Shale Gas Perspectives - Ohio Appellate Court Takes Different View on Shale Gas Preemption Than NY Courts (Vol. I, No. 2)

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

____________________________________________________________________

Oral arguments will be held on March 21, 2013 before the Appellate Division, Third Department, a branch of New York’s intermediate appellate court, on two hotly-contested lower court decisions which upheld the “home rule” authority of local municipalities to use their zoning power to ban natural gas exploration, extraction and support activities.  The Dryden and Middlefield cases squarely pit the “home rule” authority of local governments to regulate land uses within their jurisdictions against efforts at the State level, pursuant to the Oil, Gas, and Solution Mining Law [OGSML] (enacted more than 30 years ago), to promote the development of oil and gas resources in New York State and to regulate the activity of the industry.  The OGSML’s preemption provision, ECL§23-032(2), reads in pertinent part as follows: “The provisions of this article shall supercede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries; but shall not supercede local government jurisdiction over local roads ….”

The Dryden and Middlefield courts upheld the local bans on the basis that: nothing in the legislative history of the OGSML indicates that “the supersession clause… was intended to impact, let alone diminish or eliminate, a local municipality’s right to enact legislation pertaining to land use” (Middlefield); and “there remains an absence… of a clear expression of legislative intent to preempt local zoning control over land use concerning oil and gas production” (Dryden).  The Dryden court also referenced “several decisions by the highest courts of Pennsylvania and Colorado… [which] reached the same conclusion… that their respective state’s statute governing oil and gas production does not preempt the power of a local government to exercise its zoning power to regulate the districts where gas wells are a permitted use.”

A recent (Feb. 6, 2013) Ohio Court of Appeals (intermediate court) decision, State ex rel. Morrison v. Beck Energy Corp. (Case No. 25953), takes a different view.  The issue before the Court of Appeals was whether the City of Monroe Falls “can enforce its ordinances governing oil and gas drilling and related zoning and rights-of-way issues” despite Ohio’s comprehensive, statewide system for regulating oil and gas drilling.   The Ohio oil and gas drilling statute, codified at R.C. Chapter 1509, was enacted in 1965 and amended in 2010 and 2011.  It specifies in relevant part:  “… The regulation of oil and gas activities is a matter of general statewide interest that requires uniform statewide regulation, and this chapter and rules adopted under it constitute a comprehensive plan with respect to all aspects of the locating, drilling, well stimulation, completing, and operating of oil and gas wells within this state, including site construction and restoration, permitting related to those activities, and the disposal of wastes from those wells….”   Not preempted is authority granted to the director of transportation and local authorities for the care, supervision, and control of public roads—as long as that authority is “not… exercised in a manner that discriminates against, unfairly impedes, or obstructs oil and gas activities and operations regulated under this chapter.”

In the Beck Energy case, the property owner leased gas rights to Beck Energy Corporation for several acres of property in the City.  Beck Energy applied for and received a well permit from the Ohio Department of Natural Resources.  This permit set forth terms and conditions, “including 29 Urbanized Area Permit Conditions,” which include specific requirements “governing tree trimming, fencing, parking, noise, erosion, drainage, landscaping, and site restoration.”  When Beck Energy began excavation and drilling, the City issued a Stop-Work Order, asserting that the company violated 11 ordinances covering drilling, zoning and rights-of-way.  The lower court sided with the City, but the Court of Appeals reversed.

The Court began with an analysis of the “home rule” authority conferred on local governments by Article XVIII, Section 3 of the Ohio Constitution.   Not unlike the situation in New York, the Ohio Constitution gives municipalities the “authority to exercise all powers of local self-government and to adopt and enforce within their limits such local police, sanitary and other similar regulations, as are not in conflict with general laws.”  Local legislation is considered to fall within the power of local self-government and to fall solely within the prerogative of the municipality “[i]f the result affects only the municipality itself, with no extraterritorial effects.”  However, if the ordinance is determined to be an exercise of the police power, “the court then is required to review the [state] statute at issue to determine whether the statute is a ‘general law.’”  General laws are those which impose rules on citizens generally and operate uniformly throughout the state.  “A state statute takes precedence over a local ordinance when (1) the ordinance is in conflict with the statute, (2) the ordinance is an exercise of the police power, rather than of local self-government, and (3) the statute is a general law.”

The Beck Energy Court next upheld the City’s right to “enforce ordinances governing rights-of-way and excavations” (six of the 11 ordinances), as long as they are not applied unfairly to oil and gas activities and operations.  However, it then struck down as preempted by state law the remaining ordinances because the Ohio oil and gas drilling statute is a general law, the local ordinances at issue—zoning and permitting ordinances—are police power ordinances, and these ordinances directly conflict with the state law and hinder the drilling activity.

Although there are distinctions in the facts and circumstances of the NY and Ohio cases, the logic of Beck Energy seems directly transferable to the Dryden and Middlefield decisions.  It is unlikely however to factor into the Third Department’s decision.

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

Recent Entries

©2017 HH&K Contact Us: 80 Exchange Street, P.O. Box 5250, Binghamton NY 13902-5250 | 607-723-5341 Terms of Use | Privacy Policy

ATTORNEY ADVERTISING  Prior Results Do not Guarantee a Similar Outcome