Note: This article was updated Sept. 17 with additional information and Sept. 20 with a statement from Kyle Mayor Travis Mitchell.

Kyle City Council has authorized finalizing an agreement that would require Kinder Morgan to pay $2.7 million in exchange for exemption from the city’s new pipeline development ordinance.

The vote took place the night before the first hearing in the pipeline company’s lawsuit against the city over the ordinance was scheduled to take place Sept. 17.

But negotiations between the city and the company are ongoing, and as part of the terms of the potential agreement, both sides agreed to ask the court for a continuance, which was granted—the hearing will now take place Oct. 2 at the U.S. District Court in Austin.

“The city of Kyle has been in the process of discussing a potential settlement with Kinder Morgan in regards to the ongoing litigation we are involved in with them,” Mayor Travis Mitchell said when the council convened Sept. 16 after speaking with its attorneys.

The vote to negotiate the settlement came just a week after the council met to amend the ordinance, originally passed in July, that places additional restrictions on and mandates additional requirements of both pipeline companies and developers working on projects near those pipelines.

The ordinance itself was written and approved after months of vocal opposition to and legal action against the Permian Highway Pipeline—a 430-mile natural gas conduit that Kinder Morgan plans to build through parts of the city—by Kyle’s elected officials.

Before the council voted on the potential settlement, William Christian of Graves, Dougherty, Hearon & Moody—the Austin-based firm Kyle hired to defend the city against the suit—detailed the terms.

In addition to a $2.7 million payment from the company to Kyle—the first half to be delivered 30 days after completion of the pipeline and the second one year later—in exchange for exemption from the ordinance, the potential settlement would require the two parties to enter into a right-of-way use agreement that would provide the city would not be subject to additional delays or costs “above and beyond what is spelled out in state of federal statutes” and that the city issue a road-crossing permit to the company within 14 days of the execution of the settlement.

Council Member Daphne Tenorio, speaking before the vote, emphasized that the agreement is not yet final.

“I want to make sure everybody out there knows we’re not done yet,” Tenorio said. “This is just an opportunity for us to continue the talks.”

Mitchell issued a statement Sept. 20 to further explain why the city has chosen to consider the settlement:

"The City of Kyle is pursuing multiple avenues to eliminate or reduce the adverse impact that the Kinder Morgan Pipeline presents to our community, our environment, and our future.  Over the last year, the Kyle City Council has demonstrated extraordinary solidarity and resolve in the face of long odds and a complex political environment. They are committed to achieving the best outcome possible to ensure our continued ability to regulate our developments, protect our environment, and ensure public safety:

The reality is, lawsuits are expensive. Kinder Morgan made more profits in the second quarter of this year than Kyle's entire operating budget for the last decade.  The city firmly believes in their ability to regulate pipelines on the basis of infrastructure planning, but at this time the council is trying to determine what is in the best interest of the city as we face multiple lawsuits that could easily cost millions.

Ultimately, this could have been avoided if we would have had been given the opportunity to work hand-in-hand with Kinder Morgan prior to the pipeline’s route being finalized by the company. That is not our present situation.

As the council has stated many times, our opposition has not been against oil and gas pipelines in general, but rather the manner in which this particular pipeline was proposed to be installed through our city. We were not consulted, and state law is not on the side of cities in this regard.

We appreciate the patience and understanding of our community as we tackle this very difficult issue. No decisions have been finally made.

The City of Kyle would like to ask any and all residents of Texas to engage our state legislature and encourage them to give communities a better say in the pipeline routing process, better protection of landowner property rights, publicly and independently produced environmental impact studies, and the preservation of local jurisdiction’s ability to regulate these projects within their incorporated boundaries."