In a precedent setting case, Jeffrey v. Ryan et al (N.Y.S. Sup. Ct. Broome County, Index No. CA2012-001254), a New York State court has struck a local municipality's attempt to temporarily ban natural gas exploration and development.
More than 100 municipalities across New York have passed measures to prevent natural gas exploration and development within their borders. And, while the majority of these bans and moratoria have been in areas not necessarily considered prospective for Marcellus Shale development, last year the City of Binghamton passed a two-year ban on natural gas exploration and extraction as well as drilling-related waste disposal. In doing so, Binghamton's local law represented the first local prohibition in New York's Southern Tier, which is largely considered to be the geological sweet spot for Marcellus Shale drilling.
A group of pro-drilling petitioners challenged Binghamton's law, arguing that the law is (1) a zoning law that should have been referred to the Broome County Planning Board prior to enactment under section 239-m of the General Municipal Law, (2) superseded by section 23-0303 of the Environmental Conservation Law (ECL), or, in the alternative (3) a moratorium for which the requirements have not been validly met.
On petitioners' motion for summary judgment, the Court first addressed petitioners' preemption argument under ECL § 23-0303(2). In just one short paragraph, the Court noted that the issue previously had been addressed by Justices Rumsey and Cerio in the Anschutz Exploration Corp. v. Town of Dryden and Cooperstown Holstein Corp. v. Town of Middlefield cases, adopted the reasoning of those two cases, which the Court found to be "well reasoned" and "well founded[,]" and held that Binghamton's two-year ban was not preempted under the ECL.
The Court then addressed petitioners' argument that the two-year ban was a zoning law that fails procedurally because it was not referred to the County Planning Board prior to enactment. In doing so, the Court first recognized that a municipality can use its police powers to enact laws that protect the health, safety and welfare of its citizens and that it does not need to do so through a zoning law. It then went on to hold that such local laws, enacted pursuant to a municipality's police powers, do not need to be referred to a municipality's planning board under General Municipal Law § 239-m. Interestingly, the Court cited to Gernatt Asphalt Prods. v. Town of Sardina, a case that has been used by the Courts and proponents of drilling bans to reject local preemption, and quotes that decision for the proposition that "[a] municipality is not obliged to permit the exploration of any and all natural resources within the town as a permitted use if limiting that use is a reasonable exercise of its police powers to prevent damage to the rights of others and to promote the interests of the community as a whole[.]" (87 N.Y.2d 668, 684 [1996]).
Finally, the Court addressed petitioners' argument that the two-year ban was an improperly enacted moratorium. The Court held that a temporary ban on development or of certain land uses, such as was presented by the Binghamton law, "is the hallmark of a moratorium." And, while recognizing that the issue of natural gas development is controversial, the Court held that it is insufficient and improper for a municipality like the City of Binghamton to "invoke its police powers solely as a pretext to assuage strident community opposition[.]" (quoting Matter of Belle Harbor Realty Corp. v. Kerr, 35 N.Y.2 507, 512 [1974]). Rather, to uphold its local ban, the City of Binghamton was required to show that its actions were: (1) in response to a dire necessity; (2) reasonably calculated to alleviate or prevent a crisis or condition; and (3) that the municipality is presently taking steps to rectify the problem. The Court ultimately concluded that the City failed to meet any of the three necessary criteria for a properly enacted moratorium, particularly given the current state-wide moratorium on permits and the City's failure to show that it was taking steps to alleviate the alleged problems caused by natural gas drilling and related activities. The Court, therefore, found Binghamton's two-year ban to be invalid.
The Jeffrey decision, while not helpful to industry relative to local preemption under ECL § 23-0303(2), is nonetheless powerful and should serve to caution municipalities across New York from considering using their police powers to assuage community opposition to natural gas drilling. Science, not fear and opposition, must decide the fate of drilling in New York.
If you require further information regarding the information presented in this Legal Alert and its impact on your organiza-tion, please contact Richard Capozza, Chair of the Energy Practice Area at 315-425-2710 or rcapozza@hblaw.com.