Oil and gas producers should be aware of new regulatory developments in both the Eastern Marcellus and Utica Shales states as well as the Western states with development in the Niobrara and Bakken.
In Colorado, public concern over environmental impacts of drilling and hydraulic fracturing, as well as concerns about set backs from homes and schools in urban areas are prompting jurisdictional challenges from county and local governments to statewide regulations. The law permits local governments to promulgate additional zoning regulations and other requirements, so long as they do not result in “operational conflicts” with regulations of the Colorado Oil and Gas Conservation Commission. Some counties have long-standing zoning and permitting regulations; other counties and municipalities overlying the Niobrara play are responding to concerns with new regulations and moratoriums. The Colorado General Assembly is attempting to prevent a “patchwork” of regulations encumbering oil and gas production by clarifying the preemptive effect of the COGCC statewide regulations with proposed legislation, Senate Bill 88. Companies doing business in Colorado are advised to be alert to the outcome of this legislation, and to seek counsel for strategic and legal responses to proposed regulations and moratoriums proposed by local governments.
By contrast, in Pennsylvania, the permissible reach of municipal ordinances relating to oil and gas operations is covered by sweeping legislation recently adopted by its Legislature and signed by Governor Corbett (HB1950). The legislation supersedes local ordinances purporting to regulate oil and gas operations, except with respect to zoning ordinances adopted pursuant to the Municipalities Planning Code and the Flood Plain Management Act, and preempts local ordinances from regulating environmental or technical aspects of oil and gas operations. It requires that all local ordinances “allow for the reasonable development of oil and gas resources.” Well sites can be prohibited or limited in residential districts if the wellhead cannot be placed at least 500 feet from a building where individuals live or customarily work.
Of particular interest is a fee-shifting provision. A party aggrieved by the enactment of a violating local ordinance may either proceed before the PA Utilities Commission or go straight to Commonwealth Court (typically the intermediate appellate court that hears appeals involving government entities but in this case is given trial court responsibilities. The Commonwealth Court can order attorneys’ fees and costs to the prevailing party if the local government enacted or enforced a local ordinance with “willful or reckless disregard” of the law, or conversely the plaintiff’s action was frivolous or without substantial justification. Local governments with existing ordinances relating to oil and gas operations have 120 days from the effective date to review and amend their ordinance in order to comply.
In West Virginia, we successfully represented a landowner on a challenge to a municipal ordinance of the City of Morgantown that prohibited the use of horizontal drilling with fracking methods within the city or within one mile of the city limits. The Circuit Court of Monongalia County recently found that the West Virginia Oil and Gas Act provided the “exclusive control of this area of law” and preempted any local ban on fracking or attempt to regulate oil and gas development or production. No appeal was taken from this decision. Since this decision, no West Virginia municipality has enacted any ordinance attempting to regulate oil and gas development.
Ohio has statewide legislation that largely preempts additional local government control. However, companies drilling in those states should be aware of proposed regulations for hydraulic fracturing and other statewide permitting and monitoring requirements.