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New York Appellate Court Affirms Broad Right of Local Governments To Use Zoning to Ban Gas Drilling

Posted in Hydrofracking, Oil & Gas

From Steven C. Russo of GT New York:

In a much awaited ruling, an upstate New York appellate court unanimously upheld the right of local governments to zone out gas drilling.  The case, Norse Energy v. Town of Dryden, was brought by a gas company seeking to nullify a very broad ban of gas drilling adopted by the Town of Dryden in anticipation of New York State greenlighting high-volume hydraulic fracturing in New York State.

The court found that the provision in the New York’s Oil, Gas and Solution Mining Law superseding “all local laws and ordinances relating to the regulation of the oil, gas and solution mining industries”  did not preclude a total bar to gas and petroleum activities through a locality’s zoning power.  The specific ordinance at issue had banned “all activities relating to the exploration for, and production and storage of, natural gas and petroleum.”  The decision went off on the interpretation of the word “regulation,” with the court finding that the only laws precluded by this provision of law were local laws regulating the rules and procedures of the industry, not a total bar to exploration, production and storage activities on zoning principles.  The strong presumption that local governments have the right to regulate land use within its jurisdiction clearly played a strong role in the court’s reasoning.  The superseding provision in the law also carved out local laws relating to uses of roads, an exception that arguably cuts against the court’s reasoning because such carve out would appear to be unnecessary if the scope of the preemption only went to the means and method of gas drilling.

The court also found that there was no implied preemption in New York’s oil and gas law.  Petitioners had argued that local bans would make New  York’s spacing unit regulatory scheme, which authorizes the payment of royalties based on the creation of drilling spacing units of up to 640 acres, unworkable.  The court disagreed, finding that the spacing units could accommodate the existence of local bans.  That reasoning, however, ignores the fact that spacing units can and often do move across municipal boundaries.  An open question also exists as to whether a local government, using zoning, can ban subsurface drilling within its jurisdiction.  It would be difficult to find a land use rationale for precluding subsurface drilling, but the statute at issue clearly does ban such drilling and the court did not address that particular point.

There was a companion case, Cooperstown Holstein Corp. v. Town of Middlefield, where the local court also upheld the right of a local government to ban gas drilling via zoning.  That decision was also affirmed based on the reasoning of Dryden.  These two decisions confirm the primacy of local zoning in New York and the hostility of New York courts to preemption of that right.  It will be interesting to see if the Court of Appeals chooses to take up this matter and decide the controversy once and for all.