Critical hydrofracking cases advance through New York courts

March 22, 2013

Energy Alert

Author(s): Peter C. Trimarchi

A New York State court heard oral argument Thursday on an issue critical to the future of natural gas development in New York State: whether local zoning laws that ban hydraulic fracturing are preempted by New York law, which governs recovery of natural resources, including natural gas. These so-called anti-fracking zoning laws have been adopted across the state and, particularly, in areas of New York where the Marcellus Shale formation is found beneath the surface. Trial courts have found the zoning laws to be valid.

The Third Department of New York State’s Appellate Division (one of four mid-level appeals courts in NY) heard arguments in the Matter of Norse Energy Corporation USA v. Town of Dryden, Case No. 515227; and Cooperstown Holstein Corp. v. Town of Middlefield, Case No. 515498. In both of those cases, the courts have been asked to determine whether New York’s Oil, Gas and Solution Mining Law (“OGSML”) expressly preempts local zoning laws that regulate and/or prohibit natural gas production within a municipality.

The OGSML states that it supersedes “all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries,” except for jurisdiction over local roads or the rights of local governments under real property tax law. The towns of Dryden and Middlefield, NY, along with several other municipalities in the state, have enacted zoning laws that expressly prohibit high volume hydraulic fracturing within their borders. Industry proponents have sued certain municipalities over such zoning laws, arguing that they violate the plain language of the preemption provision in the OGSML.

In the Dryden and Middlefield cases cited above, the zoning laws were upheld. Despite the preemption language in the OGSML, the rationale employed by the courts relied on case law dealing with the mining industry, and the preemption language for mining set forth in the Mined Land Reclamation Law (“MLRL”). The courts reasoned that the preemption provisions for mining and oil and gas are inherently similar, and therefore the powers a municipality has over mining (e.g., the right to determine if mining is a permissible use) it should also have over oil and gas development.

The oral argument in the Third Department proceeded as expected. Industry proponents argued that (i) the plain language of the OGSML is distinct from the preemption language in the MLRL, (ii) the OGSML provides for express preemption of local laws or ordinances, and (iii) the permitting process administered by the state’s Department of Environmental Conservation would ensure that land use issues were adequately addressed. They also relied heavily on the policy behind the law, expressly set forth in the OGSML, which is to provide for the operation and development of gas properties in such a manner as to prevent waste and maximize recovery of oil and gas. The towns and certain amici argued that the Court of Appeals precedent interpreting the MLRL was equally applicable to OGSML, and therefore controlling. They also pointed to other New York statutes where the legislature had very clearly pre-empted local zoning laws, arguing that if the legislature intended to pre-empt such laws in the OGSML, they would have done so as clearly as they had in those other instances.

The four judges presiding on the panel (Judges Garry, Stein, Peters, and Spain) were quite engaged in the argument, posing a variety of questions to all of the parties. The panel appeared interested in determining whether the language of the statute was unambiguous (and therefore whether legislative history was relevant), whether MLRL case law was equally applicable to the OGSML, and the relevance of statutes in other contexts that more clearly pre-empt local zoning authority. A decision from the Third Department can be expected within six to eight weeks. It is likely that the losing party will appeal the decision to the Court of Appeals, New York’s highest court.

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