The Pennsylvania Supreme Court has rejected the long-standing test for analyzing claims brought under Article I, Section 27 of the Pennsylvania Constitution, commonly known as the Environmental Rights Amendment (ERA). In its June 20, 2017 decision in Pennsylvania Environmental Defense Foundation (PEDF) v. Commonwealth, the Supreme Court set aside the test from Payne v. Kassab that has been used since 1973, and held that the Commonwealth’s oil and gas rights are “public natural resources” under the ERA and that any revenues derived from the sale of those resources must be held in trust and only expended to conserve and maintain public natural resources.
The Supreme Court’s opinion in PEDF is an important step in the ongoing judicial re-examination of the ERA. However, the impact of the Court’s decision on environmental and land use issues beyond the relatively narrow facts of this case remains unclear.
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The Supreme Court of Appeals of West Virginia recently emphasized that a party seeking a partition of property by allotment or by sale under W. Va. Code §37-4-3 must strictly follow the prerequisites in the statute — but only those prerequisites.
In Bowyer v. Wyckoff, 2017 W. Va. LEXIS 27 (Jan. 26, 2017) (Link to PDF of the case here), the Court addressed an effort by Wyckoff to partition the surface of property in kind or by sale. Bowyer, however, counterclaimed and sought to partition both the surface and the mineral interests either though by allotment or by sale, allegedly because he wanted to develop the shallow natural gas under the property. The circuit court granted judgment to Wyckoff, and Bowyer appealed.
The Court initially confirmed that, under W. Va. Code §37-4-3, “a party desiring to compel partition through sale is required to demonstrate that the property cannot be conveniently partitioned in kind, that the interests of one or more of the parties will be promoted by the sale, and that the interests of the other parties will not be prejudiced by the sale.” Bowyer at *8. The circuit court, however, added another, general requirement for any partition: “It is predicate to the partition of an oil and gas mineral interest that there be an inability of the mineral owners to agree on how to develop the mineral estate.” Bowyer at *6.
The Court rejected the circuit court’s attempt to add a requirement that mineral owners not agree on how to develop a mineral estate before allowing partition; however, the Court affirmed the circuit court’s decision that rejected partition by sale of the surface and mineral interests because Bowyer had not otherwise proven his entitlement to partition by sale under §37-4-3. (The Court did not address Bowyer’s attempt to partition by allotment because Bowyers failed to preserve that issue for appeal.)
Perhaps most important for parties seeking partition by either sale or allotment, however, was the circuit court’s rationale for rejecting sale by partition — a rationale affirmed by the Court:
The forced sale of oil and gas minerals precludes the owner of the benefit of lease consideration and the prospect of production proceeds, which represent the primary and perhaps the exclusive value which such ownership vests. Therefore, the public interest will not be promoted by sale.
Bowyer at *9. Under this rationale, any partition for sale or by allotment under §37-4-3 can be forestalled by a single interest holder who does not wish to sell his or her interest. In fact, this rationale undercuts the entire purpose of the partition statute, which necessarily results in a “forced” sale of a person’s property interest, whether the partition be by sale or by allotment.
For oil and natural gas producers that seek partition in order to develop mineral interests, the Court’s implicit acceptance of the notion that any “forced sale of oil and gas interests” precludes partition could significantly hamper efforts to use the partition statute to develop minerals. For questions about West Virginia’s partition statute, contact Mychal Schulz (mschulz@babstcalland.com) or Matt Casto (mcasto@babstcalland.com).
On March 29, Federal Magistrate Judge Susan Paradise Baxter dismissed a motion made by Highland Township in Elk County, PA (the “Township”) and allowed a suit brought by Seneca Resources Corporation (“Seneca”) to proceed. The action filed by Seneca challenges an ordinance banning injection wells within the Township. Prior to the filing of the suit, Seneca had received a federal permit from the United States Environmental Protection Agency to convert some of its natural gas wells in the Township into underground injection wells. Seneca then applied for a permit from the PA Department of Environmental Protection (“DEP”), and the DEP indicated that it was suspending any review of the permit application in light of the conflict with the Township’s ordinance. Seneca filed its complaint on February 18, 2015, stating that the ordinance violates the state and federal Constitutions and is preempted by several state and federal laws. The Township filed a motion to dismiss the complaint, alleging that Seneca did not have standing to challenge the ordinance. The Judge denied the Township’s motion to dismiss and held that Seneca does have standing to proceed with its suit. The Judge found that Seneca had met all of the requirements for demonstrating constitutional standing. Seneca sustained and continues to sustain injury as a result of the ordinance, because the DEP suspended its review of Seneca’s permit application due to the conflict with the ordinance. In addition, Seneca demonstrated that a favorable decision is substantially likely to redress the injury, because it would remove the ordinance as an impediment to the DEP’s review of Seneca’s permit application.
Earlier today, the Pennsylvania Commonwealth Court issued a unanimous decision in the much-anticipated case of Gorsline v. Board of Supervisors of Fairfield Township, reversing the decision of the Court of Common Pleas of Lycoming County. In reversing the lower court, the Commonwealth Court upheld Fairfield Township’s decision to grant conditional use approval to Inflection Energy, LLC for an unconventional well pad. This case is significant for several reasons. First, the Commonwealth Court made it clear that it is insufficient for objectors to sustain their burden by merely stating concerns or asking questions of the developer’s expert witnesses. Instead, they must present evidence to substantiate those concerns. Second, the Commonwealth Court criticized the lower court for making its own findings of fact when it did not take additional evidence and where the municipality made its own findings of fact. Third, the Commonwealth Court recognized that the lower court erred by focusing on truck deliveries during the construction phase of the project because zoning regulates the use of land and not the particulars of development and construction. Finally, the objectors attempted to raise issues based on the Pennsylvania Supreme Court’s Robinson Township decision, arguing that natural gas development is an industrial use that is per se incompatible with a residential/agricultural zoning district and that approval of the natural gas development violated the Environmental Rights Amendment of the Pennsylvania Constitution. The Commonwealth Court summarily rejected these two arguments and noted that, because the record supported the township’s determination that the proposed well pad was compatible with the permitted uses in the residential/agricultural district and the objectors presented no evidence of harm, the objectors’ claims were unsupported by the accepted evidence of record. This final point is especially significant because many anti-industry opponents cite both the lower court’s opinion and the Delaware Riverkeeper Network’s amicus brief from this case in other zoning proceedings as support for the now rejected view that oil and gas development must only occur in industrial zoning districts.
On September 26, 2014, the Commonwealth Court of Pennsylvania issued an opinion in favor of MarkWest Liberty Midstream & Resources, LLC. MarkWest had purchased a 71.5 acre parcel of undeveloped land in Cecil Township, Pennsylvania, and had applied to the township’s zoning hearing board for a special exception under the zoning ordinance to construct and operate a natural gas compressor station.
The zoning hearing board denied MarkWest’s special exception application holding that MarkWest failed to satisfy the zoning ordinance’s requirements that the compressor station would be of the same general character as other permitted uses, and that its impact would be equal to or less than other permitted uses. MarkWest appealed to the trial court, which affirmed the zoning board’s decision. MarkWest then appealed to the Commonwealth Court.
On appeal, MarkWest argued that the zoning board erred because the compressor station is of the same general character as an “essential service” and because it meets the standards for permitted uses in the Township’s I-1 Light Industrial District. The zoning hearing board argued that MarkWest is a commercial enterprise that is neither a public utility nor an entity that provides an essential service to the public. The Commonwealth Court noted that the issue is not whether MarkWest’s proposed use is an “essential service” as defined, but rather, whether MarkWest’s proposed use is of the same general character as any essential service. The court then held that the zoning hearing board did not make any finding that the proposed compressor station was not of “the same general character” as other permitted uses. Instead, the court found that the zoning hearing board applied the wrong legal standard by requiring the use to be “of the same character” rather than “the same general character.”
Accordingly, the Commonwealth Court concluded that the zoning hearing board’s position was an unreasonable interpretation and application of the zoning ordinance, and it reversed the portion of the trial court’s decision affirming the denial of the special exception application. The Commonwealth Court remanded the case to the trial court and directed it to immediately remand the case to the zoning hearing board with the direction to grant MarkWest’s special exception application within 45 days of receiving the remand order.
Citing a recently decided case in Colorado, the bankruptcy trustee for Norse Energy filed a motion in early August urging the New York Court of Appeals to re-hear arguments in the case. In June, the Court of Appeals issued an opinion which affirmed local zoning laws adopted by two upstate towns that prohibited oil- and gas-related activities within their borders. The motion filed by the trustee in August asserted that a Colorado court’s rationale in striking down a voter-approved local law prohibiting hydraulic fracturing provides support for the position that municipal-wide drilling bans directly conflict with New York’s Oil, Gas and Solution Mining Law. In response, the environmental group Earthjustice recently filed a motion urging the Court of Appeals to reject the trustee’s request on the grounds that the motion for reargument was untimely and the Colorado decision was based on different laws and legal analyses.
As reported by the West Virginia Press Association, the West Virginia Division of Natural Resources (“DNR”) is seeking bids for natural gas drilling on state-owned land under the Ohio River. A legal notice published on Friday, August 22 indicates that the DNR intends to grant leasing rights to drill under the river in Marshall, Wetzel and Pleasants counties. The notice further states that applications to bid on these rights must be submitted by the September 11 deadline.
Today the New York Court of Appeals issued an opinion affirming local zoning laws adopted by two upstate towns that prohibited oil and gas-related activities within their borders. Specifically, the Court ruled that there was nothing within the plain language, statutory scheme and legislative history of the New York Oil, Gas and Solution Mining Law (“OGSML”) that manifested an intent by the legislature to preempt a municipality’s home rule authority to regulate land use. The Court expressly stated in the decision that it was not passing judgment on “whether hydrofracking is beneficial or detrimental to the economy, environment or energy needs of New York,” noting that the cases only “concerned the relationship between the State and its local government subdivisions, and their respective exercise of legislative power.” A copy of the Court’s opinion can be found here.
On May 9, 2014, the Ohio Division of Oil and Gas Resources Management announced changes in the procedure for obtaining orders approving drilling units. The procedure, established by R.C. 1509.28, authorizes the Division to approve drilling units that contain unleased properties and properties leased to operators who decline to agree to inclusion in the proposed drilling unit. The procedure is most often used to assemble units for horizontal drilling. The changes include extending the minimum period of time between the filing of an application and the hearing on the application from 45 to 120 days, requiring the submission of additional information by affidavit in the application, and providing additional notice to the public of the hearing. The changes appear in the Division’s guidelines for administering the unitization statute.
The Pittsburgh Post-Gazette reports that Allegheny County Council rejected a proposed three-year moratorium on natural gas drilling within county parks. The measure failed 2-9, with four council members abstaining because of conflicts of interest. The bill was originally proposed by Barbara Daly Danko, D-Regent Square, in September.
On September 26, 2013, in the case of Thornsbury v. Cabot Oil & Gas Corporation (2013 W. Va. LEXIS 958), the Supreme Court of Appeals of West Virginia ruled that, although an oil and gas lease to Cabot affecting surface lands owned by Thornsbury contained road provisions, a subsequent 2006 right-of-way contract controlled the design and use of the well access road on the land. The Supreme Court Opinion reversed a prior decision of the McDowell County Circuit Court granting summary judgment to Cabot, further holding that genuine issues of material fact remain as to the possible breach of the 2006 contract, and remanded the case for further proceedings.
In what appears to be a first in Pennsylvania, on March 11, 2013, Forward Township in Allegheny County enacted an ordinance specifically targeting and extensively regulating both transmission and gathering pipelines. While the ordinance is technically not a zoning ordinance, it imposes an approval process similar to a conditional use whereby an application is reviewed by the Township Planning Commission and approved by the Board of Supervisors, which may place any conditions or restrictions on the permit that the Board determines is necessary for the public health and safety. In addition to a detailed application, the ordinance requires an application fee of $3,000 per mile of pipeline proposed (up to $15,000) and, upon approval by the Board, a performance bond of $25,000 per mile of pipeline. The operator must also provide the Township with an escrow or letter of credit in the amount of $50,000 for the closure and abandonment of the pipeline for any restoration of the property, air or environment where the pipeline is located. The ordinance probably is preempted by a number of state and Federal statutes.
LS Power Development LLC, a New Jersey based company, received site approval this week to build a power plant estimated to cost $750 million in Lawrence County, Pennsylvania, the Pittsburgh Tribune-Review reports. The plant would be powered by Marcellus shale gas. The company still needs state and federal permits, but construction could begin early next year and the plant could generate electricity by 2016. Tennessee Gas Pipeline Company, L.L.C., a subsidiary of Kinder Morgan Energy Partners, owns and operates the gas pipelines that would supply the plant.
City Council members in Brunswick, Ohio, the largest city in Medina County, are voicing concerns regarding state laws which give the Ohio Department of Natural Resources the sole authority to issue oil and gas drilling permits throughout the state. Council members are concerned that the laws do not take local zoning into consideration and effectively pre-empt any authority to regulate hydraulic fracturing operations at the local level. The mayor of Brunswick has urged the council to consider the economic benefits brought to the area by oil and gas exploration prior to voting on a proposed resolution which would formally voice their disapproval on the issue.
On January 18, 2013, the Muskingum Watershed Conservancy District (MWCD) announced that it has negotiated a 6,700 acre non-developmental oil and gas lease with Antero Resources. The lease will prohibit drilling or surface development on MWCD property, but will allow Antero to drill under MWCD land from other nearby wells. Financial terms of the lease are still being negotiated. The MWCD staff plans to recommend to the Board of Directors to enter into the lease with Antero at the Board’s February 15, 2013 meeting.