Middle District of Pennsylvania Ruling Has Potential to Significantly Expand DRBC’s Regulatory Reach to Land Use Projects

April 10, 2017
Marc E. Gold and Michael Dillon
MGKF Special Alert

On March 23, 2017, the U.S. District Court for the Middle District of Pennsylvania issued an opinion in Wayne Land and Mineral Group, LLC v. Delaware River Basin Commission that takes an expansive view on the authority of the Delaware River Basin Commission (“DRBC”) to regulate development activities within the Delaware River Basin (the “Basin”).  The ruling came in response to DRBC’s motion to dismiss a complaint by the Wayne Land and Mineral Group, LLC (“WLMC”) requesting the Court to declare that DRBC lacks authority under the Delaware River Basin Compact (the “Compact”) to review and approve natural gas development activities in the Basin.  The Court went beyond the facts of the case to conclude that DRBC has authority to review and potentially regulate any activity in the Basin that might make use of the Basin’s “water resources,” a term broadly defined in the Compact to include “water and related natural resources in, on, under or above the ground, including related uses of land.”  Given that nearly all development projects could potentially fit within this definition, the Court’s decision creates risk for anyone wishing to undertake land use activities in the Basin. 

WLMC brought this case seeking a judicial declaration that the Compact does not authorize DRBC to require WLMC to submit an application for approval because WLMC’s proposed natural gas well and related activities are not a “project,” which the Compact defines as “any work, service or activity . . . for the conservation, utilization, control, development or management of water resources.”  Under the Compact, DRBC must approve any project that will “have a substantial effect on the water resources of the basin.”  In its Rules of Practice and Procedure, DRBC provides a list of project categories that it has determined will not have a substantial effect on Basin water resources including, inter alia, certain water withdrawals and diversions, domestic sewerage projects, pipeline and transmission projects, dredging projects, most landfill projects, and minor impacts to wetlands. 

The Court asserted that the following two-step review process is established by the Compact and governs DRBC authority to approve activities in the Basin: (1) an initial determination of whether a proposed activity constitutes a “project;” and (2) a determination whether the “project” will have a substantial effect on water resources of the Basin based on the submission of an application to DRBC for review and approval.  Under the process described by the Court, the threshold issue is whether the proposed activity is a “project.”  To make that determination, the Court said that DRBC must consider whether the proposed activity will use “water resources” in the Basin.  The Court found that the potential impacts of WMLC’s proposal on the Basin’s water resources was “conclusive” evidence that it is a “project.”  Therefore, the Court ruled that WMLC must submit an application to DRBC for review.

On the face of the opinion, the framework of the Compact described by the Court is not limited to natural gas development activities, and thereby creates a risk that any activity in the Basin may need to be evaluated in the first instance to determine whether it is a “project” that would be subject to DRBC  review and approval.  Although DRBC might not be inclined to assert jurisdiction over traditional land development projects in the Basin -- especially considering the Court’s note that DRBC attempted to “side-step” the issue of what constitutes a project -- the Court’s opinion nevertheless leaves real estate developers vulnerable to potential DRBC permitting.  For example, the decision creates a basis for third parties to attempt to delay development activities by arguing that DRBC is required to make a “project” determination and subsequently approve the project if necessary.  The involvement in this case of the Delaware Riverkeeper as an intervenor on behalf of DRBC suggests that third parties have an interest in DRBC exercising authority over development activities in the Basin and may signal their potential involvement in other matters in the future. 

Considering all this, any activity that is not specifically exempted from DRBC review risks being impacted by potential overreach by DRBC or third-party proxies.  Based on press releases following the decision, it appears that WMLC intends to appeal the ruling to the U.S. Circuit Court for the Third Circuit, which might provide further clarity about the scope of DRBC’s authority to regulate land uses in the Basin. 

For more information about this case or the likely appeal, please contact Marc Gold (610-430-2301) or Michael Dillon (610-430-2335).