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Commentary: A clash of titans over hydrofracking

A recent New York case, Wallach v. Town of Dryden, illustrates a deep schism in conflicting public attitudes over energy and local governments’ regulation of land use. The case involved the authority of an upstate town to prohibit “hydrofracking” by landowners or their agents to produce oil or gas. Hydrofracking involves the injection of water into the ground in order to facilitate the production of oil and gas.

Dryden had a comprehensive plan (implemented by its zoning ordinance) that sought to preserve its “rural and small town character” and quality of life. Norse Energy Corp. USA acquired easements to explore and develop natural gas resources, but the town interpreted its zoning ordinance to prohibit that activity, because it was not specifically permitted. A “catchall” phrase applicable to all zones in the town said that if a use were not specifically permitted, it was prohibited.

After an inquiry was made on the lawfulness of proposed fracking, the town held a public hearing and then specifically prohibited these activities. Norse Energy then went to court and sued for a declaration that the prohibition was pre-empted by a state statute that provided that state oil and gas law superseded local laws and ordinances “relating to the regulations of the oil, gas and solution mining industries.”

A trial court upheld the town’s actions, except a purported invalidation of state and federal permits already issued. Norse Energy then went bankrupt and was represented in further proceedings by its trustee, Mark Wallach. An appellate court affirmed the lower court’s decision, and the New York State Court of Appeals granted review by combining this case with a similar one involving the town of Middlefield, which also sought to regulate fracking.

The appeals court held that the “home rule” provisions of the New York Constitution allowed local governments to adopt regulations not inconsistent with state law, but required a clear expression of legislative intent to pre-empt those local regulations. The court undertook a lengthy exercise in statutory interpretation and concluded that, while the state statute did provide that state oil and gas statutes superseded local laws and ordinances “relating to the regulations of the oil, gas and solution mining industries,” that prohibition did not extend to zoning regulations, but only to the manner in which such mining operations were undertaken. Other portions of the oil and gas law relating to allowing local governments to regulate public roads or impose property or other taxes on these operations did not add any further weight to Norse Energy’s arguments.

Over two dissents that found the complete prohibition to be a regulation of mining prohibited by state law, the appeals court sided with the town that the prohibitions were valid and not pre-empted by state law.

While this was a case involving interpretation of New York law, the themes raised in the case resonate across the country.

The case has caused a stir in both the energy production and local government worlds. Proponents of energy production point to the national need to wean the country away from foreign oil and gas, the balance of payments and international relations problems that results from our addiction to foreign energy, and the jobs that would result from local energy production. Local governments counter with the impacts such operations have on the environment, on local plans and zoning, and occasional failure by state officials to implement regulations imposed by a far-away state government on a local basis.

There may be no single response to these concerns. State legislatures have the option to entrust both operational and land use regulations to a state agency in order to favor a uniform set of regulations to a given area. That same body may decide to allow local governments to undertake both operational and land use supervision of that area. Or the Legislature may decide to divide those responsibilities, as New York did, giving state agencies power to regulate the operational aspects of an industry, while leaving land use planning and regulation to the local governments having authority in a geographical area.

Edward Sullivan and Carrie Richter are owners in the Portland, Oregon, office of Garvey Schubert Barer. They can be contacted at esullivan@gsblaw.com or crichter@gsblaw.com. A version of this column originally appeared in Daily Journal of Commerce (Oregon), sister publication to The Daily Record.