PA Supreme Court Will Focus on the Natural Gas Industry in 2017

January 22, 2017
Diana A. Silva
MGKF Special Alert - Forecast 2017

There are three cases pending before the Pennsylvania Supreme Court that, when decided, may have broad implications for the development of natural gas infrastructure in the Pennsylvania’s Marcellus Shale region.  Each of these cases will be closely watched by both the regulated community and environmental advocacy groups, and will likely shape the legal framework for Pennsylvania’s natural gas industry for years to come.

The first case – Marcellus Shale Coalition v. PADEP, Dkt. Nos. 115-MAP-2016 and 573-MD-2016 – challenges the recent promulgation by the Pennsylvania Department of Environmental Protection (“PADEP”) of regulations for hydraulic fracturing operations, known as the Chapter 78(a) rules.  The Coalition argued that certain of the new regulations are beyond the scope of PADEP’s regulatory authority, and filed a complaint for declaratory and injunctive relief, including a request for a preliminary injunction to stay certain portions of the new regulations from taking effect during the pendency of the appeal.  In November 2016, the Pennsylvania Commonwealth Court granted the Coalition’s request for a preliminary injunction and barred the immediate applicability of four of the challenged regulatory provisions, including:  (1) a requirement that drillers notify local schools, playgrounds, municipalities, and water supplies of the construction of nearby gas wells; (2) a requirement that drillers identify and monitor old wells located near a proposed new-well location, even when the old wells are not under the drillers’ ownership or control; (3) requirements for upgrades to previously-constructed freshwater impoundments; and (4) heightened requirements for remediation of drilling sites.  As the challenge on the merits of the regulations continues before the Commonwealth Court, PADEP appealed the preliminary injunction to the Pennsylvania Supreme Court.  The outcome of both appeals will be important for shaping the law on agency regulatory authority in Pennsylvania.

The second case – Gorsline v. Bd. of Supervisors of Fairfield Twp., Dkt. No. 67-MAP-2016 – challenges whether a local township properly granted a conditional use permit under the township’s local zoning code to allow a natural gas company to install a well in a residential zoning district.  The local zoning code allows for the construction of “public service” facilities in the residential district, and the township granted the conditional use permit on that basis.  A group of local residents who opposed the permit sued to overturn the township’s grant of the permit.  The trial court in Lycoming County agreed with the local residents, and reversed the township’s grant of the conditional use permit.  The Commonwealth Court overturned the trial court decision, holding that the natural gas well was “similar” to a public service facility, which was expressly allowed in the residential district.  The local residents have appealed to the Supreme Court, and arguments will likely be heard early this year.  The ultimate decision in this case will mold the law on whether private natural gas development could be considered a “public” facility for local zoning exemptions throughout the state.

The final case – Pa. Envtl. Def. Fund v. Commonwealth, Dkt. No. 10-MAP-2015 – challenges the Commonwealth’s leasing of state forest land for natural gas exploration.  A citizen group opposing the leasing filed an action for declaratory relief, arguing that the leasing was contrary to the Environmental Rights Amendment contained in Article 1, Section 27 of Pennsylvania’s Constitution.  In January 2015, an en banc panel of the Commonwealth Court ruled that the Environmental Rights Amendment did not restrict what the state could do with funds generated from leasing public land.  In arriving at this holding, the Commonwealth Court reviewed the Pennsylvania Supreme Court’s Robinson Twp. decision, which was a plurality, rather than a majority decision, declared that it was not binding precedent, and instead applied the so-called Payne v. Kassab test to evaluate the constitutional issues in the case.  Pennsylvania’s Environmental Rights Act Amendment is front and center in the Supreme Court appeal, and the case is expected to generate an opinion that will clarify how the Amendment should be applied.