On May 18, 2015, Governor Greg Abbott signed into law House Bill 40, which pre-empts regulation of oil and gas activity at the municipal and local levels, and places that duty and power with the State. In addition, the newly enacted law requires that any local regulation of surface activity be “commercially reasonable,” and not effectively prohibit an oil and gas operation. The law defines commercially reasonable as “a condition that would allow a reasonably prudent operator to fully, effectively, and economically exploit, develop, produce, process, and transport oil and gas.”

HB 40 helps bring uniformity to oil & gas regulation. In praising the bill, Governor Abbott said “HB 40 does a profound job of helping to protect private property rights here in the state of Texas, ensuring those who own their own property will not have the heavy hand of local regulation deprive them of their rights. This law ensures that Texas avoids a patchwork quilt of regulations that differ from region to region, differ from county to county or city to city”.

HB 40 does preserve some local oversight, however. In this regard, the bill allows cities to retain their setback authority, and have some say over surface activities. The authority exercisable at the local level will be set forth in section 81.0523 of the Natural Resources Code.

In total, HB 40 offers regulatory certainty for the oil & gas industry, and appears to strike a balance between private mineral rights and local self-government. Despite its benefits, not all are happy with HB 40, as the new law prohibits enforcement of “fracking ban” laws that were passed by some local governments. The new law takes effect immediately.