The Oil and Gas Addendum

A recent ruling from Lycoming County suggests that the next big fight over Marcellus Shale drilling in Pennsylvania may be waged at the local municipal level. For those landowners who favor hydrocarbon development, this may not be good news. Increased regulation in the form of local zoning ordinances may discourage gas developers from drilling in certain municipalities.

In Gorsline et al. v. Inflection Energy, LLC (No. 14-000130, August 29, 2014), Judge Marc Lovecchio of Lycoming County vacated a decision by the Fairfield Township Board of Supervisors (the “Board”), which had granted a conditional use permit to Inflection Energy, LLC (“Inflection”) to construct a natural gas well pad. Inflection planned to construct the well pad, which would have been approximately 300 feet by 350 feet, on a 60-acre plot owned by the Shaheen family. The property was located within a Residential Agricultural district. There was only one residence located within a 1000 foot radius of the proposed well pad location, but there were many homes and a large residential development within a 3,000 foot radius. Neighbors objected to the well pad project, but the Board granted the permit on December 18, 2013.

The neighbors appealed and argued that the Board should not have granted the conditional use permit under the local zoning ordinance. First, the neighbors argued that the proposed well pad constituted “surface mining,” which was only permitted as a conditional use in industrial zones. Judge Lovecchio rejected this argument, concluding that the proposed well’s natural gas operations would not constitute “surface mining” as defined by the ordinance. Accordingly, he concluded that the proposed use was neither specifically permitted nor specifically denied by the ordinance. In so concluding, Judge Lovecchio gave substantial deference to the Board’s interpretation of the ordinance.

However, Judge Lovecchio found that the Board erred when it determined that the proposed use is similar to and compatible with other uses permitted in the zone. He opined that the Board erred because it granted the conditioned use permit without sufficient supporting evidence. For example, Inflection could not state how many wells would be drilled, how much water would be needed, whether the water would be supplied by pipeline or trucks, the type of energy it would be utilizing, how long the site would be under construction, whether it would drill into subsurface layers other than Marcellus Sshale, or which properties the wells would be going under. He also ruled that there was a lack of evidence demonstrating that the proposed use was not “in conflict” with the general purpose of the ordinance. Opponents argued that the well pad posed the risk of spills, fires, accidents, and other activities that threaten public health and safety, concepts promoted by the ordinance. In addition, they argued that there was no proof that the well pad would conserve or stabilize property values or negative impact traffic, and that the construction of the pad itself would be time-consuming, noisy, and inconvenient for Fairfield Township residents. As such, Judge Lovecchio held that the well pad project was inconsistent with the general purpose of the ordinance, particularly with regard to a zone designated for residential or agricultural use: “Neither the Applicant nor the Board explained how unconventional natural gas operations are compatible with the permitted use in this residential district”. Judge Lovecchio further acknowledged the residents’ concerns about radiation, water contamination, and background checks of the workers who would be constructing and working at the pad and observed that they had “presented substantial evidence that there is a high degree of probability that the use will adversely affect the health, welfare and safety of the neighborhood.”

This decision comes on the heels of the Pennsylvania Supreme Court’s 2013 opinion in Robinson Township, et al. v. Commonwealth. In Robinson, the Pennsylvania Supreme Court struck down as unconstitutional many of the core provisions of Act 13, which proposed to amend Pennsylvania’s Oil and Gas Act.

One of the provisions of Act 13 invalidated by the Supreme Court in Robinson was Section 3304. This section implemented statewide zoning standards for oil and gas operations which preempted local zoning ordinances. In striking down Section 3304, the Supreme Court breathed new life into Article I, Section 27 of the Pennsylvania Constitution and empowered municipalities to rely on their zoning ordinances to regulate oil and gas operations within their boundaries. Judge Lovecchio seized on this aspect of the Robinson decision noting that “Fairfield Township has a substantial and immediate interest in protecting the environment and the quality of life within its borders. This quality of life is a constitutional charge that must be respected by all levels of government.” (emphasis in original).

Judge Lovecchio’s opinion sheds light on how Robinson and local zoning ordinances may impact future oil and gas development throughout the Commonwealth. Without the required conditional use permit, Inflection was unable to move forward with the proposed drilling. As such, the local zoning hearing board may now be the preferred forum to contest or oppose natural gas development. Concerned citizens or municipalities hostile to such development can scrutinize proposed operations and exploit any inconsistency with or violation of local zoning ordinances, thus halting the entire project. Oil and gas developers are not the only ones who will be negatively affected; landowners like the Shaheens may now be precluded from leasing their underlying hydrocarbons. Developers will not be inclined to make capital drilling investments in areas with restrictive zoning ordinances.

If the Gorsline decision is any indication, the battle over oil and gas drilling in Pennsylvania is only going to intensify, especially at the local municipal level where local zoning ordinances and drilling interests may be sharply divided.