This post follows up on today’s earlier post on the New York Court of Appeals’ decision in Wallach v. Dryden and Cooperstown Holstein Corp. v. Middlefield.

In a 5-2 vote, New York’s highest court – the Court of Appeals – upheld the power of local governments to ban through adoption of local laws high-volume hydraulic fracturing.  The Court made its ruling in the face of broad statutory language in New York’s Oil, Gas and Solution Mining Law (OGSML) that preempts “all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries.”   The Court relied heavily on its 1987 decision in Matter of Frew Run Gravel Products v. Town of Carroll, 71 N.Y.2d 126 (1987), in which the court, interpreting a preemption provision contained in the State’s mining law, drew a distinction between laws regulating how mining is conducted versus laws regulating where the activity could take place.  The court found that the seemingly broad language contained in the OGMSL preemption provision only spoke to laws regulating “the actual operations of the oil and gas industries.”  The Court thus rejected the Industry Appellants’ main argument that a ban does constitute the regulation of actual operations.  The court found that, while local zoning bans would “undeniably have impact on the oil and gas enterprises,” the bans at issue regulated land use in general and did not attempt to regulate the details, procedures and operations of the oil and gas industries.  The court drew heavily on its view that the regulation of local land use is “one of the core powers of local governance.”

The Industry Appellants made a secondary argument, pointing to the fact that the preemption language authorized localities to regulate only transportation and taxes.  Appellants’ basic point is that local control over land use and zoning should also have been included as a carve out.  The Court of Appeals rejected this interpretation, finding that, unlike local land use laws, laws relating to road use and taxes could be construed as directly regulating industry operations. In reaching this decision the court made clear that it was not taking a position on the contentious issue of high-volume hydraulic fracturing.  What this decision makes clear is that New York’s highest court, like the trial and intermediate appellate courts that previously decided the issue, will continue to vigorously protect the right of local governments to regulate land use within their borders.  Viewed through that lens it is clear that courts in New York are unlikely to find any local land use law preempted in any area of state regulation except in cases where the statute at issue contains clear and explicit language identifying land use regulation as preempted.

Finally, the Court of Appeals rejected the argument that preemption would be inconsistent with the overall structure and regulation of the industry under the OGSML law.  The court found that the scheme providing for efficient extraction of the resource and the prevention of waste did not necessitate preemption of the location of well pads.  Like the lower courts that faced the issue, however, the Court of Appeals did not confront the actual language associated with the local bans that proscribed the location of surface well pads and banned location of subterranean laterals.  The dissenting opinion appropriately noted the breadth of the prohibitions, observing that the laws at issue in these cases “regulated the oil, gas and solution mining industries under the pretext of zoning.”  A review of the actual bans, which go well beyond the placement of the surface well pads, makes it hard to understand how those laws cannot be viewed as either regulating the activity itself or interfering with the efficient creation of spacing units as contemplated under the OGSML.

The natural gas industry has often stated that upholding local bans would be a death sentence of high-volume hydraulic fracturing in New York State, and opponents certainly hope that is the case.  Despite that view, this decision could give the Cuomo Administration some room to maneuver the treacherous political waters around fracking because any authorization of this activity would now be limited to areas of the state where no bans are in place and, presumably, more support for the industry and the economic advantages it can bring. A review of the locations where bans have been enacted reveal that the vast majority are in areas that are on the fringes of the Marcellus formation or beyond in the Utica formation.  In the southernmost areas of New York State bordering Pennsylvania, which has already been shown to be a productive area geologically, there are very few local bans in place.  While it remains to be seen what happens going forward, the Court of Appeals’ decision could make it easier, not harder, for fracking to occur in the areas of New York State that are very likely to be productive resources and where local support for the industry is stronger.