Marcellus Shale

Dryden Safe Energy Coalition Explains the Law

The Dryden Safe Energy Coalition held an informational meeting in Owego, New York, this week. The topic was New York State law as it relates to the natural gas bans that some towns have been considering and a few have adopted.  Attorney Henry Kramer discussed the legality of bans and moratoriums as well as what the next steps could be for the towns who have enacted these laws.  It was very educational and left everyone who participated with a much better understanding of the issues, which have been distorted by those advocating for the bans. 

Kramer began by discussing the two bans that have been brought to court, one by a landowner (Middlefield, Otsego County) and the other by a natural gas company (Dryden, Tompkins County). He did a great job of explaining why these Supreme Court decisions aren’t precedence for what the Court of Appeals will decide. Remember, the Supreme Court is the lowest court in New York State, while the Court of Appeals is the highest.

What Are The Next Steps?

As the courts finally decide these cases or others yet to be filed, and determine whether or not these bans are legal, we can expect one of several things to happen.

NY Court System

New York State Court System

First, we are likely to see more towns being sued by landowners or companies who have leased mineral rights from landowners.

Second, decisions going either way could lead to takings cases. A takings case is difficult to prove and the only way to do so is to show a judge the landowner cannot do anything else with their land, that is to say a ban has taken away the only practical thing (natural gas development) for which the land is suited.

This would be an easier case to win if the gas companies who have leased the mineral rights were the ones to sue a town. Clearly, a natural gas company cannot do anything else with these mineral rights except extract natural gas from them. The other option for a land owner would be to sell their mineral rights to a Limited Liability Company (LLC) that they have created. This helps keep things organized and separate from surface land rights.  It, therefore, also makes it easier to measure damages if a decision is made to sue.

Thirdly, we could see towns being sued on the procedures they have used to push through these bans. Did your particular town go about advertising their local hearings correctly? Did they post the meeting conspicuously in a public place for the correct number of days? Was the ordinance correctly submitted to the county planning agency? There are several different places a town can “cut corners” which may well make their bans and/or moratoriums legally challengeable.

Unintended Consequences

Landowners in the room had spectacular questions for Kramer, especially regarding unintended consequences.  Many of the towns enacting bans rely upon vague concepts of smell and image in their prohibitions. Do these town boards have authority over this? Well, yes, they actually do and, thanks to the bans/moratoriums being pushed through there may be tremendous unintended consequences with respect to farming, gravel pits, gas/propane distributers and others. Town boards are, by virtue of zoning regulations of the type often included in bans, given policing power over numerous industries regardless whether or not the industry is natural gas related.

New York State government can be described as a “patchwork quilt,” Kramer noted in his presentation. Each town can have as many different regulations as they like as long as they are as strong or stronger than the State’s.  One of the downsides with this is that one town may ban whatever a neighboring town may encourage and where the properties, resources and land uses affected extend over many communities, as is the case with natural gas, it can become impossible to develop these.  This is the exact reason the New York State Department of Environmental Conservation developed statewide regulations and why the Supplemental Generic Environmental Impact Statement was prepared – to ensure a comprehensive approach to regulation that is fair to all parties.

Compulsory Integration and Other Matters

Next the discussion touched on compulsory integration as opposed to the law of capture. The law of capture basically states you can pull all the gas out from under your neighbor’s land if the free gas flows to your gas well. If your neighbor isn’t leased they will not see one penny from that. Compulsory integration is a system intended to prevent this from happening. By being integrated into a production unit, a landowner gets paid for the gas captured under their land even if they choose not to lease their land to a natural gas company.

Summarizing the issues before towns, Attorney Kramer said the basic issue was whether or not the the oil and gas law we see in Environmental Conservation Law 23-0303-2 is intended to mirror mining law?  He argued these two do not mirror each other. The mining law specifically states a town can, through zoning, determine the districts where a mine would be allowed.  The oil and gas statute never mentions zoning at all.  If the legislature had intended on allowing towns to zone oil and gas, why wouldn’t they have amended ECL 23-0303-2 when they amended the mining law to include zoning?  They did not do so, strongly suggesting the legislature never intended for oil and gas law to mirror mining law.

Where do things go from here?  It’s difficult to say.  The Dryden and Middlefield decisions have been appealed and may be combined for those purposes.  There may also be other cases coming down the road that offer additional opportunities to clarify the law.  We do know these were very weak decisions and do not establish precedence with respect to the actions of other towns in other counties.  We also know the effort to enact bans has so far been confined to communities with, at best, only marginal natural gas resources.  Therefore, the net effect of these bans has been very limited and largely confined to the unintended impacts on other industries.  That’s about all we know until these or other cases move forward.

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