Proponents and opponents of hydraulic fracturing alike have been waiting with bated breath for the outcome of the Wallach v. Town of Dryden and Cooperstown Holstein Corp. v. Town of Middlefield cases. The wait is over - in late June, the New York Court of Appeals upheld the power of local governments to adopt zoning ordinances which restrict or ban oil and gas operations within their borders.
In its ruling, the Court held that the supersession clause of New York State Oil, Gas and Solution Mining Law (OGSML) does not preempt municipal home rule authority, the mechanism that allows localities to regulate land uses within their borders.
As you may remember, this issue has been closely watched since 2011. In that year, Norse Energy Corporation (Norse) and Cooperstown Holstein Corporation (CHC) brought suit against the towns of Dryden and Middlefield, respectively, alleging that the energy policy of New York State, as outlined in the OGSML, required a uniform approach to energy production within the state. Specifically, these companies took issue with zoning ordinances adopted by Dryden and Middlefield that banned hydraulic fracturing within town borders. Norse and CHC asserted that the OGSML preempted all local laws that restrict or otherwise regulate oil and gas operations.
In response to the energy companies' allegations, Dryden and Middlefield asserted that their local zoning laws were enacted pursuant to home rule authority. As announced in Article IX, Section 2 of the New York State Constitution and in the New York State Municipal Home Rule Law, localities are permitted to legislate to preserve town characteristics, to enhance the physical and visual environment, and to protect the health, safety, and welfare of citizens. The restrictions on local land use adopted by Dryden and Middlefield in their zoning ordinances constituted permitted exercises of these rights.
In February of 2012, the trial court, i.e., NY Supreme Court, issued its decision in the initial Dryden and Middlefield cases, that Dryden and Middlefield's zoning law amendments were valid and not preempted by the OGSML. These decisions were upheld by the Appellate Division. Still unsatisfied that all options had been exhausted, Norse and CHC appealed to the New York Court of Appeals to consider whether towns may ban oil and gas production activities within municipal boundaries through zoning.
In New York State, municipalities are given a broad grant of authority to regulate land use; this is a central function of local government. Though local laws inconsistent with state law are invalid, preemption is not assumed when the local legislation is within a field traditionally controlled by the municipality. Therefore, a town's zoning law will only be invalidated by a clear expression of legislative intent to preempt local control over a particular land use.
Here, the Court found that the OGSML's preemption provision only addresses laws which regulate operations of the oil and gas industry. The zoning bans enacted by Dryden and Middlefield did not address details of how this industry was required to operate, but merely identified a particular set of uses as unacceptable within their municipal borders. Accordingly, the Court concluded that the zoning ordinances adopted by the towns of Dryden and Middlefield were within home rule authority, and constituted valid restrictions on local land use.
This decision brings considerable uncertainty to the future of the hydraulic fracturing industry in New York State. Though the State has not announced an official position on the issue, at present over 170 communities in New York have enacted local bans or moratoriums on hydraulic fracturing activities. It is likely that this decision will encourage other local governments to decide whether hydraulic fracturing is right for their town, and to legislate accordingly.