Client Alert

While many key provisions of Act 13 have now been struck down by the Supreme Court’s two Robinson decisions, much of the Act remains.

Act 13 of 2012 represented a major overhaul of Pennsylvania’s oil and gas law and recodified the Oil and Gas Act of 1984 by adding new provisions that were organized into three new parts and six new chapters. One of the legislature’s goals was to provide uniformity for oil and gas development. Since it was signed into law on February 14, 2012, Act 13 has been the subject of intense litigation by municipalities, activists and a physician, who targeted specific provisions of the law. The litigation has resulted in two lengthy decisions from the Pennsylvania Supreme Court, the latest being issued on September 28, 2016. See Robinson Twp. v. Commonwealth, No. 104 MAP 2014 (Pa. Sept. 28, 2016) (Robinson IV). While many of the key provisions of Act 13, which were supposed to provide uniformity throughout the Commonwealth to promote the development of the oil and natural gas industry, have now been struck down by the Supreme Court, much of Act 13 remains. This article analyzes the Supreme Court’s decisions and looks at the surviving portions of Act 13.

On December 19, 2013, on appeal from the Commonwealth Court, the Pennsylvania Supreme Court struck down several provisions of Act 13 that restricted the ability of municipalities to promulgate their own zoning ordinances applicable to the natural gas industry. See Robinson Twp. v. Commonwealth, 83 A.3d 901 (Pa. 2013) (Robinson II). Specifically, the Supreme Court struck down the preemption clause of Act 13, 58 Pa. C.S. § 3303, which declared that any local ordinances seeking to regulate oil and gas operations were preempted. Similarly, section 3304, which required that “all municipal ordinances regulating oil and gas operations be uniform” and mandated that certain drilling and ancillary activities related to the production of natural gas be allowed in every zoning district, were declared unconstitutional by the court. The court also enjoined the application and enforcement of sections 3215(c) and (e) and sections 3305 through 3309 to the extent those provisions implemented or enforced the invalidated provisions limiting localized zoning restrictions applicable to the oil and gas industry. The Supreme Court also struck down sections 3215(b) and (d), which governed setback and spacing requirements for wells and which prohibited municipalities from seeking review of decisions or permits issued by the Pennsylvania Department of Environmental Protection (DEP).

The Supreme Court remanded the case back to the Commonwealth Court and instructed it to determine whether sections 3305 through 3309 could still survive without sections 3304 and 3305.

On remand, the Commonwealth Court concluded that sections 3305 through 3309 were not severable from sections 3303 and 3304 and, therefore, could not survive. See Robinson Twp. v. Commonwealth, 96 A.3d 1104 (Pa. Commw. Ct. 2014).

On appeal back to the Pennsylvania Supreme Court, in Robinson IV, the court agreed that sections 3305 and 3309 were not severable. Sections 3305 and 3306 permitted the Public Utility Commission (PUC) and the Commonwealth Court to decide whether a local ordinance violated the Municipal Planning Code (MPC) and provided procedures for the expedited review of local ordinances. Sections 3307 and 3308 penalized municipalities if local ordinances did not meet the requirements of the MPC. Section 3309 stated that Act 13 applied retroactively and gave municipalities time to take necessary actions to bring existing ordinances into compliance. These attempts at creating a uniform set of laws governing oil and gas operations throughout the Commonwealth are no longer in effect.

Additionally, in Robinson IV, the Pennsylvania Supreme Court struck down sections 3222.1(b)(10) and (11), which were designed to provide trade secret protections to the chemicals used in the hydraulic fracturing process by placing limits on what could be disclosed to health professionals and requiring health professional to agree to keep any information provided to them confidential. The Supreme Court concluded that the oil and gas industry was receiving “special treatment not afforded to any other class of industry” and that there was no justifiable reason to provide such special treatment, which other industries, with similar concerns, would like to receive.

The Supreme Court also struck down section 3218.1, which required the DEP to notify only public drinking water facilities that could be affected by a spill. Similar to the rationale employed in striking down sections 3222.1(b)(10) and (11), the Supreme Court struck down the notification law as a “special law” because Act 13 was enacted “to secure the health, safety, and property rights for all Pennsylvania residents during the oil and gas extraction process, without exception” and it did “not further the legislative goal of ensuring [that private well owners] may exercise their right to have the integrity of their water supply secured in the event it is threatened by pollution from a spill.” The Supreme Court issued a stay of its decision for 180 days to provide the legislature an opportunity to reach a legislative solution (i.e., presumably to reenact this provision to include private drinking water sources). If no action is taken, then the entire provision is stricken. This, however, has no impact on exploration and production companies’ obligations to report spills to the DEP.

Lastly, the Supreme Court in Robinson IV struck down section 3241, which granted to private companies the power of eminent domain for gas storage under certain circumstances. The court found this section violated the U.S. and Pennsylvania constitutions because the power was not limited to public utilities.

The takeaways from the Supreme Court’s decision in Robinson IV are (1) that the PUC no longer has authority to review municipal ordinances to ensure consistency with Act 13; (2) that medical professionals are no longer prevented from obtaining the chemical composition of fluids used in the fracturing process if they refuse to sign a confidentiality agreement; (3) that oil and gas companies do not have the power of eminent domain under Pennsylvania law to develop underground storage fields; and (4) that the DEP cannot be limited to only notifying operators of public drinking water facilities in the event of a spill.

Thus, after the Robinson II and Robinson IV decisions, the following provisions of Act 13 remain in effect:

  • the impact fee for unconventional wells located in Chapter 23 of Act 13

  • the provisions governing the Oil and Gas Lease Fund contained in Chapter 25 of Act 13, which were previously a part of the Oil and Gas Act and provide for an allocation of funds for the Marcellus Legacy Fund

  • the provisions of Chapter 27 of Act 13 creating the Natural Gas Energy Development Program to foster the development of natural gas-powered vehicles and other machinery operating combustible engines

  • most of Chapter 32 of Act 13, which provides the substantive regulations governing drilling activities, remains in effect, including the increased presumed liability radius for water sources located near drilling sites, the ability of the DEP to enter into contract with private well control teams (which also receive immunity from suit), the reporting of chemicals to, and increased bonding limits and fines (Out of Chapter 32, 58 Pa. C.S. §§ 3215(b), (c), (d), and (e); 59 Pa. C.S. § 3218.1; and 58 Pa. C.S. §§ 3222.1(b)(10) and (11) were struck down.)

  • the provisions of Chapter 35 of Act 13 pertaining to impact fee responsibility.

Local municipalities are now only constrained by the MPC when enacting local ordinances that will affect oil and gas development. Some municipalities are also enacting a “Community Bill of Rights” ordinance that specifically targets oil and gas companies. Thus, it is likely that municipalities that attempt to place unreasonable restrictions on oil and gas development will face challenges to those unreasonable restrictions.

Currently, there are proposed amendments to Chapters 78 and 78a of the Pennsylvania Code, which are set to take effect at the end of this year. Click here to read Pepper’s analysis of these proposed regulations.

The purpose of those amendments is to update the requirements relating to surface and drilling activities, as well as clean-up requirements, for conventional and unconventional wells. Based on the ruling by the Pennsylvania Supreme Court in Robinson IV, it is now unlikely that the implementation of these amendments will be impacted by the remaining provisions of Act 13.