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Two New York Courts Uphold Local Bans on Hydraulic Fracturing and Other Oil and Natural Gas Operations

Beveridge & Diamond, P.C., March 2, 2012

Two New York state trial courts recently upheld local zoning laws passed by towns in the Marcellus Shale region that would ban all oil and natural gas exploration, production, and storage within the town limits. Among the activities that are prohibited under the laws is high-volume hydraulic fracturing (“hydrofracking”) to extract natural gas, a technique that is currently the subject of proposed regulations and an environmental impact review by the New York Department of Environmental Conservation (“DEC”).

On February 21, 2012, a justice of the New York Supreme Court (Tompkins County) upheld such a ban enacted by the Town of Dryden. In Anschutz Exploration Corp. v. Town of Dryden, No. 2011-0902 (N.Y. Sup. Ct., Tompkins County, Feb. 21, 2012), an amendment to the local zoning ordinance was challenged by Anschutz Exploration Corporation, which owns gas leases covering approximately 22,200 acres in the Town. Anschutz claimed that the law was preempted by a supersession clause in the state’s Oil, Gas and Solution Mining Law (OGSML). The court disagreed, holding that the OGSML does “not expressly preempt local regulation of land use, but only regulations dealing with operations.” Slip op. at 13. Thus, “local governments may exercise their powers to regulate land use to determine where within their borders gas drilling may or may not take place, while DEC regulates all technical operational matters on a consistent statewide basis in locations where operations are permitted by local law.” Id. at 20. The court also held that municipalities have the authority to completely ban oil and gas exploration and production activities within their borders.

On February 24, another New York Supreme Court justice (Otsego County) upheld a similar law enacted by the Town of Middlefield, on similar grounds. In Cooperstown Holstein Corp. v. Town of Middlefield, No. 2011-0930 (N.Y. Sup. Ct., Otsego County, Feb. 24, 2012), the plaintiff had entered into two oil and gas leases with respect to property it owned in the Town. In denying the plaintiff’s challenge to the law, the court held (much like the Anschutz court) that “the OGSML supersession clause preempts local regulation solely and exclusively as to the method and manner of oil, gas and solution mining or drilling, but does not preempt local land use control.” Slip op. at 10. It concluded that the supersession clause “does not serve to preempt a local municipality such as defendant from enacting land use regulation within the confines of its geographical jurisdiction and, as such, local municipalities are permitted to permit or prohibit oil, gas and solution mining or drilling in conformity with such constitutional and statutory authority.” Id.

To date, these are the only court decisions that have addressed the question of whether New York municipalities may use their zoning authority to prohibit oil and natural gas exploration within their borders. It remains to be seen whether they will be appealed.

For more information, please contact Daniel Krainin at dkrainin@bdlaw.com or (212) 702 5417 or Edward Grauman at egrauman@bdlaw.com or (212) 702-5466.