Shale Gas Perspectives – Gas Drilling Opponents Suffer Two Setbacks to Ring-In the New Year (Vol. II, No. 1)

Kenneth S. Kamlet, Esq., Hinman, Howard & Kattell, LLP, kkamlet@hhk.com

A Periodic Blog on the Status of Marcellus Shale Development in the Southern Tier of New York – and Other Interesting and Exciting Developments in the Law, Science and Politics of Natural Gas Development (Or Not) in the Empire State.
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Disclaimers: Since this edition of the blog reports on matters litigated by Hinman, Howard & Kattell, LLP, it could be considered ATTORNEY ADVERTISING.  Also, readers should note that “Prior results do not guarantee a similar outcome” in other cases.  The HH&K attorneys involved were the author and Robert H. Wedlake, Esq.

(January 16, 2014)

Introduction

Landowners in the Southern Tier of New York—prime Marcellus Shale territory—were heartened by two legal developments in early January.  And, while seeking to minimize the significance of these developments, gas drilling opponents experienced less joyful sentiments.[1]

The first setback to opponents of gas drilling came as the newly-elected Mayor of Binghamton, Rich David, directed lawyers for the City (special counsel David and Helen Slottje of the Ithaca-based Community Environmental Defense Council) to withdraw the City’s appeal of a Broome County Supreme Court decision (Oct. 2, 2012) invalidating a two-year moratorium on gas drilling and various support activities.[2]  In a January 14, 2014 press release, the Mayor said that he had directed the City Attorney “last week” (his first full week in office) to withdraw the City’s appeal.  The Mayor cited three reasons for his action:

1.         The [two-year moratorium law] “expired on December 31, 2013”;

2.         “To ban an action that has not even been approved in New York [is] premature….  There is no point moving forward with a ban or appeal until the Governor receives the findings from the Department of Environmental Conservation and Department of Health and renders a decision [on whether or not to resume the issuance of State gas drilling permits]”; and

3.         “Even if the State does approve Fracking there will never be drilling within City limits for a variety of reasons.”

In his comments to the Press & Sun-Bulletin, Mayor David acknowledged that “[t]his was an intentional decision to not allow this (appeal) to navigate through the court” and “to block future attempts to revive the moratorium.”

The second setback to opponents came in a Delaware County Supreme Court decision (dated January 8, 2014 and entered on January 9th) invalidating a one-year gas drilling moratorium enacted by the Sidney Town Board on February 14, 2013.[3]  The Court denied a motion to dismiss by the Town’s special counsel (David and Helen Slottje) and granted the cross-motion for summary judgment by the petitioner/plaintiff (Inge Grafe-Kieklak),[4] declaring Town of Sidney Local Law Number 1 of 2013 “invalid.”

In his four-page Decision and Order, Judge Lambert invalidated Sidney’s moratorium law on three separate grounds, declined to address a fourth claim (“[i]nasmuch as [he had already decided that the Local Law] was not properly enacted”), and did not even mention a fifth claim.[5]  The Judge based his decision on the three arguments raised in landowner Grafe-Kieklak’s “Article 78” petition.[6]

The three Article 78 arguments can be summarized as follows, along with the Court’s clear and concise decision and reasoning on each:

1. County Referral Requirement.  To promote inter-municipal coordination on important land use decisions, the General Municipal Law (section 239-m) requires local governments to refer certain proposed actions, including “adoption or amendment of a zoning ordinance or local law,” to the County Planning Board for review.  In the event that the County Planning Board recommends disapproval and provides a rationale, the Town is free to proceed with the proposed action—but only if the action is approved by a “supermajority” (in this case, at least 4 votes within the 5-member Town Board).  The Town of Sidney passed the moratorium law, but with only a simple majority—and without any reference to the County Planning Board’s disapproval recommendation.  The Town’s lawyers argued that the moratorium law did not amount to “adoption or amendment of a zoning ordinance or local law” and, besides, the three Board members who voted for the moratorium and were in attendance when the County Planning Board presented its determination, did not receive timely written notification and allegedly could not actually hear the decision announced by the County Planning Board.  Judge Lambert rejected the Town’s contentions, stating: “Since a majority of the members of Sidney Town Board… were present at the time that report was given, this arguably constituted substantial compliance with GML §239-m.”  The Judge apparently had no problem viewing enactment of the moratorium law as the adoption or amendment of a zoning ordinance, since gas drilling and its associated activities which were prohibited by the moratorium were at least potentially possible prior to the moratorium.

2.  Landowner Protest Petition.  Section 265 of the New York State Town Law allows landowners in certain circumstances to protest proposed amendments or changes to zoning regulations, restrictions or boundaries.  At the February 14, 2013 Town Board meeting, resident and landowner Everett J. Wood presented such a Protest Petition to the Town Supervisor in the presence of the rest of the Board.  The Petition was signed by 107 owners of record of real property in the Town of Sidney, collectively accounting for more than 8,000 acres—more than 26 percent of the total land area.  This is well in excess of the “twenty percent or more” of the land acreage required to trigger the separate supermajority override requirement of Town Law §265.  Again, the Town disregarded the Petition and the supermajority approval requirement and proceeded to approve the moratorium law by a simple majority.  Once again, the Town’s attorneys argued that the moratorium law was not a change to zoning regulations or restrictions.  Again, Judge Lambert disagreed.  “Given that the Town Board only approved this law by a bare majority vote, said law was not properly enacted ….”

3. Town Planning Board Referral Requirement.  Section 1600 of the Town of Sidney’s Zoning Ordinance requires that any propose amendment, supplement, or repeal of the regulations and provisions of the Zoning Ordinance must be submitted to the Town Planning Board for report and recommendation prior to the public hearing on such proposed change by the Town Board.  This was not done.  The only defense offered was that the moratorium was not a proposed zoning amendment—despite the declarations in the moratorium law that it is a “land use regulation” and that it is intended to control land use planning and the physical use of land and property within the Town.  Again, Judge Lambert did not “buy” this defense, finding that “Local Law Number 1 of 2013 is a land use regulation and is intended to control land use planning and the physical use of land and property within the Town.” The Judge concluded: “Given that the Town did not refer [the Local Law] to the Town Planning Board, said law was defective ….”

Having deftly hammered these three “nails” into the “coffin,” Judge Lambert declared the moratorium law “INVALID.”

 

The Two Unaddressed Issues in the Sidney Case

 

Two issues raised in the landowners’ declaratory judgment action and summary judgment motion, which were left undecided by Judge Lambert, were the “moratorium” issue and the “dormant commerce clause” issue.  The Judge mentioned the moratorium issue but did not address it because he had already determined that the Local Law “was not properly enacted” and had declared it “INVALID.”  The commerce clause constitutional issue, although extensively briefed, was not even mentioned—presumably because courts are loathe to declare legislation unconstitutional if there are any other grounds for resolving a dispute.

The moratorium issue involves caselaw setting forth necessary prerequisites, such as a showing of “dire necessity,” before a valid moratorium can be enacted.  This was the basis for Judge Lebous’s invalidation of Binghamton’s moratorium law in the Jeffrey v. Ryan case.[7] 
            Suffice it to say that counsel for the landowner in the Sidney case had multiple reasons for believing that the Town did not satisfy the applicable moratorium prerequisites—including an email from the Town Supervisor acknowledging that the Town neither took nor planned any action during the timeframe of the moratorium to better protect Town residents against the gas drilling-related evils claimed to be the basis for needing the Local Law.

Finally, the constitutional claim which, if addressed and decided, would have had by far the broadest regional, state, and national implications of all of the issues raised in the Sidney case, dealt with the issue of when the cumulative impact of more than 170 municipal gas drilling bans and moratoria in New York State, coupled with the statewide de facto moratorium that has been in effect for 5-1/2 years, collectively amount to an impermissible burden on interstate commerce under Article I, Section 8, Clause 3 of the U.S. Constitution.  The constitutional analysis included in the Sidney legal papers is summarized and amplified in a previous Blog post.[8]

So, Will the Recent Binghamton and Sidney Decisions Have Any Real Impact?

Like Beauty, legal perspectives are in the eye of the beholder.  One anti-drilling lawyer, Deborah Goldberg of Earthjustice, who is involved in the Dryden and Middlefield cases, told the Oneonta Daily Star that “[t]he oil and gas industry is making a big to-do about nothing” and “[t]hese cases [Binghamton and Sidney] are going to have no impact whatsoever on the cases involving Middlefield and Dryden.”  She dismissed the Sidney decision as being based on a “technicality.”  It is true that the Dryden and Middlefield cases turn on a distinctly different issue than the Binghamton and Sidney cases and that these cases will likely have little or no influence on the Court of Appeals in the Dryden and Middlefield cases.  But, what she calls a “technicality” are important procedural issues designed for the protection of landowners.  But, as will be discussed, the likely lack of impact on the Dryden and Middlefield appeals and the procedural nature of the decisions, do not negate the importance of the Binghamton and Sidney decisions.

David Slottje, special counsel for the Town of Sidney, said simply “we respectfully do not agree with the judge’s holding [in the Sidney case] that the town’s moratorium here is a ‘zoning amendment.’” 

As to the City of Binghamton’s decision to withdraw its appeal of the decision invalidating that moratorium law, Helen Slottje (who, along with her husband David, served as special counsel to the City of Binghamton), told the Binghamton Press & Sun-Bulletin  “(t)he appeal kind of died of its own accord” and that the court would have automatically dismissed the appeal because the moratorium expired.  That is not necessarily true under the well-established “recurrence” exception to the mootness doctrine.[9]

The judicial invalidations of the Binghamton and Sidney moratoria, while having direct precedential significance only within the Sixth Judicial District (the Counties of Broome, Chemung, Chenango, Cortland, Delaware, Madison, and Otsego), are important and have impacts on several levels:

1) Psychologically, as the only two successful challenges to date of gas drilling bans or moratoria in New York State, these cases provide a rare ray of sunshine and glimmer of hope to landowners in the heart of Marcellus Shale territory, who have been denied access to economically valuable minerals under their land and of the right to lease their land for drilling.

2) Legally, there are currently (as of Dec. 20, 2013) considerably more gas drilling moratoria (106) than bans (71) in place in New York State—i.e., 60% of all temporary and permanent gas drilling bans are moratoria.[10]  Many of these moratoria were enacted by 1-vote majorities on town or village boards or city councils and wouldn’t have been approved if “supermajority” voting rules were in effect, or if the legal requirements confirmed in the Binghamton and/or Sidney decisions had been followed.  Specifically, the Binghamton (“B”) and/or Sidney (“S”) cases support all the following legal principles:

  • A gas drilling moratorium (temporary ban) must be considered a land use or zoning change where pre-existing zoning regulations would or could have allowed natural gas investigational, extraction, and/or support activities restricted or prohibited by the moratorium.  (B & S).
  • Under General Municipal Law §239-m, before such an action (including the passage of a moratorium law) is taken, the proposed moratorium must be referred for review and comment to the County Planning board or agency.[11]  (S). If the responsible County Planning entity recommends disapproval and articulates its reasons for this recommendation, the municipality may not approve the moratorium law except by a supermajority (4 votes on a 5-person Town Board; 5 votes on a 7-member City Council).  Where the County recommends disapproval, and this recommendation is communicated to a majority of the Board, even if not all formalities are strictly complied with (but there is substantial compliance), disregarding the disapproval recommendation and passing the moratorium by a simple majority is grounds for invalidation of the moratorium law. (S).[12] 
  • Under Town Law §265, landowners are given the power to force a supermajority vote where a gas drilling moratorium (or permanent ban) is opposed by landowners who control 20% or more of the land within the initiating jurisdiction.  (S).
  • Where a municipality’s zoning ordinance requires referral to the locality’s planning board of proposed changes to land use or zoning regulations, if the referral procedure is not followed in connection with a proposed gas drilling moratorium, that is also a basis for invalidation of the moratorium law.  (S). 
  • Under Court of Appeals case law precedents, moratoria can only be validly enacted where the temporary interference with landowner property rights can be justified by a showing of overriding need—e.g., to confront a “dire necessity” and/or to buy time for the initiating jurisdiction to take concrete steps to protect its residents once the moratorium expires.  Gas drilling moratoria are subject to these requirements—even if the moratoria are adopted pursuant to the municipality’s general police powers and not under its zoning authority.  (B).  Where moratoria prerequisites are not adhered to, courts will invalidate them even if they are passed by a supermajority of local legislators.  Not only that, but as long as the State’s de facto moratorium is in place against the issuance of gas drilling permits, the presumption will be that there is no necessity for a local moratorium.  (B).
  • An additional issue, raised but not decided in the Sidney case, could assume far greater statewide, and even interstate, importance than the decision in the Dryden and Middlefield appeals.  That issue is the individual and cumulative impacts of gas drilling restrictions by state and/or local governmental entities on the free-flow of interstate commerce associated with the vast network of energy-related commerce.  Even though local gas drilling laws are typically drafted to exempt interstate (and sometimes also intrastate) natural gas pipelines, which are preemptively regulated by the Federal Energy Regulatory Commission (and the NYS Public Service Commission, respectively), many other aspects of natural gas drilling, storage, disposal, and other support activities are part of the chain of interstate commerce.  That network or chain of commerce is protected by the Commerce Clause of the U.S. Constitution against undue interference —even where Congress has not specifically enacted controlling legislation.  This inherent limitation on burdensome regulation that interferes with the interstate flow of goods and services is known as the “Dormant Commerce Clause.”

            3)      Economically and Politically, the Binghamton and Sidney cases dramatically illustrate the unstable climate that currently exists in New York State for gas drilling.  The City passed its 2-year gas drilling moratorium by a 6-1 vote when all seven City Council members were Democrats, like the City’s Mayor, Matt Ryan.  A month later, as a result of new elections and term limits, the City Council’s Democratic domination was reduced to a 4-3 split (not enough to sustain a supermajority if all Democrats voted for and all Republicans against a gas drilling ban).  Just recently (two years later), the new Republican Mayor (Rich David) directed his Corporation Counsel to withdraw the City’s appeal of Judge Lebous’s decision invalidating the Binghamton moratorium.  In a similar vein, the Town of Sidney’s one-year moratorium was adopted by a 3-1 majority (one member being absent)—not enough votes to sustain a moratorium if the Delaware County Planning Board continues to recommend disapproval of gas drilling restrictions.  The ensuing election could have easily tipped the balance one way or the other.  This extreme volatility, made possible by “home rule” run rampant, will virtually guarantee that no self-respecting gas drilling firm (or other industry or business that is not universally loved) will be willing to invest money and resources in New York State, where a multi-million-dollar investment can be wiped away with the stroke of a pen by a single vote on a constantly changing town board.  Contrary to attorney Goldberg’s confident assertion that the Court of Appeals, in deciding Dryden and Middlefield, will pay no heed to the outcomes in Binghamton and Sidney, the appellants would be well-advised to argue (and, respectfully, the Court to seriously consider) this reality in deciding whether the Legislature, in enacting the Oil, Gas and Solution Mining Law (OGSML), could have possibly intended to give New York’s 1,607 general purpose local governments so much power to frustrate uniform state regulation of oil and natural gas.  The Binghamton and Sidney cases give concreteness to what is otherwise an abstract proposition.           

 

Conclusion

 

If the Court of Appeals overturns the Dryden and Middlefield gas drilling bans, by determining that the OGSML preempts the ability of New York localities to totally ban gas drilling within (or under) their boundaries—and Governor Andrew Cuomo then lifts the State’s de facto moratorium on gas drilling—the Binghamton and Sidney cases may be relegated to the dustbins of history.

 

If, on the other hand, the Court of Appeals upholds the lower courts in supporting the unrestricted home rule right of local governments to declare all land within their boundaries as off-limits to oil and gas drilling, the Binghamton and Sidney cases may be all that remains to protect landowners and preserve the possibility of economically productive gas drilling not only within Marcellus shale territory, but in other economically valuable shale gas reserves.  

 

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Article written by Kenneth S. Kamlet, Esq.  For more information, contact Mr. Kamlet at 607-231-6914 or via email at kkamlet@hhk.com .  Mr. Wedlake can be reached at 607-231-6855 or rwedlake@hhk.com.

 

Tags:    Town of Sidney, City of Binghamton, Hinman, Howard & Kattell, LLP, natural gas drilling, Marcellus shale, moratorium, fracking



[1] See, e.g., Binghamton Press & Sun-Bulletin article, Jan. 14, 2014, http://www.pressconnects.com/article/20140114/NEWS01/301140034/Binghamton-withdraws-fracking-ban-appeal?odyssey=mod|newswell|text|Local News|p ; and Oneonta Daily Star article, Jan. 16, 2014, http://www.thedailystar.com/localnews/x651176879/Judge-tosses-Sidneys-fracking-moratorium .

[2] The request to withdraw and discontinue the appeal in Matter of Jeffrey v. Ryan was communicated by Helen Slottje to the Clerk of the Appellate Division, Third Judicial Department, by letter dated January 10, 2014, and was acknowledged by the Clerk by letter of January 13th.  The Clerk indicated that Ms. Slottje’s letter “will be submitted to the Court on January 27th, as an application to withdraw and discontinue” the appeal.  It also advised that the appeal “has been removed from the Court’s February 20, 2014 term.”

[3] The Decision & Order was issued by Acting Delaware County Supreme Court Justice John F. Lambert.  Index No. 2013-602; RJI No.: 13-0220.

[4] The Court rejected the legal standing of a second petitioner for failing to articulate an “injury-in-fact” and “how that injury is different in kind or degree from the manner the public in general is affected by the statute.”

[5] An overview of the Sidney case was provided in a mid-June blog posting.

[6] A proceeding under Article 78 is a special proceeding under New York’s Civil Practice Law and Rules used to challenge the decisions of a public “body or officer”.  It must be brought within a short (usually 4-month) statute of limitations and is usually decided on an expedited basis (relying on a verified petition and, sometimes, motions by the parties) without the need for a trial.  In this case, attorneys for landowner Grafe-Kieklak both opposed the Town’s motion to dismiss and cross-moved for summary judgment (both on the Article 78 counts and on the two other, “declaratory judgment,” counts.

[7] 37 Misc.3d 1204(A) (Sup.Ct., Broome Co., 2013).  This case is also discussed in a previous Blog post at http://blog.hhk.com/?p=125.

[8] The constitutional issue is also discussed at length in a forthcoming scholarly article by Professor Meredith A. Wegener, Drilling Down: New York, Hydraulic Fracturing, and the Dormant Commerce Clause, 28 B.Y.U. J.Pub.L. (Apr. 2014).  A well-done layman’s discussion by Thomas J. Shepstone, “Drilling Bans Interfere with Interstate Commerce,” appears in the October 18, 2013 issue of his blog, NaturalGasNOW.org, at http://naturalgasnow.org/drilling-bans-interfere-interstate-commerce/ .

[9] The cases and commentary recognize two exceptions to the general rule of mootness.  “Cases do not become moot when a defendant voluntarily ceases allegedly illegal conduct, unless ‘subsequent events ma[ke] it absolutely clear that the allegedly wrongful behavior [can]not reasonably be expected to recur…. And, courts retain jurisdiction over otherwise moot cases when alleged legal violations are capable of repetition but evading review.”  Pidot, Justin, “Jurisdictional procedure; III.  The Factual Dimension of Jurisdictional Procedure through Conclusion, with footnotes, p. 45-81, William and Mary Law Review, Oct. 1, 2012, nn. 223 and 224 and associated text.  Citing Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 189-93 (2000).  See also, Matter of M.B., 6 N.Y.3d 437, 447(2006) and Coleman v. Daines, 19 N.Y.3d 1087, 1090 (2012) (“[a]n exception to the mootness doctrine may apply… when the issue to be decided, though moot, (1) is likely to recur, either between the parties or other members of the public, (2) is substantial and novel, and (3) will typically evade review in the courts”).  Two-year or one-year gas drilling moratoria (as in Binghamton and Sidney, respectively) meet all these criteria.  Because of their limited duration, they are likely to expire before judicial review has run its course.  The recurrence exception was also recently invoked in an Ohio Court of Appeals gas drilling case, State ex rel. Morrison v. Beck Energy Corp., 2013-Ohio-356, n. 5.

 

[10]See Fractracker website, http://www.fractracker.org/map/ny-moratoria/ .

 

[11]The purpose of the County referral requirement is to ensure that county-level and intermunicipal factors are taken into account before a municipality can unilaterally take an action that has economic or other impacts on residents or taxing jurisdictions outside the borders of the initiating municipality.

[12]Note that the GML 239 referral requirement also applies to permanent gas drilling bans enacted under the zoning power, as in the Dryden and Middlefield cases.  Those towns did comply with the referral requirements, but did not have to deal with county-level disapproval recommendations—because the counties in those cases took no issue with the gas drilling bans.

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