October 01, 2018
Author: Keith B. Hall
Organization: Louisiana State University Law School
The amount of oil and gas activity in the United States has increased significantly during the last several years. Much of the increase is occurring because improved hydraulic fracturing technology, and the combination of that technology with horizontal drilling, has made it economical to recover oil and gas from locations where such recovery was not economical before. The increased activity has boosted the U.S. economy and improved the country’s energy security.
The increased activity has also raised concerns about potential adverse impacts on local communities. Many local governments have reacted by enacting ordinances to regulate oil and gas activity. Such regulatory efforts are new for many local governments – both because oil and gas activity is sometimes taking place in areas where the industry has not been active for several generations, and because oil and gas activity has traditionally been regulated at the state level. Indeed, in some cases local ordinances will be preempted by state law.
This paper discusses: the impacts that hydraulic fracturing and oil and gas activity can have on a local community; how local governments are regulating oil and gas activity; and the circumstances in which local laws will be preempted by state oil and gas statutes.
A. What Impacts Do Hydraulic Fracturing and Oil and Gas Activity Have on a Local Community?
Hydraulic fracturing has become controversial, with much of the controversy resulting from the fear held by many people that hydraulic fracturing will contaminate the environment. Although hydraulic fracturing and other aspects of oil and gas activity can have adverse environmental impacts, evidence suggests that many of the fears are overblown, particularly the fear that hydraulic fracturing will cause groundwater contamination. Further, the federal government and state governments have enacted regulations to address some of the environmental concerns that have a stronger basis in fact.1
On the other hand, hydraulic fracturing and the oil and gas activities that accompany it can have other adverse impacts on local communities that are well documented. For example, large trucks must make several hundred roundtrips to a well site in order to deliver and remove the equipment, water, and other materials that are used to drill and hydraulically fracture a well. This, along with the transport of workers to and from the well location can cause a temporary, but substantial increase in vehicular traffic in a local area and can cause damage to local roads. These effects can be particularly pronounced if a large number of wells are being drilled in an area or if drilling occurs in an area that normally does not have much traffic.
Further, if drilling and hydraulic fracturing occur near residential areas, the drilling and fracturing can be a temporary aggravation. The drilling and hydraulic fracturing processes are noisy, and the fracturing process causes vibrations. Also, in order to finish the drilling and fracturing as quickly as possible, operations typically are conducted around the clock. As a result, the sites are well-lit at night for purposes of worker safety. This results in “light pollution.”
Moreover, if an area sees a substantial amount of drilling, as certain areas in North Dakota have, the influx of workers and activity creates a boomtown atmosphere. Housing prices can increase, hotel rooms can be almost impossible to reserve, and the rate of petty crime and traffic accidents can increase.
B. How are Local Governments Regulating Oil and Gas Activity?
Local governments have regulated oil and gas activity in various ways. Some have enacted ordinances prohibiting hydraulic fracturing or prohibiting all oil and gas activity. Such prohibitions are particularly likely to draw legal challenges, which may be based on arguments that state oil and gas statutes preempt local ordinances governing oil and gas activity, or that such ordinances are not within the limited scope of authority granted to a particular local government, or that such ordinances constitute a regulatory taking. Some local governments have used zoning authority to require that oil and gas wells be a minimum “setback” distance from residences, or they have used zoning to restrict the areas where oil and gas drilling can occur. In some states, such as Louisiana, state oil and gas statutes preempt zoning laws that attempt to control where an oil and gas well can be drilled, so that it is up to state regulators to determine, during consideration of an application for a permit to drill, whether a particular location is suitable for drilling. In some of those states, state oil and gas laws generally preempt local ordinances governing oil and gas activity, but zoning ordinances are not preempted. In some such states, local governments that wanted to ban oil and gas activity altogether have attempted to do so with “zoning” ordinances that prohibited oil and gas activity in all zones. This has had mixed success. Some courts have concluded that such efforts should be characterized as an attempt to regulate oil and gas activity (by banning it), rather than as an exercise of legitimate zoning that allows such activity in some zones and not others.
Some local government have enacted ordinances designed to lessen some of the localized, temporary inconvenience that comes with oil and gas drilling and hydraulic fracturing. For example, some communities have enacted noise ordinances. Further, several local jurisdictions have required or persuaded oil and gas companies to enter road use and maintenance agreements that require the companies to repair damages to local roads. Some local governments also have requested that companies consult with local officials regarding driving routes that a company plans to use to access a well location. Two examples of road use and maintenance agreement forms are attached – one from Ohio and one from Louisiana.
C. When are Local Laws Preempted by State Oil and Gas Statutes?
“Preemption” is a doctrine that “establishes a priority between potentially conflicting laws enacted by various levels of government”--federal, state, and local.2 Under this doctrine, the law enacted by the higher level of government generally will be given priority, and the law enacted by the lower level of government will be “preempted,” rendering it unenforceable, at least to the extent of the conflict. Thus, if state and local laws conflict, the local law might be preempted.
There are three types of preemption: (1) express preemption, (2) conflict preemption, and (3) field preemption. “Express preemption” occurs when a state law expressly prohibits local government from enacting a particular type of ordinance. “Conflict preemption” occurs when a local ordinance conflicts with a state law so that it is impossible to comply with both state and local law, or when enforcement of local law will frustrate the purpose of a particular state law. “Implied preemption” occurs when state statutes or regulations imply that they completely cover a subject, thereby leaving no room for local ordinances to “occupy the same field.”
Each of these types of preemption is potentially at issue with respect to local ordinances that attempt to regulate oil and gas activity. State laws often provide a comprehensive regulation of oil and gas activity, making it possible for courts to conclude that there was an implicit intention for state laws to completely occupy the field. Even if there is not field preemption, a local law might conflict with a state law. Further, state oil and gas laws often contain a clause that expressly preempts local laws on the subject.
1. Express Preemption
An example of express preemption comes from Louisiana. Louisiana Revised Statute 30:28 prohibits any person from drilling an oil or gas well without first obtaining a drilling permit from the Office of Conservation. The statute goes on to state, “No other agency or political subdivision of the state shall have authority, and they are hereby forbidden, to prohibit or in any way interfere with the drilling of a well or test well in search of minerals by the holder of such permit.” Thus, the statute expressly preempts any local ordinance that would “interfere with the drilling of a well” by someone who has obtained a permit from the Office of Conservation. In Energy Mgmt. Corp. v. City of Shreveport, the United States Fifth Circuit the court held that the statute preempted a city ordinance that purported to ban drilling within one mile of a particular lake.3
Another example of express preemption comes from New York. Section 23-0303 of the New York Environmental Conservation Law states that the law “shall supersede all local laws or ordinances relating to the regulation of the oil, gas, and solution mining industries.” In the early eighties, a state court held that this provision preempted a local zoning ordinance that purported to prohibit the drilling of any oil or gas well within the municipality unless the company seeking to drill paid a twenty-five dollar permit fee to the town and posted a $2500 bond.4
2. Conflict Preemption
An example of conflict preemption comes from Louisiana. The first sentence of Louisiana Revised Statute 30:28(F) states that if a person obtains a permit from the Office of Conservation to drill an oil or gas well in a particular location, the permit “shall be sufficient authorization to the holder of the permit to enter upon the property covered by the permit and to drill in search of minerals thereon.” Because state law makes such a permit ““sufficient authority” to drill in a particular location, any local ordinance that would prohibit drilling in that location would conflict with state law. Thus, when the City of Shreveport passed an ordinance prohibiting drilling within one mile of a particular lake, the ordinance directly conflicted with the first sentence of 30:28(F) and therefore was preempted (and, as noted above, the ordinance was also expressly preempted).5
But a local ordinance is not subject to “conflict preemption” merely because a state law exists on the same subject. For example, the Pennsylvania Surface Mining Act prohibits certain mining operations from being conducted within 300 feet of an “occupied dwelling.”6 A township enacted a zoning ordinance that prohibited such mining activity from being conducted within 1000 feet of a residence.7
A mining company challenged the ordinance, arguing that it was preempted because it provided for a different setback distance than was provided by state law. The Pennsylvania Supreme Court disagreed, noting that the state and local laws did not directly conflict. The court observed that state law did not guarantee a company the right to operate at any site located at least 300 feet from any residence. Instead, the statute merely prohibited operations from being conducted any closer than 300 feet from a residence. By locating its mining operations at least 1000 feet from any residence, a company could comply with both local and state law. Moreover, the local ordinance did not frustrate the purpose of state law. Accordingly, the local ordinance was not preempted.8
3. Field Preemption
An example of field preemption comes from West Virginia, where there are several circumstances that could support a conclusion that state law is implicitly intended to occupy the entire field of oil and gas regulation. For example, the state has a series of statutes, the West Virginia Oil and Gas Act, which governs various aspects of oil and gas activity. The Act is administered by a state agency, the West Virginia Department of Environmental Protection's Office of Oil and Gas. Further, W. Va. Code R. Sec. 22-1-1 provides that the purpose of the DEP is to “consolidate environmental regulatory programs in a single state agency, while also providing a comprehensive program for conservation, protection, exploration, development, enjoyment, and use of the natural resources of the state of West Virginia.”
In 2011, the City of Morgantown enacted an ordinance that purported to prohibit hydraulic fracturing anywhere within the city limits, as well as anywhere within one mile of the city's borders. A company filed an action challenging the ordinance and arguing that it was preempted by state law. The court agreed, holding that state law establishes a “comprehensive regulatory scheme” that “fully occupies” the subject of oil and gas regulation, leaving no room for operation of local regulations.9
4. Preemption Issues Relating to Zoning
Some of the most interesting preemption issues that arise relate to zoning. For example, assuming that state law generally preempts local ordinances governing oil and gas activity, can a local government nevertheless use zoning ordinances to regulate such activity? The answer depends in part on the particulars of state law and in part on the substance of the ordinance at issue.
For example, as previously noted, Louisiana law expressly preempts any local ordinance that “interferes” with drilling by a person holding a drilling permit from the Office of Conservation, even if the ordinance is a zoning ordinance. In contrast, some states have statutes that generally provide for express preemption of local ordinances regulating oil and gas or mining activity, but which explicitly exempt zoning ordinances from that express preemption. Examples of such statues include the Pennsylvania Surface Mining Act, Pennsylvania Noncoal Mining Act, Pennsylvania Oil and Gas Act, and the Colorado Mined Land Reclamation Act.
Courts in Colorado and Pennsylvania have explained that these provisions generally allow local government to use zoning to regulate where drilling or mining activity can take place, while simultaneously prohibiting local governments from regulating how drilling or mining is performed.
Consistent with that reasoning, the courts have noted that local government cannot immunize an ordinance from preemption merely by characterizing it as a ““zoning ordinance.” For example, local government cannot enforce an ordinance regulating how drilling or mining is conducted, even if the local government characterizes the ordinance as a “zoning ordinance.”10 Further, courts have noted that “traditional zoning” designates both zones in which an activity is restricted or banned altogether as well as zones where the activity is permitted.11 Thus, when local governments have used “zoning” to ban a type of drilling or mining activity throughout the local jurisdiction, Pennsylvania and Colorado courts have held that the ban was preempted.12 But two courts in New York have held that a municipality can use zoning to completely ban oil and gas activity, notwithstanding a provision in New York's oil and gas statutes that provides for express preemption of local laws. That section, Section 23-0303 of the New York Environmental Conservation Law, states: “The provisions of this article shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries; but shall not supersede local jurisdiction over local roads or the rights of local governments under the real property tax law.”
By its express terms, the preemptive effect of that New York statute arguably is broad enough to preempt virtually “all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries,” even including traditional zoning laws. Further, even if traditional zoning laws are not preempted by § 23-0303, many observers would have concluded that an ordinance prohibiting oil and gas activity from being conducted anywhere whatsoever in a local jurisdiction would be preempted. Nevertheless, several local governments enacted ordinances to do just that--prohibit oil and gas activity altogether. One of local governments was the Town of Middlefield, which enacted a ban on oil and gas activity in June 2011. A landowner who had granted an oil and gas lease filed a suit challenging the ordinance and arguing that it was preempted by § 23-0303. The trial court rejected the challenge, and the appellate court affirmed the trial court’s order.13 Another New York jurisdiction that banned oil and gas activity altogether was the Town of Dryden. The appellate court also upheld Dryden’s ordinance.14 Those results were upheld by New York’s highest court in June 2014.15
The New York results were different than what some observers might have predicted given the language of the state’s express preemption statute. The appellate court’s decisions in those cases illustrate two significant points. First, the analysis of whether a particular ordinance is preempted involves case-specific analyses of the language of the local ordinance at issue and the state law or laws that arguably preempt the local ordinance. Second, various courts can reach different conclusions regarding preemption even when facing somewhat similar questions (such as whether the authority to regulate where an activity is conducted includes the authority to say that the places are “nowhere”). This makes it difficult to predict the outcome of a preemption challenge, absent clear guidance from prior decisions that constitute binding authority. The difficulty in predicting outcomes is particularly high when the question is whether a state regulatory scheme implies an intent to occupy the entire field, or whether an ordinance is subject to conflict preemption because it would frustrate the intent of state law even though the ordinance is not directly contrary to state law. Lawyers should keep these points in mind when advising their clients.
Lawyers should also be aware of a few additional issues. First, aside from the possibility that a local ordinance might be preempted, parties should be aware that sometimes a local government might lack the authority to enact a particular ordinance. Local governments can be divided into two categories: those that have been granted home rule authority and those that have not. A grant of home rule authority generally includes a broad grant of authority, basically making the local government a separate sovereign that can enact whatever types of laws it wishes, though its laws still can be subject to preemption.16
In contrast, a local government that has not been granted home rule authority is generally deemed to be a subdivision of the state and to possess only the authority that has been expressly delegated to it.17 Thus, an ordinance enacted by any unit of local government that lacks home rule authority is vulnerable to challenge unless the ordinance is based on some authority (such as zoning authority) that has been explicitly delegated to that local government.
Second, certain ordinances are non-preemptible, but this should not affect an analysis regarding whether an ordinance regulating oil and gas activity or mining is preempted. Although California and Colorado make certain ordinances non-preemptible,18 most states do not. Further, even in California and Colorado, the non-preemptibility does not apply if the local government lacks home rule authority. Finally, the nonpreemptibility does not apply if the matter being regulated is a matter of both local and state concern, as opposed to a matter of purely local concern, and there is authority that oil and gas and mining activities are matters of both local and state concern.19
Pennsylvania enacted a statute to prevent local government from using zoning to prohibit oil and gas activity,20 but in December 2013 the Pennsylvania Supreme Court held that much of the statute was inconsistent with a somewhat unique environmental rights amendment that is contained in the state constitution.21
Ohio state law also preempts local regulation of oil and gas activity and, on that basis, a court struck down the attempt by the City of Munroe Falls to use various local ordinances to block a company from drilling. 22 The appellate agreed that state oil and gas law’s preempted
* Keith B. Hall is Director of the Mineral Law Institute and the Campanile Charities Professor of Energy Law at LSU Law School, where he teaches Mineral Rights, Advanced Mineral Law, International Petroleum Transactions, and an Energy Law Seminar that focuses on environmental issues relating to the oil and gas industry. Before joining LSU Law School, he was a member of Stone Pigman Walther Wittmann in New Orleans, where he practiced law for 16 years, focusing his practice on oil and gas law, environmental law, and toxic tort litigation. He is a member of the Board of Editors for the Oil & Gas Reporter, the Board of Trustees for the Rocky Mountain Mineral Law Foundation, the Board of Trustees for the Energy & Mineral Law Foundation, and the Advisory Board for the Institute for Energy Law He is a former Chair of the Louisiana State Bar Association’s Environmental Law Section. Before attending law school, he earned a B.S. in Chemical Engineering from LSU and worked for eight years as a chemical engineer.
1 See, e.g., Keith B. Hall, Hydraulic Fracturing: Trade Secrets and the Mandatory Disclosure of Fracturing Water Composition, 49 Idaho L. Rev. 399 (2013) (discussing the widespread adoption of regulations requiring the disclosure of the composition of fracturing fluid); Keith B. Hall, Hydraulic Fracturing Contamination Claims: Problems of Proof, 74 Ohio St. L.J. Furthermore 71 (2013) (discussing regulations for the baseline testing of groundwater prior to oil and gas activity); Keith B. Hall, Hydraulic Fracturing: EPA Releases Guidance for Safe Drinking Water Act Permitting for Use of Diesel in Fracturing Fluid, Environmental & Energy Law Brief (May 10, 2012); Keith B. Hall, EPA Announces Plans to Regulate Disposal of Hydraulic Fracturing Water, Environmental & Energy Law Brief (Oct. 31, 2011) (discussing EPA’s plans to draft new Clean Water Act regulations to address concerns about disposal of wastewater at treatment plants); Keith B. Hall, EPA Proposes New Air Rules for Hydraulic Fracturing and for the Oil and Gas Industry, Environmental & Energy Law Brief (Aug. 10, 2011) (discussing new Clean Air Act regulations that address concerns about venting of natural gas).
2 Huntley & Huntley, Inc. v. Borough Council of Oakmont, 964 A.2d 855, 862 (Pa. 2009).
3 397 F.3d 297 (5th Cir. 2005); but see Greater New Orleans Expressway Comm’n v. Traver Oil, 494 So. 2d 1204 (La. App. 5th Cir. 1986).
4 See Envirogas v. Town of Kiantone, 447 N.Y.S.2d 221 (N.Y. Sup.), aff'd, 454 N.Y.S.2d 694 (N.Y.A.D.), appeal denied, 458 N.Y.S.2d 1026 (N.Y. 1982).
5 City of Shreveport, 397 F.3d at 306
6 52 Pa Cons. Stat. Ann. § 1396.4b(c).
7 Hoffman Mining Co. v. Zoning Hearing Bd., 32 A.3d 587, 590 (Pa. 2011).
8 Id. at 590; but see St. Croix, Ltd. v. Bath Township, 693 N.E.2d 297 (Ohio Ct. App. 1997) (ordinance could not set greater setback than was established by state law).
9 Northeast Natural Energy, LLC v. City of Morgantown, No. 11-C-411, Circuit Court of Monongalia County (order dated Aug. 12, 2011).
10 Huntley & Huntley, Inc. v. Borough Council, 964 A.2d 855, 866 (suggesting that municipality could not “permit drilling in a particular district, but then make that permission subject to conditions addressed to features of well operations regulated by [state law]”).
11 Colorado Mining Ass'n. v. Board of County Commissioners, 199 P.3d 718, 733 (Colo. 2009).
12 Voss v. Lundvall Bros., Inc., 830 P.2d 1061, 1069 (Colo. 1992) (oil and gas); Exton Quarries, Inc. v. Zoning Bd. of Adjustment, 228 A.2d 169, 179 (Pa. 1967).
13 Cooperstown Holstein Corp. v. Town of Middlefield, 964 N.Y.S.2d 431 (N.Y. App. Div. 2013).
14 Norse Energy Corp. USA v. Town of Dryden, 964 N.Y.S.2d 714 (N.Y. Ct. App. Div. 2013).
15 Wallach v. v. Town of Dryden, __ N.E.3d __, 2014 WL 2921399 (N.Y. 2014).
16 See, e.g., Voss, 830 P.2d at 1069.
17 Colorado Mining Assoc. v. Board of County Commissioners, 199 P.3d 718, 723-4 (Colo. 2009).
18 Cal.Const. Art. 11, § 5; Colo. Const. Art. 20, § 6
19 See, e.g., Voss, 830 P.2d at 1065, 1066; People ex rel. Seal Beach Police Officers Assn. v. City of Seal Beach, 685 P.2d 1145, 1150 (Cal. 1984).
20 58 Pa. Cons. Stat. Ann. §§ 3301-3309.
21 Robinson Township v. Commonwealth of Pennsylvania, 83 A.3d 901 (Pa. 2013).
22 State of Ohio ex rel. Jack Morrison, Jr., Law Director City of Munroe Falls, Ohio v. Beck Energy Corporation, No. 2013-0465.