NY High Court To Hear Cases Determining Future of Hydraulic Fracturing

The New York State Court of Appeals has announced that it will hear a challenge to municipal bans on hydraulic fracturing operations in two separate cases. The announcement comes three months after a ruling issued by a midlevel appellate court in which a four-judge panel unanimously held that municipalities can effectively "zone out" oil and gas operations by passing zoning ordinances and that the state's Oil Gas and Solution Mining Law (OGSML) cannot be invoked to nullify such local bans. 

In May 2013, an appellate panel of the New York Supreme Court affirmed the decision of a lower state court, holding that local municipalities have the power to enact zoning ordinances that ban "all activities related to the exploration for, and the production or storage of, natural gas and petroleum within its borders." Town of Dryden et al., v. Norse Energy Corp., New York State Supreme Court, Appellate Division Third Department  (May 2, 2013).  In 2011, the Town of Dryden, New York banned hydraulic fracturing by passing a zoning ordinance that prohibited "all activities related to the exploration for, and the production or storage of, natural gas and petroleum." Norse Energy challenged the ordinance, relying primarily on preemption arguments.  In the May 2013 decision, the court considered the power ceded to localities in New York and whether the text of the OGSML includes any provisions that preempt Dryden's ordinance.  That lower court concluded there was no evidence of express or implied preemption in the OGSML.

In the latest appeal, Norse has appealed the New York State Supreme Court, Appellate Division Third Judicial Department's decision, claiming that a clause in the OGSML preempts efforts on behalf of local authorities to ban hydraulic fracturing operations.  The Dryden case will be  heard with a similar case between the Town of Middlefield, New York and Cooperstown Holstein Corporation.  Both of the cases hinge largely on the preemption language of the OGSML, which Chief Judge Karen Peters previously ruled is meant to "insure uniform statewide standards and procedures with respect to the technical operational activities of the oil, gas and mining industries in an effort to increase efficiency while minimizing waste," and not to "to usurp the authority traditionally delegated to municipalities to establish permissible and prohibited uses of land within their jurisdictions." Under this interpretation, the OGSML only preempts local governments from regulating energy companies as well as the hydraulic fracturing process itself, but not from regulating zoning and land use.

The State of New York placed a moratorium on hydraulic fracturing in July 2008 until lawmakers could draw up new regulations for the drilling process. In February, Governor Cuomo abandoned the process, further postponing any decision until the New York Department of Environmental Conservation and the State Commissioner of Health could provide more conclusive evidence as to the effects of hydraulic fracturing on health and the environment. While the State and the Governor have still yet to issue a final decision regarding hydraulic fracturing in the State, with as many as 170 municipalities enacting bans or moratoriums on the practice, the outcome of the Dryden and Middlefield cases will likely have a significant impact on future development of the New York Marcellus Shale. A decision from the high court is expected sometime in 2014.

New York is not the only state confronting issues of local authority over oil and gas drilling.  In July 2012, the Pennsylvania Supreme Court struck down as unconstitutional certain sections of the recently passed "Act 13" that would have removed a municipality's ability to zone out oil and gas drilling in Pennsylvania.