STATE LAW REGIMES: THE APPALACHIAN REGION
| Jurisdiction | United States |
STATE LAW REGIMES: THE APPALACHIAN REGION
Reed Smith LLP
Pittsburgh, PA
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NICOLLE R. SNYDER BAGNELL is a partner at Reed Smith LLP where she serves as Vice Chair of the firm's global Energy & Natural Resources Group. Nicolle focuses on litigation and regulatory issues regarding natural gas production, transportation and storage. She represents natural gas companies in a variety of litigation including lease disputes, royalty class actions, dormant mineral act claims, condemnations, encroachments and contract issues, as well as counsels clients on a variety of environmental matters including permitting and permit disputes, performs due diligence and provides advice on shale transactions. In addition to her trial work, Nicolle has argued before state appellate and supreme courts as well as before panels of the Third and Fourth Circuits. Nicolle graduated from Harvard University, cum laude, in Environmental Science and Public Policy in 1998 and received her J.D. and Masters in Environmental Science from Duke University in 2001. Nicolle was named a "2014 Lawyer on the Fast Track" by the Legal Intelligencer; a "Fast Tracker" by the Pittsburgh Business Times; a Law360 "Rising Star" three times; a "Pennsylvania Rising Star" by Pennsylvania Super Lawyers since 2005; and one of the "Pennsylvania Most Powerful and Influential Women" by the National Diversity Council. She was included in BizJournal's "Who's Who in Energy," and the Pittsburgh Business Times selected Nicolle as a Business Women First award recipient in 2015.
The Marcellus and Utica drilling boom over the past ten years has resulted in increased regulation of the oil and gas industry as it relates to drilling activity. States in the Appalachian region, in particular, have experienced a boom in oil and gas exploration and production activity, and with that, a surge in regulation of the industry. This paper will discuss statutory regulations related to surface use in Pennsylvania, Ohio, and West Virginia, and litigation stemming from those regulations.
I. Pennsylvania
A. Act 13
Act 13 of 2012 was signed into law by Governor Tom Corbett on February 14, 2012.1 The Act was the first comprehensive overhaul of the Pennsylvania Oil and Gas Act in over 25 years. The new law repealed the 1984 Oil and Gas Act. Act 13 generally affected three basic aspects of Pennsylvania unconventional gas well operations: 1) impact fee provisions; 2) upgraded environmental regulation; and 3) local ordinance preemption. After Act 13 was enacted, litigation of its various provisions quickly followed suit.
(i) Litigation Concerning Act 13
On July 26, 2012, the Commonwealth Court struck down Act 13 provisions that created uniform zoning for purposes of oil and gas development in Pennsylvania as unconstitutional.2 The court reasoned that Act 13's uniform zoning provisions were unconstitutional because they "do not serve the police power of local zoning ordinances, relating to consistent and compatible uses in the enumerated districts of a comprehensive zoning plan."3 Then-Governor Corbett appealed Robinson I to the Pennsylvania Supreme Court. The Pennsylvania Supreme Court affirmed the lower court in a plurality opinion, holding that the local zoning restrictions were unconstitutional.4 The Court also struck down sections of the law calling for statewide rules on oil and gas to preempt local zoning rules, as well as a section requiring municipalities to allow oil and gas development in all zoning areas. The Court held that these provisions violated the Environmental Rights Amendment (Article I, Section 27) of the Pennsylvania Constitution, which is a relatively unknown amendment in the Pennsylvania Constitution that guarantees the right to "clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment."5 The Court also remanded consideration of other provisions of Act 13 back to the Commonwealth Court, including: (1) whether limiting notice regarding spills to
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public drinking water systems only is constitutional, (2) whether corporations storing, selling, and transporting gas possess eminent domain powers, (3) whether Act 13 can prohibit health professionals from disclosing chemical additives used in fracking, and (4) whether those provisions of Act 13 that authorized the Public Utility Commission ("PUC") to review local zoning ordinances for compliance with Act 13 and withhold impact fees from municipalities whose ordinances are deemed non-compliant were severable from the enjoined provisions of the Act.6
On July 17, 2014, the Commonwealth Court rejected as unconstitutional Act 13's provision authorizing the PUC to review municipal zoning ordinances regulating oil and gas development and to determine whether local municipalities are entitled to receive impact fees under Act 13.7 The court determined that because the uniform zoning provisions of the law had already been rejected by the Supreme Court, Act 13's process for reviewing ordinances also failed.8 With respect to the provision limiting notice of spills to public drinking water systems, the court held that the law's requirement to notify public water supply systems, but not private water well owners, of drilling-related spills was proper.9 The court upheld the law's endorsement of a public utility's ability to use eminent domain powers for the injection, storage and removal of natural gas for public use.10 Looking to other Pennsylvania law that similarly empowered public utility companies to take private property when necessary to provide a public utility, the court reasoned that furnishing natural gas to the public by a gas company possessing a "certificate of public convenience" was clearly a public purpose by a public utility company.11 The court also held constitutional the ban on disclosure by health professionals of the composition of fracking fluid, noting that doctors can still share that information with other medical providers, in patient files, and as part of evaluations or medical treatment.12
The PUC appealed Robinson III's holding that a regulator cannot review local drilling ordinances. On September 28, 2016, the Pennsylvania Supreme Court issued an opinion striking down various provisions of Act 13.13 The Court held that the PUC is no longer authorized to review local ordinances to ensure compliance with Act 13. The Court agreed with the Commonwealth Court that Sections 3305 and 3309 of the Act were not severable. Sections 3305 and 3306 permitted the PUC and the Commonwealth Court to decide whether a local ordinance violated the Municipal Planning Code and provided procedures for the expedited review of local ordinances.14 Sections 3307 and 3308 penalized municipalities if local ordinances did not meet the requirements of the Municipal Planning Code. Section 3309 stated that Act 13 applied retroactively and gave municipalities time to take necessary actions to bring existing ordinances into compliance. Because the sections were not severable, these sections of the Act are no longer in effect.15
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The Court also struck down the restrictions and obligations placed on doctors related to confidentiality of fracturing fluid trade secrets, and concluded that the oil and gas industry was receiving "special treatment not afforded to any other class of industry" and that there was no justifiable reason to provide the special treatment.16 The Court struck down Section 3218.1 of the Act, which required the Pennsylvania Department of Environmental Protection ("DEP") to notify only public drinking water facilities that could be affected by a spill, and not private drinking water facilities.17 The Court held that this provision was a "special law" because Act 13 was enacted "to secure the health, safety, and property rights for all Pennsylvania residents during the oil and gas extraction process, without exception."18 As to this part of its holding, the Court issued a stay of its decision for 180 days to allow the legislature an opportunity to reach a solution, otherwise, the entire provision will be stricken. Notably, the legislature has not taken any action as to this provision. Finally, the Court struck down the provision of the Act that granted private companies the power of eminent domain for gas storage, finding that it violated the United States and Pennsylvania Constitutions because the power was not limited to public utilities.19
In Pennsylvania Independent Oil & Gas Association v. Department of Environmental Protection, the Commonwealth Court rejected an argument made by an oil and gas trade association that the DEP may not enforce Section 3215(c) of Act 13 as part of its well permit application process. The trade association argued that the Supreme Court in Robinson I enjoined application and enforcement of Section 3215(c), which regulates the location of wells near public resources.20 The DEP argued that Robinson I enjoined application and enforcement only with respect to its application to Section 3215(b) of Act 13.21 The mandate provided:
The remaining parts of Section 3215(b) are not severable from Section 3215(b)(4) and, as a result, the application or enforcement of Section 3215(b) is enjoined in its entirety. Moreover, Sections 3215(c) and (e), and 3305 through 3309 are not severable to the extent that these provisions implement or enforce those Sections of Act 13 which we have found invalid and, in this respect, their application or enforcement is also enjoined. 22
The court construed the Supreme Court's mandate as providing a narrower injunction with respect to Sections 3215(c) and (e) and held that the DEP's authority under Section 3215(c) was limited only with respect to the water source setback and waiver provisions set forth in Section 3215(b)...
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