Thursday, April 12, 2012

Home Rule cases are weighty factors in fracking’s future

A ruling today by a Pennsylvania court is the latest in a series of events strengthening the influence of local communities on the outcome of the national debate over hydraulic fracturing and onshore drilling.

Commonwealth Court Senior Judge Keith Quigley issued an injunction on a law passed by the legislature in February that limits the power of municipalities to regulate the gas industry. The provision, Act 13, was scheduled to take effect on Saturday. The judicial stay, issued from Harrisburg, was the product of a challenge by a group of communities -- including South Fayette in Allegheny County; and Peters, Cecil, Mt. Pleasant and Robinson in Washington County – seeking time to argue that Act 13 unconstitutionally takes away local powers.

Cases in New York are now advancing through New York’s judicial system that test the rights of towns to have a say about drilling within their borders. The industry is appealing two separate rulings by state Supreme Court justices favoring the right of towns to ban drilling. On February 24, acting Supreme Court Justice Donald F. Cerio, Jr. ruled in favor of the Town of Middlefield’s ban on hydrofracking. The decision was in response to a claim by Jennifer Huntington, a dairy farmer and president of Cooperstown Holstein Corporation, that the ordinance denied her rights to reap economic benefits of a lease to develop mineral rights on 400 acres. In a separate ruling issued days before the Middlefield decision, Supreme Court justice Phillip R. Rumsey upheld the Town of Dryden’s right to ban mineral extraction. The case stemmed from a complaint filed by Anschutz Exploration Corporation, which argued that state permitting laws regulating oil, gas and mineral extraction superseded local ordinances.

At the heart of the appeal in the Dryden case is the interpretation of a New York law allowing municipalities to zone mining activities that have significant surface impact, such as gravel mines. In 1981, state law was amended to exempt oil and gas from mining activities subject to local regulations. The home rule bills would remove that exemption.

The extraction industry is something of a throwback, with little substantive change in its corporate culture or regulatory tolerance for generations. It has been exempt from both local and national regulations that apply to other business, ranging from zoning to the handling and disposal of hazardous waste. The justification for this: cheap fossil fuel cannot be pulled from the earth with an overabundance of nit–picking inspectors and onerous regulatory burdens.

Local governments are now launching unprecedented challenges to the industry. In Pennsylvania, they are objecting to Act 13’s requirements that drilling, waste pits and pipelines be allowed in residential districts.

As the country faces a new era of environmental and economic challenges, government officials – whether local, state or national -- will ultimately have to make policy to oversee the industry, with the courts likely having the final say. Voters who elect those officials must decide on the merit of using unconventional means – including high volume hydraulic fracturing -- to extract gas and oil from plates of bedrock reaching under communities, including many in upstate New York, that have until now been untouched by mineral extraction. In this regard, choices for voters have traditionally been limited to state representatives who could legislate such matters. Now they might include neighbors or community people who can decide issues in town halls.

Anit-fracking activists see Home Rule as key to thwarting the advancement of unwanted shale gas development – which in their view is a prerequisite to refocusing resources on renewable energy. It’s more difficult for the shale gas industry to exploit the economies of scale that come with exploring and proving large contiguous acreage, and then tying it all together with the infrastructure and pipelines, if entire towns can suddenly decide to ban development.

The industry is fighting hard to maintain the status quo regulatory approach, which leaves permitting to the discretion of state regulators weighing the often incongruous tasks of protecting natural resources on one hand and enabling their commercial exploitation on the other. Leaving permitting decisions that determine the fate of vast holdings to a single bureaucrat in a given state’s oil and gas bureau is an approach the industry likes. As it heads into the 21st century, it will fight to preserve this early 20th Century way of doing business.

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