Appalachian Basin

“Free” Advice on Natural Gas Yields $50 Million Lawsuit – Part II

The Lenape Resources lawsuit against the Town of Avon is accompanied by a first-class summary of the law, demonstrating the “home rule” campaign sponsored by the Park Foundation is mightily mistaken.

Our earlier post on the subject of the Lenape Resources lawsuit against the Town of Avon dealt with the practical side of the case.  The legal side is also compelling and it’s laid out very methodically in a Memorandum of Law submitted with the complaint.  It addresses not only oil and gas law, but also pre-emption law, land use law and other statutes applicable to the case.

There are several legal bases for the complaint, which are summarized below, but the one overwhelming conclusion to be drawn from them is this; there is no foundation for any exceptions to the state’s oil and gas pre-emptions, other than those specifically articulated in the law itself.  Any other conclusion would, in sharp contrast to mining law, necessarily render the oil and gas pre-emption irrelevant and undermine the entire state program of regulation.  Moreover, it would ensure a complete disinvestment of resources in the industry within the state, subjecting all municipalities to the whims of a few – a subversion, rather than an application, of home rule.

The false idea that home rule means being able to contravene state policy has led natural gas opponents to craft a rationale based on a version of home rule that doesn’t undermine state policy while ignoring aspects of oil and gas development that would ensure the opposite.  They also turn a blind eye to the one case which is on point, and went up on appeal, dismissing it because it was, they say, too obvious, as if a harder case would have somehow made better law.

All of this, and much more, is addressed in the aforementioned Memorandum of Law, which is well worth reading.

Fully appreciating the Lenape Resources legal arguments first requires an understanding of what is being advanced by natural gas opponents.  Unfortunately, their arguments have been accepted by lower level courts in the Dryden and Middlefield cases, but both are likely to be overturned if the appeals courts follow precedent.  Here’s what the Community Environmental Defense Council (CEDC) says in their legal memorandum (emphasis added):

We believe that the same analysis should obtain with respect to judicial interpretation of the Section 23-0303 Supersession Language, and that accordingly an appropriately drafted and properly enacted zoning amendment prohibiting High-Impact Industrial Use activities as a permitted use, which has the incidental effect of prohibiting people and companies in the oil, gas or solution mining industries from conducting such activities in a municipality, should not be preempted by the Section 23-0303 Supersession Language.

Discussion and Analysis: A legislative intent to preempt can be implied by declaration of a state policy or by the comprehensive and detailed nature of the regulating scheme established by statute, or in the alternative can be evidenced by an express statutory provision. Where an express supersession clause exists, then determination of the scope of the preemption created thereby turns solely on the proper construction of the statutory provisions.

There is no New York case law directly on point interpreting whether the oil, gas and solution mining suppression language (the above-defined Section 23-0303 Supersession language) acts to preempt a validly enacted zoning law or amendment which otherwise would have the effect of prohibiting oil, gas or solution mining activities as a permitted land use within a municipality.*

* Indeed, we were able to find only a single reported case addressing any application of ECL Section 23-0303: Envirogas, Inc. v. Town of Kiantone, 446 N/Y. 2nd 221 (1982) (“Envirogas”).  Envirogas was an Erie County Supreme Court (i.e. trial level court) decision involving a local law that was styled as a ‘zoning’ law, but which fits squarely within the supersession language definition of (preempted) laws regulating oil and gas operations. (The law in question provided that no well could be constructed without prior payment of a $2,500 compliance bond and a $25 permit fee.)  Envirogas does not speak to the question presented in this Memorandum, since that case clearly involved a local law regulating the drilling industry, rather than a zoning law regulating land use generally.

The CEDC position rests on two pillars; (a) there is no case law on point and, therefore, one must go somewhere else for the answer, and (b) the mining law is a suitable precedent, because it includes the language “relating to the extractive mining industry” and the oil and gas preemption says “relating to the regulation…of the industry.”  There’s just one problem – the Lenape suit demonstrates neither of these is true and, therefore, the entire structure will likely come tumbling down unless the judges do as the Middlefield court did and simply pretend Envirogas doesn’t exist.  Here’s what Lenape states:

The issue of local attempts to regulate the oil and natural gas industries has already been addressed in this judicial department and the preemptive powers of Article 23 have been upheld.  Article 23 clearly “pre-empts not only inconsistent local legislation, but also any municipal law which purports to regulate gas and oil well drilling operations, unless the law relates to local roads or real property taxes.” Envirogas, Inc. v. Town of Kiantone, 447 N.Y.S.2d 221, 222 (NY Sup. Ct., Erie Cty 1982), affd 89 A.D.2d 1056 (4th Dep’t) (emphasis added). The Prohibition on Natural Gas is not an exercise of its ‘Jurisdiction over local roads,” nor does it affect “the real property tax law.” ECL § 23-0303(2). Because the Prohibition on Natural Gas does not fit within either of the narrow exceptions set forth in Article 23, it is preempted.

The Envirogas decision, referenced in both the CEDC and Lenape memorandums, may be found here.  It says, in relevant part, the following (emphasis added):

The mere fact that a state regulates a certain area of business does not automatically preempt all local legislation which applies to that enterprise (Landfill v. Caledonia, 51 N.Y.2d 679,683,435 N.Y.S.2d 966, 417 N.E.2d 78). But where a state law expressly states that its purpose is to supersede all local ordinances then the local government is precluded from legislating on the same subject matter unless it has received “clear and explicit” authority to the contrary. (Robin v. Inc. Vii. of Hempstead, 30 N.Y.2d 347,  350-351, 334 N.Y.S.2d 129, 285 N.E.2d 285). This is so, as the Court of Appeals recently observed, because “the fount of the police power is the sovereign state, (and) such power can be exercised … only when and to the degree it has been delegated such lawmaking authority.”

Prior to the recent Amendment of the ECL Article 23, local ordinances requiring commercial oil and gas drillers to post compliance bonds as a reasonable means of zoning enforcement were upheld ( Envirogas. Inc. v. Town of Westfield, 82 A.D.2d 117, 442 N.Y.S.2d 290; see also Town Law, Section 268). But the policy and purpose behind the recent amendment is not left to the imagination. Since the amendment specifically states that it is to “supersede all local laws or ordinances,” it pre-empts not only inconsistent local legislation, but also any municipal law which purports to regulate gas and oil well drilling operations, unless the law relates to local roads or real property taxes which are specifically excluded by the amendment.

Could it be any more clear?  No, which is why the CEDC wants to dismiss it and Lenape has brought it out into the light of day.  Notice, in particular, the reference to another case law stating a town has authority in the case of a pre-emption “only when and to the degree it has been delegated such lawmaking authority.”  The source for this reference is (People v. De Jesus, 54 N.Y.2d 465, 466 N.Y.S.2d 207, 430 N.E.2d 1260), and it is also cited by Lenape.
It means, in layman terms, a municipality only gets such authority as the state gives it once a pre-emption has been declared.  The CEDC, by using nuance, has tried to imply it’s the opposite, suggesting a municipality can still exercise some of what the state has not specifically taken away.  The CEDC effectively allows that the state has removed all operational authority except for roads and taxes, but argues the pre-emption says nothing about land use or non-operational matters and a community that prohibits natural gas development by calling it something else such as “heavy industry” would still be fine by the law.
Yes, farcical as it sounds, the CEDC says a prohibition of natural gas development, constructed by using word games to say the opposite of what is plainly said, will not run afoul of a pre-emption statute unambiguously stating the following:
The provisions of this article shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries; but shall not supersede local government jurisdiction over local roads or the rights of local governments under the real property tax law.
The judge in the Envirogas case obviously wasn’t playing word games.  He understood the statute pre-empted “any municipal law” outside the scope of the specifically granted exceptions to the pre-emption.  That’s why Envirogas is a case on point with the issue at hand.  The CEDC has created the issue by alleging there is no case and then using wholly different language from mining law to fabricate a theory about a wholly different industry.
This isn’t all the CEDC has gotten wrong about the case.  It says the town regulations were from a “local law,” which has a very specific meaning in New York State.  It was not.  It was a zoning ordinance, which also has very specific implications in New York, such ordinances being required to follow detailed zoning enabling legislation found in Sections 261-268 of the New York State Town Law.  The judge in Envirogas noted this, referring to the ordinance as a zoning statute and even citing the fact Section 268 of Town Law would, prior, to the oil and gas pre-emption being revised a few months earlier in 1981, have authorized “local ordinances requiring commercial oil and gas drillers to post compliance bonds as a reasonable means of zoning enforcement.”
The judge dealt with Kiantone’s ordinance as a zoning ordinance, not as “a local law that was styled as a ‘zoning’ law” or “a local law regulating the drilling industry,” as the CEDC has incorrectly stated.  He specifically overruled the challenged provisions on the basis they would have been legal as zoning regulations before pre-emption, but no longer were so following the legislature’s enactment of much more specific limits on local authority.  The court, therefore, directly affirmed zoning is not an exception from the pre-emption.  It is covered.  Even more importantly, as Lenape states, the Envirogas case went up on appeal, was affirmed and further appeals were denied (58 N.Y, 2nd 602), making it about as relevant as it gets.
Lenape also cites other cases that point to the obvious:
While the preemption clause in Article 23 includes an express exception for regulation of local roads and property taxes, it does not include an exception for local land-use, zoning and police power ordinances to regulate any other aspect of the oil and natural gas industries. By not including local land use and other police power authority within the stated exceptions, the Legislature clearly manifested its intent not to allow local land use and police power regulation. See Jewish Home & Infirmary v. Commissioner of N.Y. State Dep’t of Health, 84 N.Y.2d 252, 262 (1994) (quoting McKinney’s Cons. Laws of NY, Book 1, Statutes § 240, at 412-13) (”’where a statute creates provisos or exceptions as to certain matters the inclusion of such provisos or exceptions is generally considered to deny the existence of others not mentioned. “‘).

This gets at a point of common sense that is lost in all the CEDC blathering about “operations” versus land use; if the legislature had intended oil and gas pre-emption to work like mining pre-emption it could have easily synchronized the language when it updated the latter, as they are both part of the same Environmental Conservation Law.  The fact it didn’t speaks volumes about intent, especially in light of the Envirogas case.

This, in turn, points to still another problem with the CEDC theory; the language of the two pre-emption provisions are not similar, but, rather, miles apart when it comes to the exceptions.  Even before the current law, which explicitly provides exceptions for the kinds of land use restrictions the CEDC seeks for natural gas development, there was language allowing zoning with respect to mined land reclamation.  No such exceptions exist with respect to oil and gas pre-emption and, for good reason; because there are comprehensive siting criteria in DEC regulations for the latter and not the former.  The state has already staked out control of oil and gas land use considerations, while it does nothing of the kind for mining.  They are wholly different activities and any suggestion the state intended to treat them the same is simply not credible.

This brings us to a final problem with the entire “home rule” concept as applied to natural gas and mining.  It’s easy to allow “home rule” with respect to mining because it only occurs in localized areas and once established they enjoy non-conforming use protections even if local laws are changed over time.  Allowing individual towns to decide doesn’t frustrate an entire industry, as is the case with natural gas development.  One town saying no doesn’t have any particular impact on neighboring municipalities so “home rule” only impacts the community making the decision.


The opposite is true in the case of natural gas, where large swaths of land have to be leased well in advance of development and pipeline infrastructure must be constructed, both crossing multiple communities where the refusal of one to allow development necessarily impacts the ability of others to do the same.  There is no “home rule” for you if your adjacent community has decided to just say no.  You are forced into that same decision by default even though that other community may be the only one in an area taking such position.  One community gets to dictate what others may do.  This isn’t “home rule” at all; it’s rule by neighbor or rule by special interest – an absolute subversion of the entire principle.

There’s a whole lot more to read in Lenape’s memorandum.  It offers a thorough overview of pre-emption law in context and it’s context that seems to be missing from so many of the CEDC and natural gas opponent arguments.  They are so focused on getting communities to take steps to stop all natural gas development they end up getting lost in irrelevant parsing of words and miss the big point, which is this; the law is intended to promote natural gas development as a matter of state policy.  That’s why the Dryden and Middlefield decisions are likely to be overturned on appeal and why Lenape is likely to win the Avon case as well.  Anything else would make a mockery of state policy.


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