Pennsylania Supreme Court Impacts Shale Gas Development

On December 19, 2013, the Pennsylvania Supreme Court issued its decision on the constitutionality of Act 13—a comprehensive set of amendments to the Pennsylvania Oil and Gas Act. The court declared unconstitutional certain provisions, including those that prohibited local zoning and those that banned local environmental ordinances related to oil and gas development. The Pennsylvania Supreme Court’s decision affects oil and gas development by allowing local regulation and zoning of oil and gas operations near the Marcellus shale formation.

Under Act 13, municipalities were prohibited from issuing environmental regulations related to oil and gas development, municipalities were required to authorize oil and gas development in all zoning districts, and well operators were eligible to receive waivers from state regulations requiring that wells be at least a certain distance from bodies of water. Almost immediately after its passage, Act 13 was challenged as unconstitutional under multiple articles of the Pennsylvania Constitution. In the Commonwealth Court, the challengers sought, and won, an injunction enjoining the enforcement of the act.

The Pennsylvania Supreme Court held that the challenged provisions were unconstitutional, but the majority disagreed on the appropriate reasoning. After addressing preliminary procedural issues, Chief Justice Castille, joined by Justices Todd and McCaffery, found that the challenged provisions violated the state’s duties as trustee of Pennsylvania’s public natural resources under the Environmental Rights Amendment in the Pennsylvania constitution. Using language troubling for the industry, these justices found that the act provided a “maximally favorable environment for industry operators to exploit Pennsylvania’s resources,” and found that the state did not fulfill its duties as a trustee. The justices focused on the historical exploitation of Pennsylvania’s natural resources, the passage of the state constitution’s Environment Rights Amendment, and the need for Pennsylvania to protect the environment and the state’s natural resources for years to come.

More specifically, these three justices held that three core sections of Act 13 were unconstitutional. The first challenged provision preempted any local environmental regulation of oil and gas operations. The three justices ultimately held that the enactment of this section exceeded the General Assembly’s delegated police powers, since the General Assembly did not have the authority to “command municipalities to ignore their obligations” under the Environmental Rights Amendment. Second, the justices addressed the act’s requirement that local government permit oil and gas development in all zoning districts. The three justices were concerned about degradation of natural public resources and the disparate impact the act would have on state citizens. The justices stated their concern that the new regulatory regime could not conserve or maintain protected aspects of the public environment and the citizens’ quality of life and that some properties and communities would carry much heavier environmental and habitability burdens than others. Ultimately, they held that this provision was incompatible with the express command of the Environmental Rights Amendment. Finally, the justices discussed the section that dictated mandatory setbacks from water bodies but allowed a waiver if the permit applicant submitted “a plan” to protect state waters. The court listed numerous concerns and once again held that Act 13 failed to properly discharge the state’s duties as trustee of the public natural resources.

The decision leaves open whether the remaining provisions of Act 13 will survive on remand. No matter what happens on remand, this decision will impact development in the Marcellus shale formation. Due to the swift initial challenge, Act 13 was only effective for a short time. In fact, the Commonwealth Court’s injunction permitted local governments to enforce existing zoning ordinances that diverged from the Act 13 legal regime. As a result of the court’s decision, however, municipalities can presumably issue environmental and other zoning ordinances that restrict oil and gas development, and they can prevent oil and gas development in specific zoning districts. Additionally, since waivers are no longer a matter of right, operators may not be able to get waivers from setback provisions near bodies of water.

Justice Baer concurred in the result only, and found the core constitutional infirmity to be substantive due process. Justices Saylor and Eakin dissented, and Justice Orie Melvin did not participate in the consideration or decision of the case.

[mappress]
LNG World News Staff, January 03, 2014