The basic operating principles for land use have now been established in two of the three states that sit above the productive Marcellus Shale formation.
In the 5-2 decision, handed down less than a month after oral argument, the New York State Court of Appeals, New York's highest state court, determined that local bans of fracking in two towns were not preempted by the supersession clause of New York's Oil and Gas and Solution Mining Law (OGSML). Wallach v. Dryden and Cooperstown Holstein Corp v. Middlefield, New York. The decision affirms two rulings from the Appellate Division of the New York State Supreme Court, which had upheld local fracking bans in 2013.
Fracking proponents had argued that the case presented straightforward issues of statutory preemption and that it was in no one's interest to have each of New York's 932 towns retain the power to affect state energy policy by banning fracking. Fracking opponents successfully argued, however, that the OGSML did not address zoning explicitly, nor did it contain enough evidence of legislative intent to preempt this fundamental power of local government.
In New York, where approximately 70 municipalities have enacted bans and another 100 have enacted temporary moratoriums on oil and gas development, the decision may shape the landscape of where wells may be placed, notwithstanding ongoing statewide efforts to complete a statewide health and safety study as a precursor to statewide environmental regulations. In particular, the Court cited the conclusion of the Town Board of Cooperstown, which feared that the industrialization accompanying hydrofracking would "irreversibly overwhelm" the character of that town.
The Court found critical underpinning for its analysis in ArticleIX of the New York Constitution, the so-called "home rule" provision. The Court required that there be a "clear expression" of legislative intent to preempt these powers, in support of matters of statewide concern. To fashion its analysis, the Court looked at the plain language of the supersession clause; the statutory scheme as a whole; and legislative history. The Court also examined a case that had arisen in the sand and gravel mining industry, Matter of Frew Run Gravel Prods. v. Town of Carroll, 71 NY2d 126 (1987), in which a similar clash of interests had arisen.
The Court rejected the industry's argument that a savings clause in the supersession provision, which preserved local control of roads and real property tax, demonstrated that the supersession clause itself was intended to be broad and comprehensive. In the Court's view, these two areas – roads and taxes – touched on the unique operational aspects of the oil and gas industry, i.e. the "how" rather than the "where" of fracking, and thus had to be excluded otherwise they would have been preempted. It did not follow, however, that the supersession clause could be fairly read to pre-empt local laws governing the "where" of fracking, the Court reasoned. This result was consistent with the earlier holding in Frew Run, in which preemption of the supersession provision was found not to encompass local zoning laws at all, making an analysis of any "savings" provisions largely irrelevant.
Similarly, the overall statutory context of the OGSML supported a view that the legislature intended to regulate the technical methodology and consequences of oil and gas development without intending to preempt local laws that spoke to the right to conduct the operations at all in any given place. Likewise, the legislative history of the OGSML provided no support for overturning the place of local zoning in the overall legislative fabric.
The dissent noted that the consequences of a total ban on hydrofracking, as well as the language used by the municipalities of Dryden and Middlefield to accomplish it, went beyond traditional zoning concerns and spilled over into the regulation of the oil and gas industry, a result prohibited by the preemption clause of the OGSML.
The New York court's ruling takes on added significance, coming after the Pennsylvania Supreme Court's decision in Robinson Township v. Commonwealth of Pennsylvania1 found that certain provisions of Pennsylvania's Act 13, a later attempt at statewide oil and gas regulation unconstitutionally restricted the power of municipalities to govern gas drilling.2
Pennsylvania has a long history of oil and gas operations. It moved comparatively quickly to capitalize on fracking as a technique to unlock previously inaccessible natural gas reserves. In an effort to streamline and optimize the development of these operations, the Pennsylvania Legislature passed Act 13 in February, 2012, which repealed Pennsylvania's Oil and Gas Act and replaced it with a statutory framework regulating oil and gas operations in the Commonwealth, preempting local regulation and superseding local environmental laws and zoning code provisions except in limited instances, such as setbacks in areas involving oil and gas operations. Act 13 also gave the power to eminent domain to companies that transport, sell or store natural gas and required uniformity of local ordinances.
In focusing its analysis on the Environmental Rights Amendment, the Pennsylvania Supreme Court chose a constitutional vehicle which had no replica in any other state, picking the first and most salient constitutional analysis available to it to reach its conclusions and invalidate provisions if the Oil and Gas Act, and leaving largely unexplored the more traditional, constitutional challenges. Now New York's highest court has construed the more common constitutional provision of home rule, a form of which exists in a vast majority of state constitutions, and come to a similar conclusion. It now appears as if the battle over well siting in these states will occur from town hall to town hall.