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Legal Update

New York Court Upholds Zoning Ban on Hydrofracking

23 February 2012
Mayer Brown Legal Update

In a case of first impression, a New York trial court has considered “whether a local municipality may use its power to regulate land use to prohibit exploration for, and production of, oil and natural gas.” In Anschutz Exploration Corp. v. Town of Dryden, Index No. 2011-0902 (RJI No. 2011-0499-M) (Sup. Ct. Tompkins Cnty., Feb. 21, 2012), the court concluded that, but for one small and severable part of the challenged zoning law, the Town’s land use regulations are permissible and not preempted by state law.

In 2011, the Town of Dryden amended its zoning ordinance to broadly prohibit the use of land within the Town “to conduct any exploration for natural gas and/or petroleum; to drill any well for natural gas and or petroleum; to transfer, store, process or treat natural gas and/or petroleum” and numerous other uses associated with oil and gas production. Anschutz, which stated that it had gas leases covering about 22,200 acres in the Town—over one-third of its total area—and had invested over $5 million in its operations within Dryden, sued the Town. It sought a declaration that the Town’s zoning ordinance was expressly superseded by New York’s Oil, Gas and Solution Mining Law (OGSML), or that it was preempted as inconsistent with the substantive provisions of that law. The Town moved to dismiss the action and for summary judgment declaring its change to the zoning ordinance valid.

The OGSML provides that it “shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries ….” The court looked to how the New York Court of Appeals interpreted similar language in the Mined Land Reclamation Law, and to the legislative history of OGSML. The court concluded that, “as both statutes preempt only local regulations ‘relating’ to the applicable industry, they must be afforded the same plain meaning—that they do not expressly preempt local regulation of land use, but only regulations dealing with operations.”

The court explained that “[u]nder this construction, local governments may exercise their powers to regulate land use to determine where within their borders gas drilling may or may not take place, while [the Department of Environmental Conservation] regulates all technical operational matters on a consistent statewide basis in locations where operations are permitted by law.” The court saw no difficulty in the fact that Dryden’s zoning law prohibited all drilling activity. It noted that the Court of Appeals had previously approved such blanket restrictions, and that “a municipality may exercise its zoning authority to completely ban mining within its jurisdiction.”

The court did find that the Town had gone too far in one respect: the zoning statute purported to invalidate permits “issued by any local, state or federal agency, commission or board for a use which would violate” the zoning ordinance. The court held that while the Town of Dryden could regulate land use within the Town, it could not “invalidate a permit lawfully issued by another governmental entity.” This provision was, however, severable, and did not affect the validity of the remainder of the zoning ordinance.

Town governments, which exercise fairly broad regulatory powers in New York State, may now feel free to implement highly restrictive zoning statutes—even to the point of completely banning hydrofracking operations within their borders. We presume that an appeal as of right to the Appellate Division will follow, and expect to report on further developments as they occur.

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