David J. Ganje
Ganje Law Offices
Rapid City, SD, Albany, NY
Persistent institutional indecisiveness by elected officials in New York State has placed the state in the position of not having a statewide policy addressing the issue of energy development as it relates to hydraulic fracturing in the oil and gas industry. Beginning in 2008, the state-imposed moratorium on the completion method established a policy vacuum lasting 5 years and running.
Filling the vacuum are a myriad of town and city home-rule ordinances meant to control the drilling and producing industry by prohibition through recent, local zoning ordinances and planning law. Approximately 150 different municipalities have passed such local legislation. Thus the vacuum is now filled with a patchwork of local laws, ironically void of any "center," and all in effect designed to independently regulate the same area.
These types of disparate local legislative acts neither encourage development in the energy industry, as proponents of the energy industry have recommended, nor create a cohesive state policy prohibiting such development. Nobody wins. By permitting a checkerboard of local laws, what is ostensibly legislative chaos, bad policy has been created.
Other states facing a similar issue provide guidance. Ohio completed its study on hydraulic fracturing in 8 months. Illinois completed its study in 2013 and subsequently created regulations after a 17-month study. California announced new regulations on the subject in 2013 after a 2-year study. New York has failed to yet step in—even with the benefit of 5 years to study the issue.
Alexander Hamilton argued that a centralized form of government avoided factions of just the type New York now faces. Local participation in the policy and rulemaking process is perhaps understandable where the state has failed to act and manage. On oil and gas development, however, New York's existing law reflects a desire for state uniformity and addresses the problem of enforcement by local law.
The New York statute in question states, "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." The statute reflects a desire for state uniformity, consistent with the New York Environmental Conservation Commission's jurisdiction to regulate well drilling, under the Oil, Gas and Solution Mining Law. Yet, in early May, a New York Appellate Court decision effectively authorized municipalities in New York state to ban oil and gas development by use of these local laws. The New York Court of Appeals has agreed to take up the case on appeal, to decide whether state law preempts local, municipal authority.
Oil and gas are not found beneath the earth arranged in tidy blocks within existing legal boundaries, but rather in irregularly shaped subsurface reservoirs, including shales with permeability low enough to impede their flow. A hydrocarbon-bearing shale does not fit neatly within a city or town's boundaries but may well run through several towns—and thus is unable to heed the legalese of man's concept of legal borders.
New York's existing law declares a policy of not permitting waste of natural resources by inefficient withdrawal of oil and holds paramount the principle that a greater ultimate recovery of oil and gas may be had, and the correlative rights of all landowners and the general public may be fully protected.
The Court of Appeals will need to decide whether the Oil, Gas and Solution Mining Law is intended to create a statewide energy policy. It is. Permitting a patchwork of incongruous local policies is an unnecessary bureaucratic nightmare, especially when one has a state agency such as the New York Department of Environmental Conservation (DEC), which is fully equipped and professionally staffed to uniformly manage oil and gas development throughout the state.
Western states have faced this problem before and concluded—when necessary, through their courts—that whole-cloth prohibitions created by local laws are preempted by state oil and gas statutes. Several courts have held that a state's interest in efficient oil and gas development, as well as production throughout the state, is sufficiently important to override a home-rule city's imposition of a total ban on the drilling of oil and gas wells.
Both local interests and a statewide development policy can coexist. Uniform statewide administration of oil and gas development by the New York DEC and local control of land use laws through zoning policies are not mutually exclusive.
Predictability is what the industry seeks before it takes an economic risk. Security of property from environmental hazards and nuisances are the issues that local ordinances are intended to protect. Predictability is not obtained by a patchwork of oil and gas law varying from town to town.
New York's DEC Mineral Resources staff was created to deal with this issue. Staff members have average work experience of 22 years each in this field. A full DEC permit application, wherein a proposed operator identifies and addresses issues found in reasonable zoning ordinances or local comprehensive plan, would allow for a public debate on a project's effect on local issues and property through a DEC-managed environmental review.
David Ganje is an attorney with Ganje Law Offices of Rapid City, SD, and practices natural resources and commercial law in South Dakota, North Dakota, and New York.