In New York, municipalities can more effectively seek to “zone out” oil and gas operations by passing zoning ordinances. An appellate panel of the New York Supreme Court affirmed the decision of a lower court, holding local municipalities have the power to enact zoning ordinances that ban “all activities related to the exploration for, and the production or storage of, natural gas and petroleum within its borders.” Town of Dryden et al., v. Norse Energy Corp., New York State Supreme Court, Appellate Division Third Department (May 2, 2013).

Back in 2011, the Town of Dryden, New York amended its zoning ordinance to ban all activities related to the exploration for, and the production or storage of, natural gas and petroleum. Anschutz Exploration Corporation, an operator with oil and natural gas wells leases covering approximately 22,200 acres of land in Dryden, filed suit seeking invalidation of the zoning ordinance amendment. The NY Supreme Court granted Dryden’s motion for summary judgment, holding that the zoning ordinance was not preempted by the New York Oil, Gas and Solution Mining Law (OGSML).

In the latest appeal, the court focused primarily on the question of whether the OGSML prempts Dryden’s zoning amendment, which bans “all activities related to the exploration for, and the production or storage of, natural gas and petroleum.” In focusing on the “Home Rule” concept, the court noted that the NY Constitution grants “every local government [the] power to adopt and amend local laws not inconsistent with the provisions of [the] constitution or any general law relating to its property, affairs or government.” One of the local powers granted to municipalities is the “authority to regulate the use of land through the enactment of zoning laws.” After evaluating the power ceded to localities in New York, the court considered whether the text of the OGSML includes any provisions that preempt Dryden’s ordinance.

Express Preemption

The OGSML contains an express preemption clause that provides that the statute “shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries.” The court found that, while the plain language of the OGSML prohibits municipalities from enacting ordinances “relating to the regulation of the oil, gas and solution mining industries,” zoning ordinances like the one in Dryden do not actually seek to regulate “the details or procedure of the oil, gas and solution mining industries.” The court noted that while Dryden’s ordinance will have an “incidental effect” on the oil and gas industry, zoning ordinances are “not the type of regulatory provision that the Legislature intended to be preempted by the OGSML.”

Implied Preemption

The court next considered whether the Dryden ordinance was invalid based on the doctrine of implied or conflict preemption, which generally occurs when a local government’s law is inconsistent or in conflict with a state constitution or law. Petitioners argued that the Dryden ordinance was invalid because industry could not comply with both the ordinance and the OGSML well spacing provisions, which provide that wells must be drilled and spaced in a manner that maximizes resource recovery and minimizes waste. In finding that the OGSML provisions and the Dryden zoning ordinance “could harmoniously coexist,” the court held that the well spacing provisions are technical in nature and “distinct” from Dryden’s zoning authority, and that the ordinance does not “conflict with the state’s interest in establishing uniform procedures for the operational activities” of the oil and gas industries. The court reasoned that it could “find nothing in the language, statutory scheme or legislative history of the statute indicating an intention to usurp the authority traditionally delegated to municipalities to establish permissible and prohibited uses of land within their jurisdictions.”

Increased oil and gas development associated with the shale gas revolution has forced many counties, towns and other municipalities to consider controlling the level of development within their jurisdiction. The ability to enact such restrictions varies from state-to-state, and key test cases like Dryden continue to roll forward in New York, Pennsylvania and elsewhere