Friday, April 25, 2014

PA Courts, Hydraulic Fracturing, and the Energy-Business Law Nexus

Regular readers know of my view that energy and energy law are closely related to business and business law.  Further to that point: Last week, a group of 20 organizations, including those representing the interests of business, oil, coal, aggregate, farm, and power sent an open letter to Pennsylvania state legislators stating their concerns about the state supreme court's decision in Robinson Township v. Commonwealth of Pennsylvania.  That decision overturned Act 13, which largely eliminated local government's ability to prevent oil and gas operations in their jurisdictions through zoning.  The letter explains:

The opinion undermines the traditional and long-recognized authority of the Legislature to balance environmental and economic interests on a statewide basis, leading to the spectra of multiple levels of government and a myriad of agencies second guessing each other in deciding whether to approve particular developments and how to manage natural resources. This expansive, broad and vaguely case-by-case application of the Environmental Rights Amendment threatens to reestablish the very uncertainty and ambiguity that Act 13 and many other statutes were originally intended to address through adoption of a holistic, comprehensive regulatory program that carefully balances the Commonwealth twin interests in economic progress and environmental stewardship. 

The plurality opinion opens the door to a myriad of litigation, at all levels of government, attempting to thwart virtually any type of industrial, agricultural, commercial or residential facility and development. The affects of this ruling will be felt by employers in all industries and will certainly adversely impact efforts to promote job creation throughout the state.

I agree with these organizations on a number of issues here.  First, I think they are right the state legislature had the power to pass Act 13,  or at least something similar. I also agree that the plurality opinion unnecessarily invites litigation in a variety of contexts that could negatively impact both business and the environment.  On the other hand, I think that the legislature took an unnecessarily heavy-handed approach to the legislation when a more modest version of the act could have been similarly effective. 

As I have explained previously, though there are very real risks related to hydraulic fracturing for oil and gas, much of the public, many politicians, and (in this case) judges are too easily distracted by risks that seem like they could be associated with the process, but aren't. When judges assume facts, bad law (and bad policies) are very likely to follow. Building on that assessment, I have posted my article, Facts, Fiction, and Perception in Hydraulic Fracturing: Illuminating Act 13 and Robinson Township v. Commonwealth of Pennsylvania on here on SSRN.  Please click below to continue reading.

Here's the abstract: 

Hydraulic fracturing for oil and natural gas is perhaps the most polarizing energy issue in the United States and around the world, and Pennsylvania has emerged as an example of passionate views both for and against hydraulic fracturing for shale gas. To limit local government restrictions on gas drilling, the Pennsylvania legislature passed Act 13 in September 2012, and the Act largely eliminated the ability of local governments to restrict oil and gas operations through zoning. The Pennsylvania Supreme Court overturned Act 13 in December 2013. 

This Article reviews how Act 13 came to be, highlights the key provisions of the Act, and explains the various rationales used by the court to overturn the Act. The Article then takes a critical look at the Pennsylvania Supreme Court’s reliance on unsupported facts and illustrates how even well-meaning assumptions applied to highly complex issues can cause more harm then good. The Article further argues that the court did not sufficiently analyze the full scope of environmental impacts of Act 13 and the related natural gas output that would accompany it. After the court decided to engage in the environmental analysis (rather than deferring to the legislature on policy matters), a detailed fact-gathering and analysis process was warranted to avoid adopting common misconceptions as legal facts. 

To be clear, this Article does not argue that the court was wrong to question the potential environmental impacts of hydraulic fracturing. Instead, it argues that the court’s decision failed to consider the full host of potential environmental risks related to energy extraction and production, which provide necessary context when considering the proper way to manage the corpus of the public trust and enforce the environmental protections mandated by the Pennsylvania Constitution. The Article cautions that a majority of the court appears to have relied on “fracking distractions,” which are real social or environmental risks that are incorrectly, and inappropriately, linked with hydraulic fracturing. Despite the court’s laudable focus on environmental protection, the Article also argues that the decision could cause unintended problems beyond the natural gas industry, unless future courts read the case narrowly. The Article concludes that a more tailored version of Act 13 may be feasible and that a renewed commitment to determining and analyzing the full complement of pertinent facts related to hydraulic fracturing is warranted and necessary to minimize potential environmental and social harms and to maximize potential benefits.

There are, as one would expect, other views of the case. For a different, but valuable and important, critique of the case, I highly recommend a paper written by Widener University School of Law's John C. Dernbach, James May, and Kenneth Kristl, Robinson Township v. Commonwealth of Pennsylvania: Examination and Implications.  That paper takes the view that the decision "reinvigorated Pennsylvania's environmental rights and public trust amendment."  The paper can be found here.

Still, I think the opinion, does more harm than good.  Creating policies that provide safe, reliable, and cost-effective energy is difficult, especially when such policies are appropriately also intended to help protect the environment.  I remain convinced we can balance economic development and environmental protection if we are truly committed to both. Just as important, environmental policies that don't account for the reality that energy production and delivery will happen are counterproductive.  Even if well intended, such policies are more likely to entrench the status quo than promote effective and less harmful paths forward.  That's the risk I see in Robinson Township,and I hope future courts read the decision narrowly to minimize that risk. 

http://lawprofessors.typepad.com/business_law/2014/04/pa-courts-hydraulic-fracturing-and-the-energy-business-law-nexus-.html

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