NY Judge Rules Town of Dryden can Ban Shale Gas Drilling

court gavelYesterday, Tompkins County (NY) Supreme Court Judge Phillip Rumsey handed anti-drillers a first, and likely short-lived, victory. He ruled that the Town of Dryden, located near Ithaca, has the right to ban shale gas drilling. As with many legal issues, this one is complicated, so let’s take a look at the case, Judge Rumsey’s decision, and what happens next.

Background: Anschutz Exploration Corp. v. Town of Dryden

NY Civil Court StructureLast August, Dryden Town Board members voted to ban natural gas drilling in the township, stripping landowners of their rights. Zoning laws have a controversial history. No one wants a sewage plant built in their back yard, or a chemical factory. Zoning laws are meant to provide protection for a group of people. But every time they are used, they also strip away the rights of other people—the people who own the land that’s being zoned. It’s a balancing act.

Drilling company Anschutz Exploration Corporation, based in Denver, spent more than $5 million to lease 22,000 acres in the Town of Dryden anticipating the day when shale gas drilling would begin in New York. The Dryden ban, which came after the leases had been purchased, renders those leases useless, so Anschutz took the Town to court—New York State Supreme Court. Don’t let “Supreme” confuse you. New York’s “Supreme” Court is not the top court—it’s one level up from County Court. There are two levels above Supreme Court in New York—the Appellate Division of the Supreme Court, and at the top of the heap, the New York State Court of Appeals (see the graphic).

Anschutz argued that New York’s Oil, Gas and Solution Mining Law supersedes or “preempts” local law when it comes to oil and gas drilling with two exceptions, road use and property taxes. The language in state law is, according to Anschutz, unambiguous.

Judge Phillip Rumsey’s Decision

However, Judge Rumsey used a similar, but different law to argue the opposite. New York also has the Mined Land Reclamation Law—think sand and gravel mining. According to Rumsey, both the Oil, Gas and Solution Mining Law and the Mined Land Reclamation Law have very similar supercedure clauses, and therefore, similar intent:

Rumsey stated: "The primary language of the two supersedure clauses is nearly identical. The Mined Land Reclamation Law provides that ‘for the purposes stated herein, this title shall supersede all other state and local laws relating to the extractive mining industry,’ while the Oil, Gas and Solution Mining Law provides that ‘the provisions of this article shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries."

Because both clauses only preempt local regulations that relate to the applicable industries, they do not block local regulations of land use, he states in the documents. Neither clause, Rumsey states, contains a clear intent to preempt local control over land use and zoning.(1)

Rumsey is saying that to ban an activity is not to regulate or control an activity, and if you can ban via zoning something like gravel mining, you should also be able to ban something like gas drilling. The problem with the foundation of his decision is that there are major differences between mining gravel and drilling for natural gas.

In speaking with MDN editor Jim Willis, Binghamton attorney Robert Wedlake argues that gravel and sand mining happen at the surface—you can stop gravel mining at the town line. But you can’t stop gas drilling arbitrarily at the town line. Wedlake also says the legislature’s intent when writing the oil and gas law indicates they did not want decisions left to local municipalities, unlike their intent with gravel and sand mining that allows some leeway for local zoning. (Listen to Jim’s interview with Rob Wedlake here.)

That is, Rumsey’s decision is based on comparing two state laws that are more apples and oranges than they are apples and apples. Such a decision is ripe to be overturned on appeal.

What Happens Next

Will Anschutz appeal the decision to the next level? Almost certainly. When interviewed yesterday following the decision, Anschutz attorney Thomas West did not say for sure whether or not Anschutz would appeal, but that the company would decide in the next 30 days. He also said:

"It’s a legal decision that should be wide open in the appellate courts, and we still remain confident in our positions," West said. "We certainly believe that if this case goes up to the Appellate Division, that the appellate courts will, we think, find some of the legal arguments we’ve put forth to be persuasive."(1)

Let’s assume a worst-case scenario, that the ruling is appealed all the way to the Court of Appeals and Anschutz loses. Or let’s say Anschutz says, “Forget New York, let’s go drill somewhere else.” What then? Town of Dryden taxpayers should be prepared to see their town on the hook to pay out millions, perhaps hundreds of millions of dollars.

Thomas West, the Albany lawyer representing Anschutz, said the company might appeal or instead pursue a “takings” claim against the town — based on the principle that private property should not be taken without just compensation. Mr. West said the company had spent more than $5 million securing land leases from Dryden property owners and could claim the lost value of its assets, including any profits it would have derived from exploiting the mineral rights under the land.

“It could be a very large claim,” he said.(2)

Actions have consequences, and the actions of five board members in Dryden may end up costing its residents for generations to come.

(1) Ithaca Journal (Feb 22, 2012) – Judge: Dryden can block gas drilling in community

(2) New York Times (Feb 21, 2012) – New York Judge Rules Town Can Ban Gas Hydrofracking

See also:

Reuters (Feb 21, 2012) – New York judge upholds fracking ban in towns

ABC News (Feb 22, 2012) – US judge upholds fracking ban