimously (14-0, 1 Absent) supported authorizing
the Chapter 26 public hearing
was informed by staff that: Trinity East had completed their title work and identified a
site (Radio Tower Tract) owned by the City, omitted fromthe Dallas North Property List group (for which the Councilhad authorized execution of the lease)
surface use would not in any way impact the park systemor the park use (Parks Director)
If application was made to drill on this site or otherparkland, staff stated another Chapter 26 hearing by CityCouncil would be required (Attachment E)
Audio clip and transcript provided (Attachment F)
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Explanatory Notes
City properties within the Barnett Shale (including DallasNorth Properties) were attached to the Gas Lease RFP withthe caveats:
Property was identified as needing ownership verification City made no warranty of title or boundaries,
proposers had responsibility to confirm title, etc.
February 27, 2008 council agenda item to authorize
execution of contracts, which contained the same propertylists as in Gas Lease RFP, was still not updated to include theRadio Tower tract, which had now reverted to the City
City gave Trinity East a 90-day period to conduct its titlework, locking in the mineral rights price, in return for a$1.75M deposit that would be forfeited if Trinity East didnot complete the lease other than due to title defects
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Explanatory Notes
As required, Trinity East completed its
comprehensive title work by June 2008 andnotified the City of its ownership of the Radio
Tower tract, which was located within the
Dallas North Properties
After the Radio Tower tract (22 acres) was
confirmed to be owned by the City, the tractwas included in the lease as part of the Dallas
North Properties
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Explanatory Notes
City Attorneys Office has concluded the City Managerwas authorized to finalize and execute the lease:
RFP described property inventory list as subject to deedand title work
City Council authorized lease of Dallas North Properties
After City Council authorization, requisite comprehensive
title work was conducted Radio Tower Site (22 acre) is within Dallas North Properties
On June 25, 2008, City Council and staff discussedidentification and inclusion of the Radio Tower tract
Therefore, City Manager had authorization to executethe lease August 15, 2008
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Timeline
On August 15, 2008 leases were executed with Trinity EastEnergy for approximately 3,500 acres of city-ownedminerals
A total of $19 million was received 25% royalty in any gas commercially developed
5% override interest in any gas from others mineral rightscollected via City drill sites
City only listed four tracts, approximately 250 out of 3,500
acres, where surface use might be possible Three tracts are included as Proposed Drill Sites
One tract was included as Drill Site
Concurrently, CMO signed the Trinity East letter memorializing
staffs assurances of assistance in moving the process forward On August 20, 2008, Council held a Chapter 26 hearing and
approved (10-1, 4 Absent) non-park use of the subsurfaceof parkland included in the leases
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Explanatory Notes Trinity East understood, in order to drill on any
city-owned property, it would need to obtainseveral different approvals
Chapter 26 hearing and Council approval, if site is onparkland
Amendment to the Citys floodplain ordinance or fillpermit, if site is in floodplain
SUP as to any surface drilling activity
Drilling permit for any drilling activity Appropriate approvals from other agencies like
TCEQ, Railroad Commission, etc.
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Explanatory Notes Before Trinity East would sign the lease and
make its initial $19 million payment, it soughtassurance that the City staff would assist it in
obtaining necessary approvals
Requests for assurance of assistance are often
sought by outside parties in development
deals
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Explanatory Notes
When the City Council has determined that a
project is in the Citys best interest, staff hasdeveloped a standard response to these requests
for assurance
Will use its reasonable efforts to place before theCouncil those matters requiring City Council approval
Include explicit statement that this does not
constitute a binding agreement
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Explanatory Notes Using these principles/guidelines, staff
negotiated the content of Trinity Eastsproposed letter and the City Manager signed
it, acknowledging and agreeing to staffs
assistance
(Attachment G)
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Timeline In 2010 and 2011, Trinity East asked for an
extension to the lease Trinity East agreed to reduce the city-owned
acreage leased, but wanted the radio tower
tract to remain in this reduced acreage Radio tower tract was included in the 2011
briefings to City Council regarding the possible
extension and in the map attached to the2011 City Council agenda item
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Timeline
On June 16, 2011, the Park Board recommendedauthorizing a Chapter 26 hearing to considersurface gas drilling and production use at the
radio tower and the gun club sites
On June 22, 2011, City Council authorized (13-1, 1Vacant) amended lease
30 month extension
Reduced mineral acreage, but reiterates that RadioTower tract is included
Added provisions to clarify that Trinity East must Request Chapter 26 hearing, if it seeks to drill in parkland
Address floodplain issues if it seeks to drill in floodplain
Obtain SUPs if it intends to drill24
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Summary Review of Issues 22 acre Radio Tower tract
Not included because of lag in property status update
Noted to City Council at June 25, 2008 meeting
City Manager had the authority to execute the lease once title work wascompleted
August 2008, Trinity East letter acknowledged by City Manager No guarantees made
Common practice in development deals
City Manager has the authority to sign non-binding letters
Surface/subsurface drilling activities in parkland Subsurface approved August 20, 2008 after Chapter 26 hearing process,
subsequent to lease signing
Surface On June 25,2008 staff discussed with Council need for Chapter26 hearing if parkland was requested as a drilling site
90-day period to conduct title work Staff negotiated an earnest money deposit from Trinity East while it
conducted its comprehensive title work
City Council authorization not limited to a 90-day period
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Appendix
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Attachment A
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Attachment B From June 2007 to June 2010, Council
approved five SUPs for gas drilling andproduction on private property
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Approved SUPs: June 2007 June 2010
SUP 1791
Approved - October 28, 2009
SUP 1673Approved - June 13, 2007
SUP 1674
Approved - June 13, 2007
SUP 1672
Approved June 13, 2007
formMountain Creek Lake
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Approved SUPs: June 2007 June 2010
SUP 1806Approved June 9, 2010
North Lake Cypress Waters
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Attachment C
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Attachment D
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A h E
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Chapter 26 Texas Parks and Wildlife Code Section 26.001 provides
that a municipality may not approve any project that
requires the use any public land designated and usedprior thereto as a park, recreation area, scientific area,wildlife refuge, or historic site, unless the municipality,acting through its duly authorized governing body,
determines that: (1) there is no feasible and prudent alternative to the use
or taking of such land; and
(2) the project includes all reasonable planning to
minimize harm to the land, as a park, recreation area,scientific area, wildlife refuge, or historic site, resultingfrom the use.
Attachment E
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Chapter 26 The section provides that
the findings are to be made after notice and apublic hearing, commonly referred to as a Chapter
26 hearing and
its provisions do not constitute a mandatoryprohibition against the proposed use if the
findings are made to justify it
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Attachment F Audio and Transcript
June 25, 2008
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Attachment G
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Attachment G
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Attachment H
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TimelineSeptember 5, 2006 Economic Development & Housing Committee briefing
Gas Exploration in the City ofDallas, discusses available property for drilling operations
and attracting exploration companies to the City of Dallas.
Slide 27, the following city-owned properties have been identified as potential sites for gasexploration. Seven properties are listed.
Slide 32, Whats next. . . .Code amendment to permit gas exploration on parkland and/or in
other zoning districts, RFP for gas exploration on City-owned property.
April 2007
May-June 2007
The 22.4 acre property known as the Radio Tower site was in transition. The property wasdonated to the park department in 1963; however, the property was encumbered with a 30-
year lease and purchase option that later became the subject of a lawsuit. In the lawsuit
settlement, the c ity conveyed the property (subject to a reverter) for use as a radio tower. The
title reverted to the City of Dallas in April 2007.
Staff began compiling lists of city-owned property within the Barnett Shale for the NaturalGas Exploration Request for Proposals. The lists of city-owned properties were categorized in
three areas, one of which is the Dallas North Properties. The 22.4 acre Radio Tower tract,
within the other Dallas North Properties, did not appear on this list because of the lag time in
getting the 22.4 acres into the citys system after it reverted back to the city.
Attachment H
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Timeline
June 11, 2007 Transportation and Environment Committee briefing
Proposed Gas Drilling and Production Regulations Briefing outline: (1) need for code
amendment (Chapter 51A); (2) background on natural gas production in the Barnett Shale;
(3) natural gas drilling and production phases; (4) major issues to be addressed; and (5)
update on status of code amendment.
July 20, 2007
August 27, 2007
City issued RFP for gas drilling and production. No city-owned surface drill sites were
specifically part of this RFP, but the RFP does not say no surface drilling rights.
Council Briefing
Proposed Gas Drilling and Production Regulations/Request for Proposals Briefing
outlines: (1) need for code amendment (Chapter 51A); (2) background on natural gas
production in the Barnett Shale; (3) natural gas drilling and production phases; (4) major
issues to be addressed; and (5) update on status of code amendment.
September 5-13,
2007
Surface sites identified by staff for amended RFP, including LB Houston Golf Course (1700
Royal Lane).
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Timeline
October 1, 2007 RFP amended to include locations for surface drilling sites on city-owned property to benefit
the lease play. RFP Exhibit G included future Elm Fork Soccer Complex and other parkland as
potential sites.
October 10, 2007 RFP for Gas Well Drilling and Production Leases Addendum No. 8 - Exhibit G Property
Available for Potential Surface Use. Parkland was removed from the Exhibit with the
following explanation, With respect to surface rights, we note that properties that have been
designated and used as a park, recreation area, scientific area, or historic site may beunavailable for surface use under applicable state and federal laws.
September 12, 2007 Council approved amendments to Dallas Development Code regarding gas drilling
regulations. Gas drilling regulations do not prohibit gas drilling and production use on
parkland, but require an SUP. See also, Dallas Development Code Section 51A-
4.203(3.2)(E)(v), All structures and equipment, including tanks . . . must be spaced at least . .
. 100 feet from any . . . recreational use (except when the operation s ite is in a public park). . .
.
FOR: Medrano, Neumann, Caraway, Hill, Salazar, Davis, Atkins, Kadane, Allen, Natinsky,
Rasansky; AGAINST: Hunt; ABSENT: Leppert, Garcia, Koop
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Timeline
February 6, 2008 Council briefing, Gas Drilling and Production Leases
Slide 6, The RFP included city-owned properties located on the western edge of the city and
within the Barnett Shale area of play. Several key locations include . . . LB Houston Golf
Course. By using horizontal drilling, drill sites can be located at the edge of these properties to
provide minimum impact.
Slide 24, There will be no drilling allowed on the surface of city parkland. The Texas Parks &
Wildlife Code would require a finding that there is no feasible and prudent alternative to using
the park surface as a drill site.
Slide 26, Only 5 sites of city property are available for potential on-site drilling. There will be
no drilling on city parkland. . . . All drill sites will still have to undergo the SUP process. . . and must comply with all other laws. . . .
Slide 35, Recommendation, Council approval of lease for gas well drilling and production in
the City of Dallas with XTO Energy, Inc. and Trinity East.
November 9, 2007 Trinity East responded to RFP. Special instructions in the RFP stated, It shall be the
responsibility of the Respondent to determine the actual net mineral acres to be leased. For
purposes of this Proposal and unless otherwise established by a credible authority on such
matters acceptable to the City of Dallas, the net mineral acres shall be assumed to be the
acreage listed in the description of the property listed above.
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Timeline
February 27, 2008 Council authorized City Manager to execute two 36-month lease agreements with one
36-month renewal option, as well as initial options to lease, with Trinity East.
FOR: Leppert, Garcia, Caraway, Medrano, Neumann, Hill, Salazar, Atkins, Kadane,
Allen, Koop, Natinsky; AGAINST: Hunt, Davis; ABSENT: Rasansky
Trinity East and City Manager executed two Leasing Agreements (the initial
options) for the Dallas North and Trinity River Properties respectively, giving Trinity
East the option to secure oil and gas leases subject to a title review, objection, cure, and
price adjustment process. Said process was to be completed within a calculated period if
Trinity East was to have its benefits as a matter of right.
March 6, 2008 Administrative revision to Resolution No. 08-0720. The revision is an amendment made
from the floor by Councilmember Natinsky on February 27, 2008, to revise Sections 1
and 2 of the resolution.
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Timeline
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TimelineJune 5, 2008 Park Board presentation on Gas Drilling and Production Leases.
Slide 24, There will be no drilling allowed on the surface of City of Dallas parkland. The
Texas Parks & Wildlife Code would require a finding that there is no feasible and prudent
alternative to using the park surface as a drill site.
Slide 26, Only 5 sites of city property are available for potential on-site drilling. There will beno drilling on city parkland. . . . All drill sites will still have to undergo the SUP process
. . . and must comply with all other laws. . . .
Slide 36, next steps, lease executed with Trinity East . . . public hearing for parkland.
The Park Board then recommended that a Chapter 26 Council public hearing be authorized toconsider allowing the non-park subsurface gas drilling and production use on certain parkland.
In one of the Park Board resolution whereas clauses it states, the City of Dallas will prohibit
surface level drilling and mineral production on all parkland and any subsurface mineral
extraction will take place at an off-site location as to not reduce or distract from any of the
recreation uses or experiences of parks in question. . . .
June 6-26, 2008 Trinity East began raising an issue about the lack of drill sites associated with the Trinity East
properties. City staff and Trinity East met and Trinity East brought up the Radio Tower tract.
Staff checked with the Park Department Director to see if the Radio Tower tract could be part of
the transaction. On June 26, Trinity East sent a formal written proposal that included the Radio
tower tract.
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Timeline
August 15, 2008 Leases with Trinity East were executed, which permit exploring, drilling, and producing oil and
gas, laying pipelines, and building roads to produce oil and gas on specific land identified in
Exhibit A of the lease.
Exhibit A of the Group 1 lease identifies three proposed drill site locations and one drill site
location. The proposed drill site locations are parkland and in the flood plain. These parkland
sites were identified as proposed drill site locations because a Chapter 26 Council public hearing is
required; a code amendment to allow the gas drilling and production use in the flood plain or a fill
permit is required; and an SUP is required.
June 25, 2008 Council authorized a Chapter 26 public hearing to be held on August 20, 2008 to receive
comments on the use of subsurface parkland for natural gas drilling and production. The agenda
materials state, The City of Dallas is prohibiting surface level drilling and mineral production on
parkland as part of the gas leases. The City of Dallas has taken great efforts to ensure none of the
surface level recreational uses will be disturbed. All natural gas drilling and production will take
place at an off-site location through methods such as directional drilling. Accordingly, no parkassets or recreational activities will be impacted.
Discussions occurred between Council and staff regarding the need for future public hearings for
a surface gas drilling and production use on parkland. The Park Department Director also
confirmed that there was one property being considered for surface drilling, the Radio Tower site,
that would not affect adjacent parkland.
FOR: Leppert, Garcia, Caraway, Medrano, Neumann, Hill, Salazar, Atkins, Kadane, Allen, Koop,
Natinsky, Rasansky, Hunt; ABSENT: Davis
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TimelineAugust 15, 2008
continued
August 20, 2008
Letter from Trinity East to the City of Dallas and countersigned by City Manager regarding
Trinity Easts purchase of an oil and gas lease (Group 1) stating, City staff has advised us
that although they can make no guarantees, they are reasonably confident that Trinity East
can be granted the right to use. . . the Radio Tower Tract as a drill site location. . . .The City
staff will use its reasonable efforts to assist Trinity East in placing before the Dallas Council
those permits and other matters requiring Council approval. . . .We understand that this letteris not a binding agreement, but is merely a good faith representation of our discussions.
Council held a Chapter 26 public hearing and authorized the non-park subsurface gas
drilling and production use subject to the terms and conditions in the contract authorized by
the Council on February 27, 2008.
The agenda materials state, the City of Dallas is prohibiting surface level drilling and
mineral production on parkland as part of the gas leases. In the whereas clause of the
resolution, it states, the City of Dallas has taken great efforts to ensure none of the surface
level recreational uses will be disturbed, and any subsurface mineral extraction will take
place at an off-site location as to not reduce or detract from any of the recreation uses or
experiences of the parks. . . .
FOR: Leppert, Garcia, Medrano, Neumann, Hill, Atkins, Kadane, Allen, Koop, Natinsky;
AGAINST: Hunt; ABSENT: Caraway, Salazar, Davis, Rasansky
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TimelineFebruary 10, 2011
March 17, 2011
Letter to Trinity East regarding request for extension of the oil and gas leases listing the
processes and requirements with which Trinity East must comply or complete before it may
drill on the proposed drill site locations, including a Chapter 26 hearing, amendments to the
flood plain regulations or a fill permit, and SUPs.
Trinity East filed two SUP applications for surface gas drilling and production at the LBHouston Sports Complex (the radio tower and the gun club proposed drill sites)
April 20, 2011 Council briefing Update on a number of environmental and regulatory aspects of gas
drilling and provide information on concerns raised by citizens. Slide 23 identifies 3
proposed drill sites and 1 drill site, but does not indication locations.
Closed session gas drilling updates.
June 15, 2011 Closed session - Legal issues involving the oil and gas leases between City of Dallas and
Trinity East, LLC.
June 16, 2011 The Park Board recommended that a Chapter26 Council public hearing be authorized toconsider allowing a non-park surface gas drilling and production use at the LB Houston
Sports Complex (the radio tower and the gun club proposed drill sites)
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TimelineJune 22, 2011 Council authorized an amendment to the Trinity East oil and gas leases executed on August
15, 2008. The amended leases extended the primary term by 30 months and added
provisions stating Trinity East understands that (1) the proposed drill sites are located on
parkland, and Council must authorize the non-park gas drilling and production use; (2) the
proposed drill sites are in the flood plain, and gas drilling is not a permitted use in the flood
plain without a code amendment or a Council-authorized fill permit; (3) an SUP is required;
(4) a gas well permit is required before the land may be used for gas drilling and
production; and (5) that the citys police powers cannot be contracted away. All other terms
of the lease not expressly amended continued in full force and effect.
FOR: Caraway, Medrano, Jasso, Neumann, Hill, Salazar, Davis, Atkins, Kadane, Allen,
Koop, Natinsky, Margolin; AGAINST: Hunt; 1 VACANCY
July 1, 2011 ACM signed amendment to oil and gas leases.
August 10, 2011 Council deferred authorizing the public hearing to consider the non-park surface gas
drilling and production use on the two sites at the LB Houston Sports Complex until 30
days after the gas drilling and production ordinance is amended.
Closed session occurred.
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