Friday, October 17, 2014

New York's Highest Court Denies Industry Motion to Revive Fracking Case

Sarah J. Adams-Schoen has a nice summary of a recent, important New York fracking case on her blog.  She has agreed to let us re-post it here:

Yesterday, New York’s highest court, the Court of Appeals, denied a last-ditch industry motion for reargument inMatter of Wallach v. Town of Dryden. As a result, and not surprisingly, the Court’s June 2014 decision remains the law of the land in New York.

In the June decision, the Court ruled that the towns’ authority to ban hydraulic fracturing (commonly referred to as “fracking”) within their borders pursuant to the home rule powers vested in municipalities to regulate land use was not preempted by New York’s Oil, Gas and Solution Mining Law (“OGSML”). In August 2014, Wallach filed a motion for reargument, asking the Court to reconsider its ruling in light of Colorado Oil & Gas Ass’n v. City of Longmont (D. Ct., Boulder Cnty. Co., July 24, 2014), which granted summary judgment in favor of the Colorado Oil & Gas Association, reasoning that Colorado’s oil and gas law preempted Longmont’s fracking ban. Today, the New York Court of Appeals denied Wallach’s motion for reargument without opinion.

For those unfamiliar with the underlying case, Wallach and Dryden were two appeals brought on behalf of gas and oil interests that sought to overturn lower court rulings that had rejected challenges to the upstate towns of Dryden’s and Middlefield’s zoning enactments, which banned fracking operations within their boundaries. Appellants Norse Energy Corp. USA and Cooperstown Holstein Corporation asserted that the towns lacked the authority to proscribe fracking because section 23-0303(2) of New York’s Environmental Conservation Law (“ECL”), which is the supersession clause in the OGSML, demonstrated that the state legislature intended to preempt local zoning laws that curtailed energy production.

On June 30, 2014, a 5-2 majority of the Court of Appeals affirmed the lower court in a single opinion authored by Judge Graffeo. The majority applied the “home rule” provision of the state constitution, the Municipal Home Rule Law, and the plain language of the Court’s prior holdings in Frew Run Gravel Products v. Town of Carroll and Matter of Gernatt Asphalt Products v. Town of Sardinia to arrive at the conclusion that the OGSML “does not preempt the home rule authority vested in municipalities to regulate land use.”

New York State Constitution Article IX is the provision that grants local governments the authority to regulate land use and provides that “every local government shall have power to adopt and amend local laws not inconsistent with the provisions of this constitution or any general law … except to the extent that the legislature shall restrict the adoption of such local law.”

According to the Wallach majority, the OGSML is not a restriction on the adoption of zoning laws because it only supersedes “all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries” and not the designation of areas in which mining is either permitted or prohibited. Since zoning does not regulate mining or the mining industry, but rather designates the areas where mining is permitted, the Court found that local zoning laws do not constitute regulation of the industry and are therefore not covered by the OGSML suppression clause.

This language in the OGSML is virtually identical to language in New York’s Mined Land Reclamation Law (“MLRL”) considered by the Court in Frew Run 25 years ago. In Frew Run, the Court of Appeals held that the MLRL’s prohibition against “local laws relating to the extractive mining industry” did not preempt local zoning laws. The Frew Run Court had interpreted this language in conjunction with municipal home rule powers and concluded that “local laws that purported to regulate the ‘how’ of mining activities and operations were preempted whereas those limiting ‘where’ mining could take place were not.” Thus, it would seem that the only path the Court could have taken to strike Dryden’s and Middlefield’s zoning laws would have been to overrule Frew Run.

The Court’s analysis conforms to traditional concepts of municipal zoning authority. Practically speaking, zoning laws have always regulated where businesses, such as retail stores, banking, and gas stations may be located, but not how they operate (e.g., hours of operation and labor policies). No basis in law exists for treating zoning related to extractive mining processes differently.

What then of the Towns of Dryden’s and Middlefield’s absolute ban on mining via their zoning laws? Weren’t they regulation of mining?

Yes, according to the July 2014 Colorado decision. But, no, according to the majority in Wallach. While the local ordinance in Frew Run delineated the zoning districts in which mining was banned, the local law under consideration in Gernatt, the other case upon which the New York opinion relied, eliminated mining as a permitted use anywhere in the town borders. In Gernatt, the Court of Appeals, relying on Frew Run, ruled that an absolute mining ban was a reasonable use of a town’s police and zoning powers.

Relying on Gernatt, Judge Graffeo upheld the two towns’ actions:

Manifestly, Dryden and Middlefield engaged in a reasonable exercise of their zoning authority as contemplated in Gernatt when they adopted local laws clarifying that oil and gas extraction and production were not permissible uses in any zoning districts. . . .

[T]here is no meaningful distinction between the zoning ordinance we upheld in Gernatt, which “eliminate[d] mining as a permitted use” in Sardinia, and the zoning laws here classifying oil and gas drilling as prohibited land uses in Dryden and Middlefield.

The June 2014 opinion was also careful to emphasize that it was passing no judgment on the merits of fracking and noted that

“These appeals are not about whether hydrofracking is beneficial or detrimental to the economy, environment or energy needs of New York.”

Rather, the Court explained, the appeals are concerned only with “the relationship between the State and its local government subdivisions, and their respective exercise of legislative power.”

Writing for the dissent, Judge Pigott took the view, in which Judge Smith concurred, that the zoning laws of “Dryden and Middlefield do more than just regulate land use, they regulate oil, gas, and solution mining industries under the pretext of zoning.” The dissent argued that the Dryden and Middlefield ordinances are distinguishable from the ordinances in Frew Run and Gernatt, because the Dryden and Middlefield ordinances apply to the entire municipality and do more than eliminate fracking as a permitted use by, for example, going into detail concerning prohibitions against gas storage, petroleum exploration, and production materials and equipment.

Rejecting these arguments, the majority reaffirmed that “the regulation of land use through the adoption of zoning ordinances [is] . . . one of the core powers of local governance,” noting that the Court has “repeatedly highlighted the breadth of a municipality’s zoning powers ‘to provide for the development of a balanced, cohesive community’ in consideration of regional needs and requirements.” The majority explained that the Court does not “lightly presume preemption where the preeminent power of a locality to regulate land use is at stake. Rather, [the Court] will invalidate a zoning law only where there is a ‘clear expression of legislative intent to preempt local control over land use.” And here, following the analytical framework articulated in the Court’s prior decisions, the Court reaffirmed that the OGSML did not contain a clear expression of legislative intent to preempt local control over land use.

Thus, notwithstanding a Colorado court’s contrary opinion, yesterday’s order reaffirmed the right of New York municipalities to regulate where fracking may occur, including the right to ban fracking entirely within their boundaries, pursuant to the home rule authority vested in municipalities to regulate land use.

Commenting on yesterday’s denial of the Wallach motion to revive the case, Earthjustice Managing Attorney Deborah Goldberg, who represented the Town of Dryden, opined that

“We are not surprised that the Court refused to give the oil and gas industry a second bite at the apple. The law of the state is clear, and it supports local zoning of high impact industrial land uses. But we’ll gladly celebrate with the people of Dryden and communities throughout New York whose rights once again have been upheld.”

You can find the Court’s June 2014 opinion here, yesterday’s order (no opinion) here (see page 11), and Wallach’s motion for reargument here.

| Permalink