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HB 40 cont’d from p. 1
Do cities still have a role in oil and gas regulation under House Bill 40?
Yes. For the first time ever, state statute specifies cities’ authority to regulate aboveground activity related to oil and
gas operations including fire and emergency response, traffic, lights, noise, imposing notice, and reasonable
setbacks.
What does “commercially reasonable” mean?
In HB 40, the definition of “commercially reasonable” is based on “the objective standard of a reasonably prudent
operator and not on an individualized assessment of an actual operator’s capacity to act.” The definition is not
subjective.
In other words, the individual financial circumstances of an individual operator is not what is considered when
determining what is “commercially reasonable.”
By design, HB 40 is intended to and in fact encourages operators and the cities to sit down together to plan and
coordinate the orderly development of minerals in the communities.
How was the bill revised to address various stakeholders’s concerns?
HB 40 is a product of comp romise.
Our House and Senate committees heard hours of testimony, which informed some substantive changes that made
the bill better.
For example, after hearing from various stakeholders, the House Energy Resources committee more clearly defined
“commercially reasonable” to reflect the objective standard that is well-established in Texas oil and gas case law.
The committee substitute added a “Safe Harbor” provision that says an ordinance will be considered commercially
reasonable if the ordinance has been in effect for at least five years and has allowed the oil and gas operations at
issue to continue during that period.