Tuesday, September 13, 2011

Looming Preemption Battles in Appalachia?

The Wall Street Journal reports that two ballot measures in Pennsylvania--in Peters Township and State College--have proposed to ban natural gas extraction, and the town of Warren is considering a similar ban.  The Journal believes that these are the first voter-led anti-gas provisions.  Several other Pennsylvania, New York, and West Virginia towns, including Pittsburgh, Ithaca, Morgantown, and Oneonta, among others, already have attempted to ban gas extraction or hydraulic fracturing for gas through city council, town board, or common council votes.  It is not clear, though, that these bans-- whether enacted by town governments or citizens--would hold up in court if challenged. Indeed, a county court already has struck down the attempted ban by Morgantown, West Virginia.

Both Pennsylvania and New York expressly preempt local regulation of oil and gas extraction.  Pennsylvania's Oil and Gas Act reads: "Except with respect to ordinances adopted pursuant to the ... Municipalities Planning Code, and the ... Flood Plain Management Act, all local ordinances and enactments purporting to regulate oil and gas well operations regulated by this act are hereby superseded." 58 Pa. Cons. Stat. 601.602 (2011) (emphasis added).  New York similarly provides that "[t]he provisions of this article shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries; but shall not supersede local government jurisdiction over local roads or the rights of local governments under the real property tax law."  NY Envtl. Conserv. 23-0303 (2011). The Supreme Court of Pennsylvania has determined that towns may enact "traditional zoning regulations that identify which uses are permitted in different areas of the locality, even if such regulations preclude oil and gas drilling in certain zones."  Range Resources Appalachia LLC v. Salem Tp., 600 Pa. 231, 236 (2009) (citing Huntley & Huntley, Inc. v. Borough Council of the Council of Oakmont, 600 Pa. 207, 223 (2009)).  Municipalities may not, however, "attempt . . . to enact a comprehensive regulatory scheme relative to oil and gas development within the municipality."  Range Resources, 600 Pa. at 240.  The New York Supreme Court of Erie County similarly has held that a town may not impose bonding and permit fee requirements only on oil and gas wells because this impermissibly singles them out and is preempted by New York's Environmental Conservation Law.  Envirogas, Inc. v. Town of Kiantone, 112 Misc.2d 432, 434-35 (N.Y.Sup. 1982).  West Virginia, in contrast, does not have a clear preemption provision for local regulation of oil and gas extraction, but in August, a county court determined that the state has "assumed control of a particular subject of regulation" by enacting a "comprehensive regulatory scheme" for environmental control of oil and gas drilling--a scheme solely implemented by the West Virginia Department of Environmental Protection that does not leave any room for local regulation according to the court. 

Yet another interesting jurisdictional conflict in gas regulation may arise from the Delaware River Basin Commission's proposed regulation of fracturing in the Basin.  These regulations would require bonding requirements and fees in addition to state bonding mandates (see page 21--"The financial assurance required by this Section is separate from any financial assurance provided to the host state in accordance with state regulations") and a nonpoint source pollution control plan for certain well sites--a plan that the Commission concedes may require an "Administrative Agreement between the Commission and the host state." The DRBC regulations also would require gas well pad sites to be set back 500 feet from wetlands, water bodies, and other water sources, whereas Pennsylvania, a member state of the Delaware River Basin Compact, only mandates a 100-foot well setback from wetlands greater than one acre and from streams, springs, and bodies of water.  58 Pa. Cons. Stat. 601.205(b) (2011).  New York, in turn, (also a Compact member) would require a "site-specific" assessment only for well pads within 150 feet of streams, storm drains, lakes, or ponds.  Whose regulations will win?  Very likely the DRBC's for gas development within the Basin, if and when its regulations emerge from litigation.  New York and Pennsylvania, after all, agreed to be part of the Delaware River Basin Compact, which provides that state projects affecting water resources and "related to powers delegated to the commission . . . shall be undertaken in consultation with the commission."  The states also are voting members of the DRBC and could object to the regulations through the voting process, and, as New York has suggested, rules of the DRBC are of a federal nature (see New York complaint arguing that "[t]he development of the DRBC Regulations authorizing natural gas development within the Basin under the Compact . . .  is a 'federal action"); these rules likely sit on a higher peg than state regulations. 

Questions about the interaction between federal and/or regional regulation of gas drilling and certain state regulations, as well as state preemption of local controls on gas drilling, will be increasingly important, particularly as New York moves slowly toward allowing high-volume hydraulic fracturing in the Marcellus Shale--an activity not yet permitted in the state. 

-Hannah Wiseman



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