Local Fracking Regulation Still In Play In Act 13 Case

May 13, 2014

MGKF's Todd Kantorczyk was interviewed as part of Matt Fair's Law360 article on Pennsylvania's new oil and gas regulations, setting up a key decision on the energy industry's ability to fight local fracking restrictions.

Law360, Philadelphia (May 13, 2014, 8:07 PM ET) -- A Pennsylvania state court is set to hear arguments Wednesday on unresolved issues from December's landmark decision striking down large portions of the state's new oil and gas regulations, setting up a key decision on the energy industry's ability to fight local fracking restrictions.

A core issue remaining in the case set to go before an en banc panel of the Commonwealth Court on remand is whether the Pennsylvania Supreme Court's landmark December decision striking down broad portions of the regulatory scheme known as Act 13 — including provisions preventing local governments from passing zoning ordinances prohibiting natural gas drilling — barred the state Public Utility Commission from exercising its authority under the law to review local ordinances for compliance with state regulation.

Michael Krancer, the head of Blank Rome LLP's energy, petrochemical and natural resources practices who previously served as secretary of the Pennsylvania Department of Environmental Protection, said that barring the PUC from exercising its authority to review local oil and gas zoning ordinances under Act 13 creates the risk of patchwork regulatory schemes that would vary from town to town and county to county.

“If you're driving freight in Pennsylvania, you don't want 67 different driver's license requirements,” he said, referring to the state's 67 counties. “Neither you nor I want to have to get 67 difference driver's licenses. It's not only bad for you and me as citizens, it's bad for job growth, it's bad for citizens, and it doesn't make any sense.”

Act 13, which amended the state's Oil and Gas Act, was signed by Gov. Tom Corbett in 2012. A group of towns and environmental advocates, however, quickly challenged the measure on grounds that it violated both the due process rights of municipalities and environmental protections in the Pennsylvania Constitution.

Wednesday's hearing comes after the high court found that the law's goal of creating statewide zoning rules for the gas drilling industry was not properly balanced against the environmental rights amendment to the state constitution, which enshrines the public's right to clean air and pure water.

The Supreme Court remanded portions of the case for further consideration, including questions over whether provisions of the law left untouched by the justices could operate independently from those struck down.

The Commonwealth Court is set to eye sections dealing with the PUC's ability to review local zoning ordinances for compliance with the state's Municipalities Planning Code and other statutes, a condition that municipalities are required to meet in order to receive so-called impact fees from drillers, which compensate the municipalities for hosting drilling activity.

In briefs filed in April, the PUC argued that it needed to review local zoning ordinances to ensure compliance with relevant provisions of the MPC, as well as the state's Flood Plain Management Act and other pre-existing portions of Act 13 left standing by the Supreme Court.

Without the PUC review process in place, Manko Gold Katcher & Fox LLP partner Todd Kantorczyk said, interested parties would be forced to go to court to challenge zoning rules they believed were too restrictive.

“There certainly wouldn't be an administrative remedy,” he said. “There's always been a judicial remedy for that, but now Act 13 seems to provide some sort of remedy through the PUC.”

In particular, the PUC would have the authority to review whether ordinances adopted under the MPC or FPMA imposed conditions, requirements or limitations on oil and gas operations that were subject to statewide regulation when the Oil and Gas Act was first passed before being incorporated into Act 13.

Krancer said that, historically, towns have been allowed to control only where drilling activity was taking place but not how it was taking place.

“Contrary to the popular belief, there is nothing new at all about state DEP regulations preempting local municipal authority to control the operational aspects of oil and gas activity,” Krancer said. “The Oil and Gas Act since the '60s has provided that DEP has preemptive authority over operational aspects of oil and gas activity, and that's been upheld by the Supreme Court at least twice.”

If its authority under Act 13 is left standing by the Commonwealth Court, Krancer said, the PUC would have the ability to ensure that local ordinances were not infringing operational aspects typically left up to the DEP to regulate.

Kenneth Komoroski, a partner in Morgan Lewis & Bockius LLP's oil and gas practice, said that allowing the PUC to act as a third-party reviewer was in the best interest of both municipalities and the energy industry.

“The industry wants to work cooperatively with municipalities and townships, but these ordinances can cause some tension,” he said. “The benefit of a PUC review is that you get an entity that’s a specialized tribunal that already has some level of expertise.”

The law's challengers, however, have argued that the review process will be used as a “backdoor method” of enforcing setbacks located in a separate portion of the law as an unconstitutional ceiling on the distance municipalities could require between existing structures and certain new oil and and gas facilities.

Instead, the challengers said, the setback provision in the law could only be considered as a floor and that municipalities retained the authority to increase it as they see fit.

Komoroski, however, said that the PUC was unlikely to take an approach that would disproportionately favor drillers and operators. 

Philip Hinerman, a partner with Fox Rothschild LLP, said that he was unsure why industry players would want to participate in a nonbinding review of local ordinances before the PUC when they could simply challenge overly restrictive laws in court.

“If you wanted to drill a well and you think the zoning code is too restrictive, you're going to go the court,” he said. “You're not going to ask the PUC for a nonbinding opinion. I've worked with enough developers to know that they're not going to want to go through the time and expense of that process.”

Officials with the Delaware Riverkeeper Network, one of the environmental groups involved in the challenge, did not respond to request for an interview.

Arguments on Wednesday will not focus solely on the authority of PUC to review local ordinances. The court will also consider whether to strike down a provision of the law requiring doctors to agree not to share proprietary information about chemicals their patients may have been exposed to as a result of fracking. 

The court will also consider the constitutionality of a section of the law that exempts drillers from having to inform owners of private water sources in the event of a potentially contaminating spill near their properties.

Under the provision, according to court records, drillers only have to provide notice in the event that a spill threatens a public water supply.

The petitioners are represented by Jordan Yeager and Lauren Williams of Curtin & Heefner LLP, John Smith and Jennifer Schiavoni of Smith Butz LLC, Jonathan Kamin of Goldberg Kamin & Garvin LLP and Susan Kraham of the Columbia Law School.

The PUC is represented by Matthew Haverstick, James Rohn, Mark Seiberling and Joshua Voss of Conrad O'Brien PC.

The state is represented by Jarad Handelman of the Governor's Office of General Counsel and Dennis Whitaker of the state Department of Environmental Protection.

The case is Robinson Township et al. v. Commonwealth of Pennsylvania et al., case number 284 MD 2012, in the Pennsylvania Commonwealth Court.

Written by Matt Fair
--Additional reporting by Dan Packel. Editing by Jeremy Barker.