HOME RULE: CAN MUNICIPALITIES BAN NATURAL GAS EXPLORATION IN NEW YORK? To Date: All New York Cases Answer this Question in the Affirmative.

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1 HOME RULE: CAN MUNICIPALITIES BAN NATURAL GAS EXPLORATION IN NEW YORK? To Date: All New York Cases Answer this Question in the Affirmative.

2 MAY 2, 2013 TWO APPELLATE DECISIONS CONFIRM THE VALIDITY OF MUNICIPAL BANS Norse Energy Corp. USA v. Town of Dryden, 108 A.D.3d 25 (Third Department, 2013). Cooperstown Holstein Corp. v. Town of Middlefield, 106 A.D.3d 1170 (Third Department, 2013).

3 THE DECISIONS Both decisions affirm the lower courts holding that the New York Oil and Gas and Solution Mining Law does not expressly preempt municipal zoning, including total bans on oil and gas development within a municipality; Both decisions reject conflict preemption, finding that total bans on oil and gas development may harmoniously coexist with statutory policies of providing for greater ultimate recovery, preventing waste and protecting the correlative rights of all owners; and Both decisions and the lower court cases follow precedent under the New York Mined Land Reclamation Law which has distinctly different language and policy objectives.

4 The Status of the Issue On August 29, 2013, the New York Court of Appeals granted leave to appeal in both cases. Only 6% of cases requesting leave to appeal to the New York Court of Appeals are granted. When leave to appeal is granted, 54% of those appeals result in reversal. This is a pure issue of law, which means that a de novo review will occur. As such, this is a wide-open issue notwithstanding prior lower court decisions.

5 THE CURRENT LANDSCAPE IN NEW YORK

6 What is Involved? The Oil and Gas and Solution Mining Law, ECL Article 23, Titles 3,5,7 & 9 ( OGSML ). Based upon a model from the Interstate Oil and Gas Compact Commission. New York has been a member since See ECL Article 23, Title 21. The Interstate Compact requires member states to prevent, among other things, the drilling, equipping, locating, spacing or operating of the well or wells so as to bring about physical waste of oil or gas or loss in ultimate recovery thereof.

7 The OGSML The statute contains terms of art that are unique to the oil and gas industry. Express declaration of policy that directs that development and production of oil and gas resources are to be performed in such manner that will prevent waste, that the greater ultimate recovery of oil and gas may be had, and that the correlative rights of all owners and the rights of all persons including landowners and the general public may be fully protected.

8 The OGSML In accord with the declaration of policy and the obligations of the Interstate Compact, the statute defines the oil and gas term waste as, inter alia, [t]he locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which causes or tends to cause reduction in the quantity of oil or gas ultimately recoverable from a pool under prudent and proper operations.

9 The OGSML Last, but not least, the statute requires protection of the correlative rights of all owners. Again, this is a unique oil and gas term relating to the right of mineral owners to have their oil and gas resources developed for their benefit. This language, including its applicability to all owners, has been emasculated by the lower court decisions.

10 The State Energy Law State Energy Policy: It shall be the energy policy of the state:. 5. to foster, encourage and promote the prudent development and wise use of all indigenous state energy resources including, but not limited to, onshore oil and natural gas, offshore oil and natural gas, [and] natural gas from Devonian shale formations.

11 1981 AMENDMENTS TO THE OGSML EXPRESS PREEMPTION: ECL (2) 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.

12 GOVERNOR S PROGRAM BILL # A.6928 The provision for supersedure by the Oil, Gas and Solution Mining Law of local laws and ordinances clarifies the legislative intent behind the enactment of the oil and gas law in The comprehensive scheme envisioned by this law and the technical expertise required to administer and enforce it, necessitates that this authority be reserved to the State. Local government s diverse attempts to regulate the oil, gas and solution mining activities serve to hamper those who seek to develop these resources and threaten the efficient development of these resources, with Statewide repercussions. With adequate staffing and funding, the State s oil, gas and solution mining regulatory program will be able to address the concern of local governments and assure the efficient and safe development of these energy resources. Governor s Program Bill, Page 4

13 What is Not Involved? The Mined Land Reclamation Law, ECL Article 23, Title 27 ( MLRL ). Regulates mining, e.g., sand and gravel mining, not oil and gas development. Has no relationship to the Interstate Compact. Has no counterpart to preventing waste or protecting the correlative rights of mineral owners.

14 The Frew Run Trap All lower court decisions have followed or felt compelled to follow the Court of Appeals MLRL decision in Frew Run Gravel Products v. Town of Carroll (1987) based upon the express supersession language contained in the MLRL, a wholly different statute, involving wholly distinct language, legislative history and policy objectives. One lower court Judge actually criticized the decision as being flawed, but concluded that local zoning ordinances do not relate to the regulation of the subject industry based upon Frew Run.

15 The MLRL Language At the time Frew Run was decided, express preemption language read as follows: For the purposes stated herein, this article shall supersede all other state and local laws relating to the extractive mining industry; provided, however, that nothing in this article 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.

16 Conflict Preemption Even where express preemption does not exist, implied preemption may be found through direct conflict between a state and local statutory scheme. New York comprehensively regulates where natural gas wells may be located through statutory and regulatory spacing requirements based upon geology and detailed environmental restrictions concerning land-use prohibitions and setbacks from sensitive resources. This is direct conflict that cannot harmoniously coexist. A ban on oil and gas development emasculates the correlative rights of owners. Again, this is direct conflict that cannot harmoniously coexist.

17 THE WEST FIRM, PLLC THOMAS S. WEST, ESQ. 677 Broadway, 8 th Floor Albany, New York Tel.: (518) twest@westfirmlaw.com Website: Blog: This presentation is made available by The West Firm, PLLC only for educational purposes as well as to give general information and a general understanding of the law. It should not be construed as the firm s legal advice or opinion regarding a particular issue or assessment of law for any particular jurisdiction. It also should not be construed to represent the position of any client represented by the firm.

Natural Gas and Oil Exploration & NYS Municipal Home Rule Case Law Update

Natural Gas and Oil Exploration & NYS Municipal Home Rule Case Law Update Presented by: John C. Cappello, Esq. 2013, 2012 by Jacobowitz & Gubits, LLP, & John C. Cappello, Esq. All rights reserved. 1 Cases