Chapter 32 Fracking

• Library: The Zoning and Land Use Handbook (ABA) (2016 Ed.)

Chapter 32 Fracking

A. What Is Fracking?

"Fracking" is a shorthand term for what is described as hydraulic fracturing. This is the extraction of oil and gas from rock formations such as shale.¹ The hydraulic fracturing technology to extract oil and gas has been commercially employed since 1949.² What has changed to make fracking the economic phenomena that it has now become is technology. Whereas, formerly, fracking was accomplished by vertical drilling, new technologies in the industry allow for horizontal drilling for up to another mile in all directions once the vertical depth has been reached. This greatly increases the productivity and the economics of extracting oil and gas.

In his 2012 State of the Union address, President Obama referred to fracking as one of the energy policies that will fuel America's economic growth and meet the country's natural gas needs for the next 100 years.³ One study has indicated that fracking is likely to generate 1.5 million jobs and contribute $332 billion dollars to the U.S. gross domestic product by 2035.⁴ By that same date, total government revenues from unconventional or fracking-related gas development could approach $1.5 trillion dollars.⁵

Daniel Yergin, a respected energy scholar and energy expert, testified before Congress as follows:

This abundance of natural gas is very different from what was expected a half decade ago. It was then anticipated that constraints on domestic natural gas production would result in high prices for consumers and the migration of gas-using industries—and the jobs that go with them—out of the United States to parts of the world with cheaper supplies. The United States was also expected to be importing substantial amounts of natural gas in the form of liquefied natural gas (LNG). That would have added as much as $100 billion to our trade deficit. None of that has occurred. Instead, the United States has become, except for imports from Canada, mostly self-sufficient. . . . Gas prices have fallen substantially, lowering the cost of gas-generated electricity and home heating bills. Several hundred thousand jobs have been created in the United States. Gas-consuming industries have invested billions of dollars in factories in the United States, something which they would not have expected to do half a decade ago— creating new jobs in the process. The development of shale has created significant new revenue sources for states—for the state of Pennsylvania and localities in that state, for example, $1.1 billion in revenues in 2010.⁶
Hydraulic fracturing has . . . boosted local economies—generating royalty payments to property owners, providing tax revenues to the government and creating much-needed high-paying American jobs. Engineering and surveying, construction, hospitality, equipment manufacturing and environmental permitting are just some of the professions experiencing the positive ripple effects of increased oil and natural gas shale development.⁷

However, there are those that speak out against fracking. Although local governments benefit temporarily from increased tax revenues during drilling booms, the costs to repair road damage—sometimes running into the millions of dollars—may outweigh that short-term bonus. In 2012, the State of Texas received about $3.6 billion in severance taxes from all oil and gas produced in the state (from conventional wells as well as those in fracked shale). But during that same year, the Texas Department of Transportation estimated damage to Texas roads from drilling operations at $4 billion. Arkansas has taken in roughly $182 million in severance taxes since 2009, but costs from road damage associated with drilling are estimated at $450 million. Roads designed to last 20 years are requiring major repairs after only five years due to the constant stream of overweight vehicles ferrying equipment and water to and from fracking sites.⁸

B. Preemption versus Home Rule

The expansion of fracking into sometimes densely populated regions and areas not familiar with the gas and oil extraction process has raised concerns about the effect of fracking on health and the environment. Although there are federal regulations that govern the hydraulic fracturing process, the states are primarily responsible for regulation in this field. The issue facing the various legislatures is how to take advantage of the tremendous economic potential offered by fracking, while at the same time protecting the health and safety of the general public. According to at least one article more than 170 bills in 29 states were introduced in 2012 regulating the fracking process.⁹

The Interstate Oil and Gas Compact Commission is a multi-state government agency that is organized to enhance "the quality of life for all Americans." Most of the states of the United States belong to the commission.¹⁰ The commission is comprised of the governors of oil- and gas-producing states as well as appointed representatives. The commission also has international affiliates, which includes Canadian provinces, Alberta, and British Columbia, as well as Newfoundland, Nova Scotia, and Venezuela.¹¹

The issue of preemption versus home rule arises in context of the legal view that the local government only has the powers derived by state constitutions or by statutory authority. Here the issue is whether the rule referred to as Dillon's Rule after Judge Dillon's treatise on local government, which limited local government authority to that prescribed by State statute entities, or whether home rule authority, giving municipalities all authority in furtherance of its government and affairs except as specifically limited by the State applies.

The term "Dillon's Rule" comes from an 1865 decision rendered by Judge Robert Dillon of Iowa over the issuance of bonds unauthorized by state legislatures, which found that local governments only have authority over matters when a charter or law expressly grants its power. Courts only become involved in legal disputes when the intent of the legislature or the state constitution is not clearly expressed to determine grants of authority. In theory, a Dillon's Rule state can have either a liberal or a conservative regulatory model. The limiting factor is that a locality's authority must be expressly determined.

"Home rule" states typically are described as having a more expansive set of powers that are assumed unless it is clearly denied by law. Anecdotally, political scientists and observers note the public often misapplies and confuses the concept of "home rule" because the term is used both as a legal doctrine and as a political motto. Two components are foundational to the notion of home rule granted by a constitutional amendment or legislative action. The first is the ability of a local government to manage its own affairs. Secondly, local governments must be able to avoid interference from the state or a state agency. According to the National League of Cities, 32 states employ Dillon's Rule to all municipalities, seven states apply the rule on only certain localities and 10 states apply home rule. Florida applies home rule for all issues but taxation.¹²

In the case of Northeast Natural Energy, LLC v. City of Morgantown,¹³ the Morgantown local ordinance imposed a ban on hydraulic fracturing within one mile of the city limits. The plaintiff, Northeast Natural Energy, LLC argued that state law preempted the ordinance. The town maintained that as a home-rule municipality it had the authority to pass the ordinance. The court held that although the city has home-rule power and an interest in regulating uses on land within its jurisdiction, that authority is trumped by comprehensive state law.

The same holding is found in State ex rel. Morrison v. Beck Energy Corp.¹⁴ The plaintiff, an energy...