Dallas City Council quietly approves up to $55 million payout to oil and gas company

The council’s quiet vote approving a $55 million payout to an oil and gas company could be the end of a decade-long legal fight over drilling on city-owned land.

By Nathan Collins, KERA NewsJanuary 26, 2024 10:15 am, ,

From KERA News:

The Dallas City Council unanimously approved a payout totaling up to $55 million to an oil and natural gas drilling company — with no discussion.

And the city will use refunding bonds — and possibly liability reserve funds — to pay for it.

The approval at Wednesday’s meeting comes after a nearly decade-long legal battle over whether the city illegally reneged on a development deal.

“Cities may choose to pay large judgments from current operating funds or by issuing debt which spreads the cost over time. Due to the size of this judgment, the city will issue bonds,” a city spokesperson told KERA ahead of the Wednesday’s vote.

The Trinity East Energy, LLC natural gas company alleges in its 2014 lawsuit against the city of Dallas, that after entering a lease with Dallas for drilling on city-owned land, city officials backed out of issuing specialty permits Trinity needed to operate.

Trinity also alleged that the city was facing a $90 million budget shortfall — causing officials to start soliciting for possible drilling operations on city-owned land.

After negotiations, the gas company paid out over $19 million to the city for leases on two tracts of land — one of which was the proposed drilling site.

During that process, Trinity sent a letter to then-City Manager Mary Suhm saying that while city staff “couldn’t make any guarantees,” they said they were “reasonably confident” that city commissions and the council would approve Trinity’s request to drill on the newly leased land.

“We understand that this letter is not a binding agreement, but is merely a good faith representation of our discussions in connection with this transaction. If this correctly sets forth your understanding of our discussions in connection with entering into the…Lease, please so indicate by your signature below,” the letter from Trinity executive Stephen Fort said.

Suhm signed the letter.

But the approval never came. Both the city’s Plan Commission and the city council rejected the company’s application to drill on the leased land.

And Trinity sued the city claiming it wouldn’t have answered the city’s solicitation, sign the lease or apply for the specialty permits, if city officials had not assured the company it would be approved for drilling.

The council’s approval on Wednesday to pay the final judgment — which may be up to $55 million — could bring the lengthy legal fight to a close. The item was included in the council’s consent agenda, a portion of the meeting that rarely gets discussed before a vote.

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