Marcellus Shale and Municipal Empowerment in New York

By Zachary Kansler, Albany Government Law Review

Introduction

Natural gas deposits in the Marcellus Shale geologic formations have been a polarizing issue in New York State, spanning areas of concern including public health, environmental welfare, and municipal authority, among others.  For some, Marcellus Shale is a symbol for a movement or point of view, and for others, the extraction of natural gas deposits in Marcellus Shale formations has had a more profound effect, including families alleging that their water supply has been tainted by drilling and extraction processes known as hydrofracking.[1]  Many believe the adverse effects of hydrofracking can be addressed, and hopefully mitigated through various means, including state regulation.[2]  In addition, it is also possible that local governments may have the authority to address natural gas extraction as well. However, until recently, it was not known whether such authority existed.   

This question of local authority was answered on February 21, 2012 by the New York State Supreme Court, Tompkins County, in the case of Anschutz Exploration Corporation v. Town of Dryden.[3]  The Supreme Court determined that local governments did indeed enjoy the authority to apply regulations to natural gas extraction operations, but only when premised upon the correct purpose.[4]  This article will discuss the case of Anschutz Exploration, address how it defined local authority in this area, as well as briefly address what may happen in the future concerning this newly found empowerment of local governments.

Anschutz Exploration Corporation v. Town of Dryden

Fearing the potential adverse consequences that could occur as a result of Marcellus Shale natural gas drilling and extraction, Dryden residents began to organize against industry.  Starting in 2009, Dryden residents “requested that the Town Board take action to ban hydrofracking within its jurisdiction and a petition containing 1,594 signatures was presented to the Town Board on April 20, 2011 requesting such a ban.”[5]  As a result of such exceptional support, the Town of Dryden enacted via zoning amendment a total ban on natural gas extracting and exploration practices.[6]  This ban prohibited in toto natural gas extraction and exploration, essentially banning any and all Marcellus Shale natural gas operations within the Town’s jurisdiction.[7]  The Town effectuated these bans as part of their land use controls, under the Town’s Zoning Ordinance.[8]

This action came to the attention of the Supreme Court, Tompkins County, as Anschutz Exploration Corporation was not pleased with the zoning change; Anschutz Exploration is a natural gas extraction company owning natural gas lease interests in about 22,000 acres of land, or one third of the Town’s territory.[9]  Anschutz Exploration had invested over $5 million in the Town,[10] and if these local regulations remained on the books, Anschutz Exploration’s business activities and investments would have been for not.  Anschutz had argued that these local regulations were preempted by state law on two grounds, express preemption and conflict preemption.[11]  The Town of Dryden moved for summary judgment, asserting their local regulations were valid and that the Article 78 proceeding should be dismissed.[12]  As stated previously, the Supreme Court found for the Town of Dryden, granting summary judgment and dismissal, as the Town was authorized to enact the land use controls.[13]

In making its determination, the Supreme Court focused its inquiry on the express preemption language found in the Oil, Gas and Solution Mining Law (hereinafter “OGSML”).  This preemptive provision provides, “The provisions of this article shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries; but shall not supersede local government jurisdiction over local roads or the rights of local governments under the real property tax law.”[14]  In interpreting this provision, the Supreme Court encountered an issue of first impression; however, the court had persuasive authority that could assist in the provision’s construction.[15]  The OGSML is located in the Environmental Conservation Law, which contains other preemptive provisions concerning natural resource extraction.  Of significance to this case is the preemptive language found in the Mined Land Reclamation Law (hereinafter “MLRL”), Section 23-2703(2) of the Environmental Conservation Law, which provides that the MLRL preempts local regulation “relating to the extractive mining industry.”[16]  This language is similar to the preemptive language found in the OGSML, as they both provide that the State law preempts local law “relating to the” industry.[17]

In the 1987 case of Frew Run Gravel Products v. Town of Carroll, the New York Court of Appeals was tasked with determining the preemptive scope of the MLRL.[18]  The Court of Appeals determined that the preemptive language only supersedes local regulations to the extent that the regulations relate to the extractive mining industry.[19]  Thus, the Court of Appeals determined that the challenged land use regulations banning certain extractive mining practices in enumerated zone districts were not preempted because they related to land use, not to the industry.[20]  Following up on Frew Run, the Court of Appeals clarified the issue in Gernatt Asphalt Products v. Town of Sardinia, providing that “in the absence of a clear expression of legislative intent to preempt local control over land use, the statute could not be read as preempting local zoning authority.”[21]

In reviewing the preemptive language in both the OGSML and the MLRL, the Supreme Court determined they are “nearly identical.”[22]  The Supreme Court found it significant that both preemptive provisions employed the same “primary language:” relating to the industry.[23]  Since both provisions employed the same language, the Supreme Court determined both provisions should be afforded the same statutory construction, prohibiting local regulation relating to the respective industry, and permitting local land use regulation.[24]  Since Dryden’s regulations related to land use, and not to the Marcellus Shale gas extraction industry, the Supreme Court, Tomkins County determined that the OGSML, Section 02-0303(2) of the Environmental Conservation Law, did not preempt Dryden’s zoning amendment.[25]

Where do We Go From Here?

            The Supreme Court, Tompkins County empowered local governments to regulate, and even ban, natural gas exploratory and extracting operations, so long as the local action is premised on the regulation of land uses.[26]  This case alone illustrates the financial implications for corporations that have invested in natural gas extraction leases within the political subdivisions of New York State.  Given the large financial interests at stake, it would not be surprising if the natural gas industry lobbied the state legislature to wholly preempt, or curtail, local authority.

In addition to possible change coming from the state legislature, either in the form of codifying or denouncing the decision in Anschutz Exploration, this case is not over, and the appellate courts of New York will have a say.  Recently, it has been reported that the defeated party in Anschutz Exploration has filed a notice of appeal with the Supreme Court, Appellate Division, claiming the Supreme Court’s determination was erroneous.[27]  This appeal will likely be consolidated with the appeal of the Supreme Court, Otsego County decision in Cooperstown Holstein Corp. v. Town of Middlefield,[28] another New York case that came to the same conclusion as the Supreme Court, Tompkins County. [29]

            Given these prospects, it is not clear if local governments will retain the authority to regulate the extraction of natural gas located in the Marcellus Shale geologic formation.  However, in the mean time, it is clear that local governments do enjoy such authority, and this concept is supported by two Supreme Court decisions.  Only time, as well as the New York appellate courts, will tell whether local governments can continue to define how the land in their jurisdiction is utilized, and whether they can do what they believe is necessary to safeguard their community.


 [1]See Mary Esch, Health Impact Studies Taking Hold, With Challenges, Bloomberg Business Week (Mar. 31, 2012), http://www.businessweek.com/ap/2012-03/D9TRJ2300.htm.

[2] See N.Y. State Dep’t of Envtl. Consrev., High Volume Hydraulic Fracturing Proposed Regulations, available at http://www.dec.ny.gov/regulations/77353.html.

[3] No. 2011-0902, 2012 WL 556172, at *1 (N.Y. Sup. Ct. Feb. 21, 2012).

[4] Id.  at *5, *11.

[5] Id.  at *3.

[6] Id.

[7] Town of Dryden, N.Y., Proposed Amendments to Town of Dryden Zoning Ordinance (2011), available at http://dryden.ny.us/Downloads/PROPOSED_AMENDMENTS_ZONING_ORDINANCE.pdf.

[8] Id. at 1; Anschutz Exploration Corp., 2012 WL 556172 at *3–4.

[9] Anschutz Exploration Corp., 2012 WL 556172 at *1.

[10] Id.

[11] Id.  at *4.

[12] Id.  at *1.

[13] Id.  at *11.

[14] N.Y Envtl. Conserv. Law § 02-0303(2) (McKinney 2012).

[15] Anschutz Exploration Corp., 2012 WL 556172 at *4.

[16] § 23-2703(2).

[17] Compare § 02-0303(2) and § 23-2703(2).

[18] 518 N.E.2d 920, 921 (N.Y. 1987).

[19] Id. at 922.

[20] Id. at 923–24.

[21] 664 N.E.2d 1226, 1234 (N.Y. 1996).

[22] Anschutz Exploration Corp., 2012 WL 556172 at *5.

[23] Id.

[24] Id.

[25] Id.  at *5, *11  (one provision of Dryden’s regulations provided that “‘[n]o permit issued by any local, state or federal agency, commission or board for a use which would violate the prohibitions of this section or of this Ordinance shall be deemed valid within the Town.’”)  Id.  at *11 (quoting Dryden, N.Y, Zoning Ord. § 2104(5) (2012)).  The Supreme Court, Tompkins County found this section to be preempted by the OGSML because this section was more than a land use regulation, it was a regulation relating to the natural gas industry.  Id.  The court also found it could be separated from Dryden’s zoning amendment, thereby resulting in the rest of the amendment being valid.  Id.

[26] Id.

[27] Chris Dolmetsch & Jim Efstathiou Jr., New York Drill Ban Ruling Being Appealed, Lawyers Say, Bloomberg, (Mar. 30, 2012), http://www.bloomberg.com/news/2012-03-30/anschutz-files-appeal-notice-in-fracking-case-lawyer-says.html

[28] Id.

1 Comment

Filed under Energy Law, Land Use, Municipal Law, Municipal Liability, New York Court of Appeals, Technology Law

One response to “Marcellus Shale and Municipal Empowerment in New York

  1. Brady Begeal

    Nice article. This is a massive issue in my neck of the woods (Broome County). Our firm has been following this case law closely. Keep up the good work GLR Fireplace.

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