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  • Hydraulic Fracturing and Local Regulations Leveraging State Preemption, Addressing Fracking Risks, and Navigating Zoning Challenges

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    THURSDAY, JULY 11, 2013

    Presenting a live 90-minute webinar with interactive Q&A

    Samuel B. Boxerman, Partner, Sidley Austin, Washington, D.C.

    Steven C. Russo, Chair, Greenberg Traurig, New York

    Deborah Goldberg, Managing Attorney, Earthjustice, New York

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  • BEIJING BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA HONG KONG HOUSTON LONDON LOS ANGELES NEW YORK PALO ALTO SAN FRANCISCO SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C.

    Shale Oil/Gas Development Preemption of Local Laws July 11, 2013

    Sam Boxerman

    [email protected]

    (202) 736-8547

  • Introduction

    Context

    Preemption, generally

    Specific cases

    Wrap

    6

  • Context - Shale Oil and Gas Development

    We have a supply of natural gas that can last America nearly one hundred years, and my Administration will take every possible action to safely develop this energy. Experts believe this will support more than 600,000 jobs by the end of the decade. Pres. Obama, 2012 State of the Union The bottom line is natural gas is creating jobs. Its lowering many families heat and power bills. Pres. Obama, June 25, 2013

    7

  • Context - Shale Oil/Gas Development

    Development of shale resources = game changer

    o Enormous reserves of oil (33 billion barrels) and gas (~ 500 trillion cubic feet) in shale (per EIA)

    o Production could grow dramatically by 2025

    o 1.7 million jobs + 3.0 million more by 2020

    o $62bn taxes/royalties + $111bn by 2020

    o Growth in other sectors: chemicals, transportation, steel, etc.

    Both national/local support and opposition

    o Supporters: jobs, economic value, energy security

    o Opponents: environmental aspects, other alleged effects, disruption, climate change

    Significant benefits and determined opposition

    8

  • Context State and Local Laws

    Federal limited role

    State Traditional regulator of oil and gas development

    o Existing oil & gas statutes

    o New statutes/amendments + hydraulic fracturing rules

    o Some: bans pending study (NY, MD, VT)

    Local

    o Restrict / ban development + use of hydraulic fracturing in e.g., CO, NY, NC, NM, OH, PA, WV

    o Regulations and local moratoria extending to related industries, such as silica mining MN, WI

    Question: Can these state/local legal regimes co-exist?

    9

  • State v. Local Laws

    Is the local government authorized

    o Creatures of state law

    o Home rule, limited home rule

    o Statutory - police power / zoning authority

    o Will vary from state to state

    10

  • State v. Local Laws

    Is the local law preempted

    o Express preemption

    o Implied preemption

    o Conflict preemption

    o Field preemption

    o Will vary from state to state

    11

  • Court Decisions - Preemption

    Northeast Natural Energy, LLC v. City of Morgantown, (Monongalia Co. Aug. 12, 2011)

    o State law + WV DEP oil/gas rules

    o Morgantown local ordinance Imposed a ban on hydraulic fracturing w/n 1 mile of city

    o Plaintiffs argued: State law, DEP rules preempted ordinance

    o Town argued: Allowed under home rule

    o Court:

    o State assumed control of a particular subject

    o The City is a creature of state law + only has powers granted to it by legislature

    o Although City has Home rule power and interest in control of its land, that is trumped by comprehensive state law

    12

  • Court Decisions - Preemption

    Morrison v. Beck Energy, (Ohio Ct. App. 2013)

    o State oil and gas drilling laws

    o Ohio DNR sole and exclusive authority to regulate the permitting, location, and spacing

    o Express reservation to local governments (rights of way)

    o Local ordinances required drilling permit, public hearing zoning cert, planning board OK, fees/bond, etc.

    o Plaintiffs: State law preempts ordinances

    o City argued: Home rule authorizes

    o Court: 1) were not matter of local self governance and 2) was an exercise of police power, and 3) conflicted with the States oil/gas drilling law

    o The citys requirement for a permit directly conflicts with the statute as it could prohibit what the state has permitted

    o Case is on appeal to the Ohio Supreme Court

    13

  • Pending Cases/Activity- Colorado

    City of Longmont

    Issued municipal oil and gas ordinance (July 2012)

    Residents approved ballot initiative banning all hydraulic fracturing w/n city limits (Nov. 2012)

    Colorado Oil & Gas Conservation Commission (COGCC) v. City of Longmont, Colorado, (Boulder Co. Dist. Ct.)

    COGCC: Local law preempted by Colorado state law

    City: Counterclaimed for declaration - home rule and land use rights, can regulate oil and gas operations

    NGOs, Industry have intervened

    Court denied Plaintiffs motion to dismiss counterclaim

    Case is pending

    14

  • Pending Cases/Activity- Colorado (cont.)

    Colorado Oil & Gas Assn v. City of Longmont, Colorado, (Boulder Co. Dist. Ct.)

    Plaintiffs: Moratorium preempted + a taking

    City: Seek to dismiss takings assert failed to specify what was taken or est. just compensation.

    TOP Operating, NGOs moved to intervene.

    Other local restrictions

    Fort Collins Ban passed, but rescinded when developer agreed to use best mgmt practices beyond state rules

    City of Boulder 1 yr ban + ballot measure for 3 yr ban

    County of Boulder 1 yr ban, ext. for future develop.

    El Paso County lifted ban, but left certain enhanced groundwater monitoring

    Commerce City Local rules + ban in some areas

    15

  • State Control of Local Authority

    Pennsylvania Act 13

    o Replaced states Oil and Gas Act

    o Requires uniformity among local ordinances: must treat oil and gas operations as permitted uses in local zoning districts

    o Also, strengthen environmental protections/ minimize impacts setbacks, public input, restoration, impact fees

    Robinson TP v. Comm. of Penn., 52 A.3d 463, 484 ( 2012).

    Municipalities, individuals challenged the law. Holding:

    o Municipalities have standing because required uniformity of ordinances = direct obligation

    o Law violates substantive due process by allowing incompatible uses in zoning districts

    o Dissent: Act 13 is proper exercise of police power strikes balance btw development / restrictions on operations

    o Case is on appeal to PA Supreme Court

    16

  • Outlook 2013 + Local

    o Expect continued activity - bans/restrictions, ballot initiatives, challenges, litigation or compromises (e.g., MN, Fort Collins)

    States

    o Expanding activity may lead to legislation/rules e.g., Illinois (New Albany play) w/taxes + fees

    o Expanding existing rules potentially related to water use

    o Legislation/Regulations/Litigation in NY, California?

    Federal level

    o Possible advances in federal involvement e.g., BLM rule on federal land, EPA diesel guidance

    o Citizen petitions? Legislation?

    17

  • Thank You.

    Sam Boxerman [email protected]

    (202) 736-8547

    18

  • G R E E N B E R G T R A U R I G , L L P | A T T O R N E Y S A T L A W | W W W . G T L A W . C O M

    2013 Greenberg Traurig, LLP. All rights reserved.

    Local Gas Drilling Bans:

    How New Yorks Presumption of Strong Zoning

    Laws Presents a High Hurdle for Operators and

    Landowners

    July 11, 2013

    Steven Russo Shareholder [email protected] 212.801.2155

  • Greenberg Traurig, LLP | gtlaw.com

    CONTENT

    I. Backdrop to Norse Energy v. Town of Dryden

    Revised Draft of the Supplemental Generic Environmental Impact Statement

    Lower court decisions

    Analogy to cases under Mined Land Reclamation Law

    Strong focus on the term regulation

    II. Unresolved Issues Present in Appellate Ruling

    Exception language differs across statutes

    Land use rationale for regulating subterranean laterals

    Frustration of N.Y.s spacing unit regulatory scheme?

    III. Potential for National Trends?

    IV. Preemption vs. Tradition of Local Zoning

    20

  • Greenberg Traurig, LLP | gtlaw.com

    Background to Norse Energy

    > In 2008, energy companies expressed increased interest in obtaining permits for gas drilling and high-volume hydraulic fracturing to develop N.Y.s Marcellus Shale and other gas reservoirs.

    > In September 2009, the DEC prepared a Draft Supplemental Generic Environmental Impact Statement (SGEIS) to assess issues unique to horizontal drilling and high-volume hydraulic fracturing in the Marcellus Shale and other reservoirs.

    > The DEC took public comment until December 31, 2009. In response to public comment, DEC released a Revised Draft SGEIS September 7, 2011.

    21

  • Greenberg Traurig, LLP | gtlaw.com

    Background to Norse Energy

    > Towns of Dryden and Middlefield passed zoning laws banning gas drilling within the towns borders.

    No land in the Town shall be used: to conduct any exploration for natural gas and/or petroleum; to drill any well for natural gas and/or petroleum; or to dispose of natural gas and/or petroleum exploration or production wastes; or to erect any derrick, building or other structure; or to place any machinery or equipment for any such purposes. 1

    > In response, oil and gas lessor and energy company sought declaratory judgments that these new zoning laws are preempted by the N.Y. Oil, Gas and Solution Mining Law Section 23-0303[2].

    22

    1. Section 2104 (1) excerpt from Article XXI of Drydens Zoning Ordinance.

  • Greenberg Traurig, LLP | gtlaw.com

    Background to Norse Energy

    > Trial courts each held that the NY OGSML did not preempt the local zoning ordinances.1

    > In Norse Energy and its companion case Cooperstown Holstein Corp., the Third Department affirmed the judgments of the trial courts.2

    23

    1. See Anschutz Exploration Corp. v. Town of Dryden, 35 Misc.3d 450, 471 (Sup. Ct., Tompkins County 2012); see also Cooperstown Holstein Corp. v. Town of Middlefield, 35 Misc.3d 767, 780 (Sup. Ct.,

    Otsego County 2012).

    2. See Norse Energy Corp. v. Town of Dryden, 964 N.Y.S.2d 714, 724 (3rd Dept 2013); see also

    Cooperstown Holstein Corp.,964 N.Y.S.2d 431, 432 (3d Dept 2013).

  • Greenberg Traurig, LLP | gtlaw.com

    Lower Court Decisions

    Found that state law does not preempt local zoning laws and that local governments can zone out gas drilling.

    Relied upon strong presumption that local governments have the right to regulate land use within their jurisdictions.

    Matter of first impression, turned on statutory interpretation of New Yorks Oil, Gas and Solution Mining Law.

    But drew analogies to cases interpreting the preemption provision of the Mined Land Reclamation Law.

    24

  • Greenberg Traurig, LLP | gtlaw.com

    The Language at Issue?

    > OGSML Section 230303[2] 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.1

    > The courts thus held that all local laws or ordinances did not really mean all.

    25

    1. ECL 230303[2] [OGSML]

  • Greenberg Traurig, LLP | gtlaw.com

    Analogy to Cases under Mined Land

    Reclamation Law

    > Matter of Frew Run Gravel Products, Inc. v. Town of Carroll, 71 N.Y.2d 126, 133134 (1987).

    Holding that the MLRL did not preempt a towns zoning law which established a zoning district where sand and gravel operations were not a permitted use.

    > Gernatt Asphalt Products, Inc. v. Town of Sardinia, 87 N.Y.2d 668, 683 (1996).

    Similarly holding that the MLRL did not preempt the towns authority to determine that mining should not be a permitted use of land within the town.

    26

  • Greenberg Traurig, LLP | gtlaw.com

    Different Language in the Statutes

    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. ECL 230303[2] [OGSML]

    [T]his title shall supersede all other state and local laws relating to the extractive mining industry; provided, however, that nothing in this title shall be construed to prevent any local government from enacting local zoning ordinances or other local laws which impose stricter mined land reclamation standards or requirements than those found herein. ECL 232703 [MLRL]

    > The court focused on the similarities between the primary language while ignoring the differences in the exceptions.

    27

  • Greenberg Traurig, LLP | gtlaw.com

    Regulation

    > The court in Norse Energy focuses on the term regulation as referring to laws concerning only the technical operational activities of the oil, gas and mining industries.1

    > The provisions of this article shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries . . .2

    28

    1. Norse Energy, 964 N.Y.S.2d at 721.

    2. ECL 230303[2] [OGSML]

  • Greenberg Traurig, LLP | gtlaw.com

    Problems with the Courts Reasoning

    > The exclusionary language in the Mined Land Reclamation Law differs from the language in the Oil, Gas and Solution Mining Law.

    > The cases fail to address the issue of banning subsurface lateral drilling.

    How does this have anything to do with traditional zoning interests?

    Only zoning rationale would be an environmental rationale

    > Outcome frustrates the purpose of the statute and New Yorks spacing unit scheme, especially to the extent it upholds statutes banning non-surface activity.

    29

  • Greenberg Traurig, LLP | gtlaw.com

    Subterranean Laterals and Land Use

    > Are these laterals something we traditionally think of as land use?

    > Clues in decisions as to what is really going on.1

    Public Opinion

    Environmental Concerns

    30

    1. Anschutz Exploration Corp., 35 Misc.3d at 458 (Because hydrofracking may involve the risk of

    contaminating ground and surface water supplies, it has become extremely controversial).

  • Greenberg Traurig, LLP | gtlaw.com

    Unnecessary Carve Outs under OGSML

    > Why explicitly carve out exceptions for local laws relating to uses of roads if the preemption provision only applies to local laws regulating the rules and procedures of the industry?

    31

  • Greenberg Traurig, LLP | gtlaw.com

    Frustrating NYs Spacing Unit Regulatory

    Scheme

    > Statutes purpose is to increase efficiency while minimizing waste during extraction in new fields.1

    > N.Y. regulations accomplish this purpose through a spacing unit scheme.

    > Spacing units can and often do move across municipal boundaries.

    > How can this spacing unit structure function if municipalities are able to create no drill zones in the middle of the units?

    32

    1. Norse Energy, 964 N.Y.S.2d at 721.

  • Greenberg Traurig, LLP | gtlaw.com

    Potential for National Trends? > P.A.s Act 13 allows the state to assess an impact fee

    which is shared with local governments, while also requiring those local governments to conform their municipal regulations to statewide standards.

    > Robinson Township v. Public Utilities Commission held Act 13s zoning pre-emption unconstitutional as a violation of substantive due process because it does not protect the interests of neighboring property owners from harm, alters the character of neighborhoods and makes irrational classifications.1

    > Remains on appeal in the Supreme Court of Pennsylvania, leaving the issue unresolved.

    33

    1. Robinson Township v. Public Utilities Commission, 52 A.3d 463, 484 (Pa. Commw. Ct. 2012).

  • Greenberg Traurig, LLP | gtlaw.com

    Takeaways > Gas drillers in N.Y. now face an additional hurdle while

    attempting to establish spacing units.

    > Virtually impossible to obtain a large spacing unit in areas with local bans, especially if laws can go beyond regulation of surface activity.

    > This ruling tied to specific language of preemption statutes at issue and thus may or may not have an effect on drilling in other jurisdictions.

    > If you want to supersede zoning in NY you are going to need to call it out specifically.

    > Applicability elsewhere may depend on each states tradition of defense to local land use statutes.

    34

  • Fracking, Local Regulation, and Preemption

    Strafford Webinars

    July 11, 2013

    Using Zoning to Protect Property Values and Community Character from Heavy Industrial Activities

    Deborah Goldberg, Managing Attorney

    Earthjustice 212-845-7377

    [email protected]

    Photo Goes ere

    Photo: marcellus-shale.us

  • 36

    Outline of Presentation

    The community perspective

    The New York preemption cases

    The regulatory options

  • 37

    Whats at Stake

    Photos: Town of Dryden Supervisor Mary Ann Sumner

  • 38

    The Game Changer

    Photo: Robert Donnan

  • 39

    Impacts on the safety, health and

    well-being of persons or property

    Photo: Ann Pinca Photo: Frank Finan

    http://www.mothersagainstfracking.org

  • 40

    One of the most significant functions of a local

    government is to foster productive land use within its

    borders by enacting zoning ordinances.

    DJL Rest. Corp. v. City of New York, 96 N.Y.2d 91, 96 (2001)

    Broadview Heights, OH http://www.mothersagainstfracking.org/category/bvhphotos/page/3/

    Washington County, PA Andrew Harrer/Bloomberg News (New York Times 10/20/11)

    Wagner Vineyards, Seneca Lake http://www.fingerlakeswinecountry.com

    Cooperstown

  • 41

    NY Court of Appeals Precedents

    Preemption of local zoning authority is disfavored in the absence of a clear expression of legislative intent to preempt local control over land use. Gernatt Asphalt Prods. v. Town of Sardinia, 87 N.Y.2d 668, 682 (1996) (emphasis added).

    [W]e cannot interpret the phrase local laws relating to the extractive mining industry as including the Town of Carroll Zoning Ordinance. The zoning ordinance relates not to the extractive mining industry but to an entirely different subject matter and purpose . . . . The purpose of a municipal zoning ordinance in dividing a governmental area into districts and establishing uses to be permitted within the districts is to regulate land use generally. Frew Run Gravel Prods. v. Town of Carroll, 71 N.Y.2d 126, 131 (1987).

    A municipality is not obliged to permit the exploitation of any and all natural resources within the town as a permitted use if limiting that use is a reasonable exercise of its police powers to prevent damage to the rights of others and to promote the interests of the community as a whole . . . . Gernatt, 87 N.Y.2d at 684.

  • Greenberg Traurig, LLP | gtlaw.com

    The Language at Issue?

    > OGSML Section 230303[2] 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.1

    > The courts thus held that all local laws or ordinances did not really mean all.

    42

    1. ECL 230303[2] [OGSML]

  • 43

    The Exceptions in Context

    Local road after fracking traffic, April 2013

  • 44

    Subsurface Drilling & Spacing Units

    Photo: thestickmanspeaks.wordpress.com

    http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=9x2nTi4P_lqBBM&tbnid=MXPHg5An4-6EOM:&ved=0CAgQjRwwAA&url=http://thestickmanspeaks.wordpress.com/2011/02/04/cornered/&ei=ZhrUUdDkIo-AqwGpyoGoCg&psig=AFQjCNFFKH3GeLzS9PzEjVsYuvHYUnCNIQ&ust=1372941286606318

  • 45

    The Real Thing

    The Legislature knows how to preempt local land use law. When local land use law is preempted, the Legislature provides formal protections for the private property and community character interests normally protected by zoning, by requiring opportunities for local participation in the siting decisions.

    E.g., Notwithstanding any other provision of law, no municipality may, . . . require any approval . . . including conformity with local zoning or land use laws and ordinances, regarding the operation of a facility with respect to which a certificate hereunder has been granted; provided, however, that such municipality has received notice of the filing of the application therefor. ECL 27-1107

    The MLRL had provisions for local involvement, but the Court of Appeals still declined to find preemption. The OGSML has none.

  • 46

    Wide range of local control under state legal regimes:

    Land use (including bans) and operational regulations (e.g., OK, TX)

    Land use regulations (including bans) (e.g., CA, NY)

    Land use (excluding bans) and operational regulations not in conflict with state law (e.g., CO)

    Regulations in areas not covered by state law (e.g., OH)

    No local land use or operational regulations (e.g., WV)

    The Spectrum of Co-Existence

    http://www.google.com/imgres?imgurl=http://www1.assumption.edu/users/bniece/spectra/HiResolution/Ws.jpg&imgrefurl=http://www1.assumption.edu/users/bniece/spectra/lightsources.html&h=768&w=1024&sz=58&tbnid=DPmRnayG367vTM:&tbnh=98&tbnw=130&prev=/search?q=spectrum+image&tbm=isch&tbo=u&zoom=1&q=spectrum+image&usg=__6ePqadJCq75UROa6s68rBUyR-Xg=&docid=fdfyRqalsbeZgM&sa=X&ei=9N3WUcTqBouuqwHNjoGoBA&ved=0CHQQ9QEwDg&dur=2852

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