New York Appeals Court Upholds Zoning Laws Banning Hydrofracking over State Oil and Gas Laws

May 30, 2013

In Norse Energy Corporation USA v. Town of Dryden, et al. and Cooperstown Holstein Corporation v. Town of Middlefield, the Third Department upheld local ordinances banning all activities related to the exploration for and the production or storage of natural gas and petroleum in the towns of Dryden and Middlefield, New York. The bans in question were enacted pursuant to local zoning laws, which were found not to be preempted by the state’s oil and gas laws.

Background: Dryden and Middlefield
In 2011, the towns of Dryden and Middlefield amended their respective zoning ordinances to ban all activities related to the exploration for and the production or storage of natural gas and petroleum. These amendments were enacted in a climate of heightened concern over the proposed use of hydrofracking in New York State.

Thereafter, two energy companies that owned drilling leases in these municipalities, Anschutz Exploration Corporation and Cooperstown Holstein Corporation, commenced separate actions seeking a declaratory judgment invalidating the zoning amendments on the grounds that they were preempted by the oil and gas law.

In both suits, the lower court ruled in favor of the municipalities, holding that the legislative intent of the oil and gas law was not to preempt local zoning authority but rather to ensure that where oil or gas drilling occurs, the operations are as efficient and effective as possible and the rights of all persons affected by such operations are protected. The energy companies subsequently appealed.

On appeal, the Third Department affirmed the trial court ruling in both cases, holding that the intent of the oil and gas law was not to preempt the authority of a municipality to enact local land use laws prohibiting oil, gas and solution mining or drilling activities within its borders. Indeed, the court held that the municipalities’ decision to prohibit hydrofracking is an explicit example of an individual municipality acting to determine the best course of action necessary to protect the community with regard to drilling activities. As stated by the court, “the policy [of the oil and gas law] explicitly seeks to protect the rights of ‘all persons including landowners and the general public’ – not just the owners of oil and gas properties … a goal which is realized when individual municipalities can determine whether drilling activities are appropriate for their respective communities.”

New York State currently has a moratorium on large-scale hydrofracking as the Department of Health and the Department of Environmental Conservation complete various reviews of the technique. Under cover of the moratorium and several delays in health and environmental analysis results, more than 150 municipalities in the state have passed bans or moratoriums on the hydrofracking process; many of these bans and moratoriums have occurred in the Finger Lakes region and central New York, where the gas-rich Marcellus Shale formation is located. Hydrofracking proponents contend that state law prohibits local bans because it defers all regulatory oversight of drilling to the state; opponents of the hydrofracking process have countered this assertion by arguing that the state law does not impede a municipality’s ability to use zoning laws in whichever way they deem fit. As drilling operations continue to assert their ability to carry on industrial operations and local governments counter with land use arguments, it is likely that courts all over New York State will hear cases on this issue.

The Dryden and Middlefield decisions will likely be appealed to the New York State Court of Appeals. If the hydrofracking moratorium is lifted, municipalities will rely on this precedent to invoke the principles of home rule and local zoning laws governing land use to bypass statewide legislation and regulation, even if those rulings are affirmed by the Court of Appeals. This has the potential to effectively shift the political battle over hydrofracking from the larger stage of Albany to the localities, where hydrofracking opponents largely outnumber proponents. A grassroots movement opposing the drilling industry’s interests, buoyed by the standard that local laws and zoning guidelines trump the state’s oil and gas law, could diminish the industry’s interest in pursuing its ability to drill in New York.

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