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.
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