Sign of Things to Come? More Municipalities Challenge State Drilling Regulations

Today's Wall Street Journal features a prominent story chronicling the number of local municipalities challenging state laws prohibiting them from regulating oil and gas drilling.The trend underscores an inherent tension between states seeking to provide regulatory certainty (not to mention a steady stream of tax revenue) with localities that believe they should have more control over zoning and development in or near their town borders.

Over recent weeks, a flurry of legislative activity and court rulings have highlighted a push by communities in states where hydraulic fracturing is occurring - especially in the Marcellus Shale region -  for more control over the siting and jurisdiction of oil and gas drilling. A New York State judge ruled last February that a town could use its zoning powers to prohibit oil and gas drilling because current state law does not specifically preclude a locality's ability to do so under its land use regulations. That ruling has since been appealed but it adds another wrinkle to an already contentious debate about the future of fracking in New York. On March 30, seven municipalities within Pennsylvania sued the state over the recently passed Marcellus Drilling Law Act 13, which prevents them from using their zoning powers to restrict oil and gas leasing or development. In addition to providing counties and communities with shale drilling impact fees, the law establishes statewide standards over where wells can be allowed and prohibits any local zoning ordnances that are more strict than state standards. Any local law in excess of state standards can be challenged by drilling companies, however, those disputes would be decided by the state Public Utility Commission. The plaintiffs said, "By crafting a single set of statewide zoning rules applicable to oil and gas drilling throughout the Commonwealth, the Pennsylvania General Assembly provided much sought-after predictability for the oil and gas development industry. However, it did so at the expense of the predictability afforded to Petitioners and the citizens of Pennsylvania whose health, safety and welfare, community development objectives, zoning districts and concerns regarding property values were pushed aside to elevate the interests of out-of-state oil and gas companies and the owners of hydrocarbons underlying each property, who are frequently not the surface owners."

Officials with Governor Corbett's office point out that the final legislation was negotiated with significant public input by local governments and municipalities. They believe consistent and uniform regulations need to be put in place to ensure that development will in fact occur after an operation receives a permit by the state and that mineral rights of property owners are also respected. Without this assurance, drilling advocates note that many community land use rules treat fracking differently than other industrial uses and that significant investments would be put in jeopardy under a retroactive, patchwork of local rules. If operational costs go up, they fear that companies may move elsewhere to states with more predictable regulatory policies - thus losing a reliable source of tax revenue and the jobs associated with the fracking boom.  Many supporters of fracking contend that if the municipalities' lawsuit is successful it will drive companies to neighboring Ohio, where state laws prohibit local zoning regulations from superseding state standards and significant development is already underway to access the Utica Shale.