Shale Gas Perspectives - The Legal and Policy Implications of the May 2, 2013 Decisions of the NY Appellate Division Upholding the Gas Drilling Zoning Bans by the Towns of Dryden and Middlefield (Vol. I, No. 6)

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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(May 3, 2013)

An intermediate Court of Appeals in Albany, the Third Department of the Appellate Division, on May 2nd, issued twin decisions (explicated in the Dryden case) upholding the legal authority under New York law of the Towns of Dryden and Middlefield to ban, by means of zoning, gas drilling within their borders.  http://www.scribd.com/doc/139076654/Dryden-Appellate-Decision .  (Although there were technically two decisions, upholding similar zoning ordinances enacted by the Towns of Dryden and Middlefield, the Court’s reasoning in both cases is identical, with the Middlefield decision relying on the analysis in the Dryden case.  So, for purposes of this blog, I will refer to the twin decisions as “the Decision.”)

The Decision will greatly please those who view High Volume Hydraulic Fracturing (commonly referred to as "Fracking"—although the term also applies to more conventional low-volume and vertical oil and gas drilling) as one of the greatest threats to planetary survival.  It will anger and sadden the New York farmers and other landowners who counted on the sale of gas leases to help keep their family farms and pay their taxes.  It will have less of an immediate impact on drilling companies --most of whom have already given up on New York and have been harvesting Marcellus Shale gas in more welcoming venues, such as Pennsylvania, West Virginia and Ohio.  It may also bring smiles to the lips of the oil sheiks and jihadists in distant lands who want America to remain dependent on foreign oil for our energy needs—to hold us over the proverbial “barrel.”
 
As a lawyer, I do not wish to dwell on these different worldviews and philosophies, but I would like to focus on the legal and policy implications of the Decision.  First, what did the Decision not say?  Second, what legal options are left to those New Yorkers who would still like to lease their land for gas drilling?  And, third, what policy opportunities does the Decision open up for Governor Andrew Cuomo?
 
1. What the Decision did not say.  The Decision turned on the Court's holding that "the powers delegated to local governments… to regulate the use of land through the enactment of zoning laws" are not preempted by State laws that regulate "the details and procedures" of oil and gas drilling, even if the former "have an incidental effect" on the latter. 

But, the Decision does not expand the territorial reach of traditional zoning and land use regulation.  Town A may be able to validly regulate or ban the use of the ground surface (and some of the subsurface) within its boundaries for construction of well pads and drilling of wells.  But, Town A cannot prevent Town B from allowing wells to be drilled on adjacent land within Town B’s borders.  Zoning laws do not have extraterritorial application. 

And, Town A can probably not prevent well-drillers in Town B from extending their wells horizontally thousands of feet beneath the surface of Town A--as long as the affected landowners consent and the terms of State drilling permits are adhered to.  While the ownership of land may be viewed under the common law as extending from the center of the earth to the sky, the use of zoning laws to control land use is usually viewed as limited to controlling what goes on at the surface or at limited distances above and below the surface—to prevent one landowner’s uses of his land from interfering with those of his neighbors, or from imposing excessive noise, traffic, or other nuisances on the community.

And, while the Decision speaks to the rights of municipalities opposed to gas drilling, the Decision does not address what must be assumed to be the coequal rights of municipalities to welcome such drilling. 

Indeed, the Statute of Local Governments, http://law.justia.com/codes/new-york/2006/statute-of-local-governments/ , (enacted by the Legislature in response to a constitutional mandate under Article IX of the State Constitution, http://www.dos.ny.gov/info/constitution.htm) prohibits the State Legislature from repealing, diminishing, impairing or suspending the power of local governments to "adopt, amend [or] repeal zoning regulations" except by the action of two successive Legislatures and with the concurrence of the Governor.  So, if the Legislature, emboldened by the Dryden decision (or otherwise), decided to permanently or temporarily ban gas drilling statewide, or in portions of the State like the Southern Tier, as the Assembly already did in a March 5th bill (A.5424-A, http://assembly.state.ny.us/leg/?bn=A05424&term=2013), and as a Senate bill (S.4046, http://assembly.state.ny.us/leg/?default_fld=%0D%0At&bn=S.4046&term=2013&Summary=Y) has proposed, the Legislature could not trample on the "home rule" rights of cities, towns or villages that support gas drilling without following the double-enactment requirements of the Statute of Local Governments.  (The Dryden decision does not change this or even address it.)
 
2. Options left to pro-drilling landowners.  Assuming New York's highest court (the Court of Appeals) does not accept review of the Decision or, even if it does but upholds the Appellate Division, landowners still have options.  As was decided last October by Broome County Supreme Court Judge Ferris D. Lebous in the Jeffrey v. Ryan case, http://scholar.google.com/scholar_case?case=5661478946168854815&hl=en&as_sdt=2&as_vis=1&oi=scholarr, gas drilling moratoria, like the City of Binghamton's, must satisfy certain essential prerequisites laid down in case law,  http://www.dos.ny.gov/lg/publications/Land_Use_Moratoria.pdf, including a "dire necessity" justification that does not exist as long as no State gas drilling permits are being issued. 

In addition, under well-established legal precedents, both moratoria and bans must adhere to State laws of general applicability, such as the General Municipal Law requirement that they be referred to County Planning Departments for review and recommendation--and if the recommendation is disapproval, the referring entity may only pass the moratorium or the ban by a super-majority vote (e.g., 4 affirmative votes in a 5-person city council or town board).  http://codes.lp.findlaw.com/nycode/GMU/12-B/239-m .

Landowners may also subject proposed local laws seeking to restrict gas drilling rights to super-majority approval requirements by collecting signatures on "Protest Petitions" pursuant to Town Law 265.  http://codes.lp.findlaw.com/nycode/TWN/16/265 .

And, once the State starts issuing drilling permits--or, if it continues to delay issuing such permits--landowners may have additional options, in the form of "takings" lawsuits against municipalities that seek to interfere with landowners' "reasonable investment-backed expectations" to make beneficial use of their oil and gas mineral rights.  http://files.ali-cle.org/thumbs/datastorage/skoobesruoc/pdf/CL012-CH14_thumb.pdf .
 
3. Policy options for Governor Cuomo.  Had the Appellate Division overturned the Dryden and Middlefield decisions, the Governor would have been faced with a dilemma because then he and his administration would have been all that was standing in the way of the widespread commencement of high-volume fracking in multiple parts of the State. 

By upholding the Dryden and Middlefield gas drilling bans, the Appellate Division has given Governor Cuomo a middle ground approach that will anger fewer anti-frackers and displease fewer pro-drilling landowners than under the other scenario: he can cite the Court decisions as the definitive word (absent action by the Court of Appeals) that local governments in New York can control their own destinies and that a locality that does not want gas drilling (and has followed the rules in banning it) will not have to accept it.

The Governor could even point to the home rule rights of pro-gas drilling localities as a compelling rationale for allowing the Department of Environmental Conservation to finalize the SGEIS (the Supplemental Generic Environmental Impact Statement in the works for nearly five years, http://www.dec.ny.gov/energy/47554.html , and begin issuing fracking permits in those municipalities that choose to allow it.
 
The Decision issued on May 2nd will elicit cheers or jeers from various quarters, but I hope the Governor will use the Decision as a basis for prompt and decisive action to allow the "new New York" to move forward and end a divisive debate that has diverted our energies (no pun intended).

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Article written by Kenneth S. Kamlet, Esq. (with helpful edits from Robert H. Wedlake, Esq.).  For more information, contact Mr. Kamlet at 607-231-6914 or via email at kkamlet@hhk.com.

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