Archive for the ‘Hydraulic Fracturing’ Category

New York’s Highest Court Affirms Zoning Ordinances Banning Hydrofracking

Wednesday, July 2nd, 2014

By Martin L. Eide, Sedgwick New York

The Insurance Law Blog has been following decisions related to hydraulic fracturing for potential impacts on insurance coverage issues. As we previously reported in May 2013, the New York Supreme Court, Appellate Division, upheld two zoning ordinances passed in 2011 by the Towns of Dryden and Middlefield, New York, which prohibited the exploration and production of natural gas and petroleum – including hydraulic fracturing, or hydrofracking. On June 30, 2014, the New York Court of Appeals affirmed the Appellate Division’s ruling finding that the New York Oil, Gas and Solution Mining Law’s (“OGSML”) supersession clause does not preempt “home rule” authority vested in the Towns to regulate land use. 

In Matter of Mark Wallach, as Chapter 7 Trustee for Norse Energy Corp. USA, v. Town of Dryden, et al., and Cooperstown Holstein Corp., v. Town of Middlefield, – N.Y.3d –, (June 30, 2014), the New York Court of Appeals affirmed the Appellate Divisions’ May 2013 decision upholding summary judgment in favor of Dryden and Middlefield which passed zoning ordinances banning natural gas and petroleum production operations.  The ordinances were established in 2011, and subsequently challenged by natural gas exploration companies alleging that the ordinances were preempted by the OGSML which, among other things, regulates the production and storage of oil and natural gas.  The trial courts disagreed with the production companies’ preemption arguments, and granted cross-motions for summary judgment in favor of the Towns because the zoning ordinances in question only limit the use of land and do not attempt to regulate the manner in which oil and gas is extracted under the OGSML.  The Third Department affirmed in May 2013, finding that the OGSML does not expressly preempt the local zoning regulations which did not limit the methods and means of mining proscribed by the OGSML, but merely limited where mining could occur.  Thus, the local zoning ordinances at issue were reasonable uses of the Towns’ home rule powers established pursuant to Article 9 of the New York Constitution.

In its opinion, the Court of Appeals affirmed finding that the OGSML’s supersession clause does not preempt the Town’s home rule power to regulate industrial land use, preserve a communities’ characteristics, and protect the health, safety and welfare of the community as a whole.  In particular, the Court of Appeals rejected the appellants’ arguments based on a three-pronged test previously discussed in Matter of Frew Run Gravel Prods. v. Town of Carroll, 71 N.Y. 2d 126 (1987).  In Frew Run, the Court of Appeals found that the Town of Carroll’s ordinance which restricted mining operations from a certain portion of the Town did not conflict with the Mined Land Reclamation Law (MLRL).  The Court of Appeals analyzed the plain language of the MLRL’s supersession clause, the statutory scheme of the MLRL as whole, and the MLRL’s legislative history to determine if the ordinance interfered with the MLRL.  The Court of Appeals found that the MLRL did not preempt a town’s ability to regulate land use because the New York Legislature passed the MLRL to regulate only the means and methods of extractive mining operations, and not where those operations could occur.

Here, the Court of Appeals applied the test in Frew Run and found that the plain language of the OGSML’s supersession clause, the statutory scheme as a whole, and the legislative history only focus on regulating the means and methods of gas, oil, and mining operations and not the location of where such operations could occur.  Therefore, the OGSML does not preempt the Towns’ home rule power to regulate land use and exclude gas and oil production operations.

The Court of Appeals also rejected the appellants’ secondary argument.  In this regard, the appellants argued that land use ordinances may only limit hydrofracking operations from certain portions of the Towns (i.e., residential areas) because a complete ban would run afoul of the OGSML and essentially, regulate the oil and gas industry.  The Court of Appeals disagreed, relying on Matter of Gernatt Asphalt Prods. v. Town of Sardinia, 87 N.Y.2d 668 (2006), a decision that follows Frew Run.  In Gernatt Asphalt, the Town of Sardinia amended its zoning ordinance to prohibit all mining operations following the New York State Legislature’s revision of the MLRL in accordance with Frew Run.  As a result of the Town’s amendment, a mining operator challenged the prohibition based on the MLRL’s supersession clause.  The Court of Appeals rejected the mining company’s challenge, finding that nothing in Frew Run or the MLRL obligates a town to permit mining just because minerals are available to be mined as a natural resource.

The Court of Appeals found that the restrictions at issue here are no different in substance to the ordinances passed by the Town of Sardinia and upheld in Gernatt Asphalt.  In addition, Dryden and Middlefield acted reasonably because they each studied the potential negative effects that hydrofracking may have on the character of their respective communities prior to enacting the ordinances.

Sedgwick tracks local and national developments in hydraulic fracturing in its newsletter, Hydraulic Fracturing Digest. Prior issues can be found here.

 

 

New York Court of Appeals Upholds Ban on Hydraulic Fracturing

Monday, June 30th, 2014

For readers following the developments in hydraulic fracturing and the potential insurance coverage implications, we have been tracking litigation in New York involving zoning ordinances passed by the Town of Dryden and the Town of Middlefield, and most recently reported on the litigation in our Hydraulic Fracturing Digest in January 2014.  Readers may recall that an appellate court decision issued on May 3, 2013, had upheld the zoning ordinances prohibiting the exploration and production of natural gas and petroleum.  Today, the New York Court of Appeals, the state’s highest court, affirmed the decisions.  We are reviewing the court’s decision and will provide further analysis in the Hydraulic Fracturing Digest.

Developments in the Hydraulic Fracturing Industry

Wednesday, March 5th, 2014

For our readers who are keeping tabs on developments in the hydraulic fracturing (“fracking”) industry, you may be interested in our recent “news flashes” concerning the fracking industry in California.

The first is regarding a bill, introduced last Thursday, February 27th, that would halt all types of fracturing both on- and off-shore California until the completion of a multiagency review of the economic, environmental and public health impacts. SB 1132 would not only halt the use of high pressure injection of water and fracturing fluids into oil and gas reservoirs, the process most often thought of as “fracking” by the public, but would also prevent the use of acids to enhance permeability in “pay zones” to increase the flow of oil and gas into wells until the report is finished. To view a PDF copy the news flash, click here. 

Just one day later, on February 28th, the Los Angeles City Council’s unanimously voted to draft a new municipal ordinance banning hydraulic fracturing and other well-stimulation activities, such as acidizing, within the city confines. The ordinance would place a moratorium on “all activity associated with well stimulation, including, but not limited to, hydraulic fracturing, gravel packing, and acidizing, or any combination thereof, and the use of waste disposal injection wells.”  The ordinance would make Los Angeles the only oil-producing city in California to ban hydraulic fracturing. The moratorium would remain in place until the city verifies that hydraulic fracturing will not harm public safety or compromise drinking water.  The ordinance must still be drafted and is subject to additional public input before being presented to the City Council for a final vote. To view a PDF copy of this news flash, click here.

Hydraulic Fracturing Digest

Friday, June 28th, 2013

Our Hydraulic Fracturing Practice Group recently issued its June newsletter. This issue discusses the Bureau of Land Management call for the expansion of fracking on 36 million acres of Federal and Indian land and the response from the Obama administration with its own revised rules regarding Hydraulic Fracturing. These revised rules have been met with criticism from both sides of the issue.

Click here to read the full issue.

New York Appellate Division Affirms Zoning Ordinance Banning Fracking

Monday, May 6th, 2013

By Martin L. Eide, Sedgwick New York

The Sedgwick Insurance Law Blog has been following decisions related to hydraulic fracturing for potential impacts on insurance coverage issues.  Although not involving coverage, the New York Supreme Court, Appellate Division, recently upheld two zoning ordinances passed by Dryden and Middlefield, New York in 2011, prohibiting the exploration and production of natural gas and petroleum. These decisions are victories for local governments seeking to ban hydraulic fracturing (“fracking”) before the current statewide moratorium against fracking is lifted.

In Matter of Norse Energy Corp. USA, v. Town of Dryden, et al., – AD3d –, 2013 NY Slip Op 03145 (3rd Dep’t May 3, 2013) and Cooperstown Holstein Corp., v. Town of Middlefield, – AD3d –, 013 N.Y. Slip Op. 03148 (3rd Dep’t May 2, 2013)(decided based upon the analysis in Norse Energy), the Appellate Division, Third Department, affirmed two February 2012 Supreme Court decisions granting summary judgment in favor of two towns that passed zoning ordinances banning natural gas and petroleum production operations.  The ordinances in question were passed in 2011, and subsequently challenged by natural gas exploration companies alleging that the ordinances were preempted by New York’s Oil, Gas and Solution Mining Law (OGSML) which, among other things, regulates the production and storage of oil and natural gas. The trial courts disagreed with the production companies’ preemption arguments, and granted cross-motions for summary judgment in favor of the towns because the zoning ordinances in question only limit the use of land and do not attempt to regulate the manner in which oil and gas is extracted, as regulated in New York under the OGSML.

On appeal, the Third Department affirmed for the same fundamental reasons. First, the OGSML does not expressly preempt the local zoning regulations because the OGSML’s preemption clause is limited to the gas, oil and solution mining industries generally, but not the use of land which is under the police power of local municipalities. This is supported by the OGSML’s legislative history and the Court’s interpretation of the “plain meaning” of the preemption clause. Secondly, implied or conflict preemption does not apply here, because the OGSML’s provisions regulating the location of drilling and extraction processes to maximize efficiency and avoid wasting natural resources does not include land use and zoning restrictions. Thus, the local zoning ordinances were reasonable uses of the towns’ police powers.

We expect a further appeal of this issue, and will be monitoring these matters for further developments.

Please click here for other recent posts on fracking.

Fracking Decision in New York Delayed Once Again

Tuesday, February 19th, 2013

By Dirk Haarhoff, Sedgwick New York

In late December 2012, we reported that the New York Department of Environmental Conservation (DEC) was in the process of preparing an environmental impact statement (EIS) regarding well permits for extracting oil and natural gas through horizontal drilling and high-volume hydraulic fracturing – i.e., “fracking.”  The final draft of the EIS was due last Wednesday.  However, the DEC allowed that deadline to pass without issuing its final draft, meaning that the four-year moratorium on shale gas drilling in New York could extend into 2014 or even longer.

According to the DEC, the decision to delay finalizing the report was made in order to allow the state’s health commissioner more time to study fracking’s potential health effects.  The moratorium has been in place because of concerns that fracking may contaminate water supplies.  The Joint Landowners Coalition, a pro-fracking group, plans to sue the DEC as a result of the missed deadline on the ground that delaying the drilling is a “de facto taking of property rights.”  Meanwhile, anti-fracking groups are planning to litigate if regulations are drafted and drilling is allowed to proceed.  As such, whether fracking is permitted in New York ultimately may be decided by the courts.

We are also continuing to watch developments in fracking-related litigation in California and elsewhere.  The current edition of Sedgwick’s Hydraulic Fracturing Digest discusses pending litigation filed in CA by several environmental groups.  Please click here to read this issue.

Hydraulic Fracking – Recent Developments in CA, NY, NJ and PA

Thursday, December 20th, 2012

By Greg Lahr

For our readers who are keeping tabs on developments in the hydraulic fracturing (“fracking”) industry, we thought you would be interested in Sedgwick’s latest Hydraulic Fracturing News Flash regarding a recent proposal in California to regulate fracking, which can be viewed here.

Here are some recent developments that we are following in other states:

In New York, the Department of Environmental Conservation (“DEC”) has prepared a Revised Draft Supplemental Generic Environmental Impact Statement (“SGEIS”) on the Oil, Gas and Solution Mining Regulatory Program. The SGEIS pertains to issuing well permits for horizontal drilling and high-volume hydraulic fracturing for extracting oil and natural gas from the Marcellus Shale and other low-permeability gas reservoirs. Since making the SGEIS available for public review in September 2011, the DEC has drafted proposed regulations, which are available for comments from December 12, 2012 to January 11, 2013. At least until the regulations are finalized, it appears that the DEC’s moratorium on issuing well permits for horizontal drilling and fracking will continue.

In Pennsylvania, appellate review of the constitutionality of Act 13 of 2012 (“Act 13”), 58 Pa. C.S. §§ 2301 et seq. (signed into law on February 14, 2012), continues with the filing of appellate briefs to the Pennsylvania Supreme Court in September 2012. According to the General Assembly, Act 13 broadly reformed the laws that govern the development of oil and gas resources in Pennsylvania by establishing uniformity and promoting growth in the industry though the pre-emption of local ordinances that impose conditions or limitations on oil and gas operations. The General Assembly intended to allow oil and gas development as a permitted use in any zoning district, and mandate that restrictions placed on oil and gas development by municipalities be no greater than those placed on other industrial uses. A number of municipalities sought a declaratory judgment that Act 13 is unconstitutional, and requested that the Act be permanently enjoined. After the Pennsylvania Attorney General filed preliminary objections based primarily on standing and justiciability grounds, the municipalities filed a motion for summary judgment. On July 12, 2012, the Commonwealth Court issued a decision that granted in part and denied in part the summary judgment motion, and in part sustained the Attorney General’s objections. Significantly, the court declared a section of Act 13, which provides for uniformity of local ordinances, to be unconstitutional. Cross-appeals were filed by the municipalities and the Attorney General.

In New Jersey, a one-year moratorium on fracking signed by Governor Christie is set to expire in January 2013. However, a New Jersey assemblyman is currently sponsoring legislation that would extend the ban on fracking until the state Department of Environmental Protection reviews the federal Environmental Protection Agency’s study on the effects of fracking, which may not be out in final form until 2014.

Hydraulic Fracturing Digest

Tuesday, June 12th, 2012

Our Hydraulic Fracturing Task Force recently issued its June newsletter.  We think the readers of this blog who work with insureds involved in this industry will find of interest this issue’s articles about the potential for fracking to lead to silicosis claims, the EPA’s new rules regarding air pollution from natural gas wells and proposed fracking regulation in Illinois.  Please click here to read the full issue.

Will Sackett Impact the USEPA’s Regulation of Hydraulic Fracking?

Wednesday, March 21st, 2012

By Earl L. Hagström

On March 21, 2012, the U.S. Supreme Court handed down a decision that clarified the U.S. Environmental Protection Agency’s (USEPA) administrative enforcement authority.  The decision, Sackett, et al. v. EPA, et al. (Docket 10-1062), held that parties subject to an Administrative Compliance Order (ACO) under 33 U.S.C. section 1319 of the Clean Water Act (CWA) are entitled to seek pre-enforcement review under the Administrative Procedures Act (APA).  The decision, while framed in the context of the CWA, may impact the USEPA’s use of its administrative authority under section 1431 of the Safe Drinking Water Act (SDWA) to regulate hydraulic fracking. Click here to read more

New York Supreme Court Upholds Towns’ Fracking Bans

Tuesday, February 21st, 2012

By Matthew Francois, Gregory Lahr and Stevi Raab

In two separate decisions issued last week, the Supreme Court of the State of New York (the state’s trial level court) upheld the Town of Dryden’s ban on hydraulic fracturing (or fracking) in Tompkins County, and upheld the Town of Middlefield’s ban on fracking in Otsego County.  (Fracking involves the injection of a mix of water, chemicals and propping agents under high-pressure into subsurface gas bearing formations causing them to fracture, thereby allowing for the release and production of natural gas trapped in those low permeability formations.)  Both courts held that while the state has control over how drilling operations occur, local governments retain discretion over where such activities take place. Click here to read more.

Stevi Raab, associate in the New York office, contributed to the article.

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