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June 30, 2014

Court of Appeals Upholds Dryden and Middlfield Decisions - Municipalities in New York Have the Right to Ban Drilling

In a 5-2 decision, the New York State Court of Appeals, New York’s highest court, ruled that State law does not preempt municipal zoning laws prohibiting natural gas drilling within municipal boundaries.  The decision upheld laws passed by the Towns of Dryden and Middlefield in response to concerns about high-volume hydraulic fracturing, a method used to extract natural gas from shale.  The laws were challenged by the now-bankrupt Norse Energy Corp. USA and the Cooperstown Holstein Corporation, a landowner and lessor of natural gas development rights in the Town of Middlefield.

According to the Court, the preemption provision of the State “Oil, Gas, and Solution Mining Law [OGSML] does not preempt the home rule authority vested in municipalities to regulate land use.”  This OGSML states that: “The provisions of this article shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries…”  Despite this express language, the Court relied on its previous ruling regarding a similar provision in the State mining law, which distinguished between the local regulation of “how” mining occurs, which was preempted, versus “where” mining occurs (if at all), which the Court ruled was not preempted.  The Court applied the same distinction to the drilling laws passed by Dryden and Middlefield stating that the impact on the oil and gas industry was “incidental” to the municipalities’ “right to regulate land use.”

The Court also examined the preemption provision within the context of the OGSML and concluded that the provision relates only to the safety, technical, and operations aspects of drilling, rather than its location.  In addition, the Court found that the legislative history of the OGSML did not undermine their view that the preemption provision left the laws of Dryden and Middlefield intact.

The Court’s ruling will have the immediate effect of strengthening the position of those municipalities across New York that have passed local bans or moratoriums on drilling and it may also encourage other municipalities that have sat on the sidelines so far.  Luckily though, most of the municipalities in New York that have or seek to ban drilling are located outside of the area thought to be most prospective for shale development.  Furthermore, the Court’s decision, although not optimal and certainly disappointing, may be just what New York needs to move forward with its almost six-year stalled environmental review.  The State can finalize its standards for shale development but will no longer be on the hook politically for deciding whether shale development actually moves forward in New York – by today’s Court ruling, that decision has been delegated to local municipalities and their leaders.

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