Previously in our "Fracking NY" Blog Series, we summarized the two recent New York Supreme Court cases - Anschutz Exploration Corp. v. Town of Dryden, 940 N.Y.S.2d 458 (Sup. Ct. Tompkins Co. Feb. 21, 2012) and Cooperstown Holstein Corp. v. Town of Middlefield, 2012 N.Y. Misc. LEXIS 1420 (Sup. Ct. Otsego Co. Feb. 24, 2012), which both upheld local municipalities' authority to ban oil and gas operations (as a round-about way of banning the controversial high-volume hydraulic fracturing, or "fracking," operations specifically) - as being not preempted by the State Oil and Gas Act ("OGSML"). To read about those cases, please click here and here. As we expected, both of those cases were appealed to the Supreme Court of New York, Appellate Division, Third Department.
The rationale by the lower courts in upholding the municipalities' zoning bans was that the OGSML regulates the "how" of oil and gas operations (i.e., the technical and operational aspects) whereas the local zoning ordinances regulate the "where" of oil and gas operations. Based on this how/where distinction, the lower courts held that there is no conflict between the state and local regulations and, therefore, no preemption of the local bans.
On appeal, the municipal appellees will argue that this how/where distinction is the correct analysis, and the precedent of Matter of Frew Run Gravel Prods. v. Town of Carroll, 71 NY2d 126 (1987) and Matter of Gernatt Asphalt Prods. v. Town of Sardinia, 87 NY2d 668 (1996) is so persuasive that the lower courts' rulings should be upheld.
The industry and landowner appellants, however, will argue that a complete zoning ban on oil and gas operations (whether throughout the municipality or in a specific zoning district) directly conflicts with the stated purpose of the OGSML, which is "to prevent waste; to authorize and to provide for the operation and development of oil and gas properties in such a manner that a greater ultimate recovery of oil and gas may be had, and that the correlative rights of all owners...may be fully protected" (ECL §23-0301), and therefore is preempted by the state law. As well, they will argue that the supersession clause in the OGSML that expressly exempts local regulations of roads and property taxes from preemption was so narrowly drawn by the Legislature that all other local regulation of oil and gas operations by municipalities, including zoning, falls within the express preemption language of the statute: that the OGSML "shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solutions mining industries" (ECL § 23-0303). The appellants will argue that the how/where distinction made by the lower courts is not persuasive enough to overcome this express preemption language.
The case law precedent, which was set down in Matter of Frew Run and Matter of Gernatt and which dealt with a similar State statute (the Mining Land Reclamation Law), with a fairly similar supersession clause, seems to be quite clear that local governments can ban oil and gas operations under their zoning authority. This precedent was followed closely by the Supreme Court of Otsego County and the Supreme Court of Tompkins in determining that the state OGSML did not preempt the authority of local governments to regulate - or even outright ban - fracking under their zoning ordinances. It is our speculation that most likely, on appeal, the courts will uphold the challenged zoning ordinances under this precedent, although a complete ban of oil and gas operations does seem to frustrate the stated purposes of the OGSML. We will keep you updated on the outcomes of these appeals.
(Copies of the Notices of Appeal in Anschutz Exploration Corp. v. Town of Dryden and Cooperstown Holstein Corp. v. Town of Middlefield are available from Abigail M. Jones upon request.)