NY Judge Rules Town of Dryden can Ban Shale Gas Drilling
Yesterday, 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
Last 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
“Actions have consequences, and the actions of five board members in Dryden may end up costing its residents for generations to come.”
A ridiculous and empty threat. You can’t make a takings claim for a speculative commercial venture.
All levels of the NY court repeatedly have repeatedly held that town home rule through zoning trumps state DEC regulation in surface mining and there is a good chance they will do likewise for drilling.
Drilling does take place on the surface, just like surface mining. However the well bore does not. It is not at all clear that towns could ban drilling under towns.
This claim of takings is nonsense and is only used to scare official. True that the Fifth Amendment says “… nor shall private property be taken for public use without just compensation.” However the Supreme Court has defined “taken” as the loss of ALL use of property, such as in eminent domain. What is more, the Supreme Court has held that under common law “… all property in this country is held under the implied obligation that the owner’s use of it shall not be injurious to the community” in Mugler v. Kansas 123 U.S. 623, 665 (1887).
Anschutz bought the leases in a state with a moratorium on high volume hydraulic fracturing and uncertainty in the regulations. That is business risk and deserves no compensation. Maybe their due diligence was lacking on the social/political makeup of Tompkins County or maybe they were fully aware of the risks and made a business decision to be the major lease holder in Dryden. Cut your losses and move on.
The bad thing about local rule it opens up a door to the evil side of politics being money. In too many cases local control has seen extortion, insider dealing in zoning to enhance the wealth of the local politicians. A constant battle for more money.
Bin, there are instances in which these town drill bans do constitute 100% takings. They take away all of an existing leasehold interest, which is a real property right. Also, though rare in NYS, should there be an owner of severed mineral interests in these towns, which is also a recognized real property right in the U.S.A., the bans take all that away.
The majority of Anschutz’s NYS leasehold pre-dates NYS’s July 23, 2008 moratorium, and was contracted for during a period when industry was primarily interested in Trenton-Black River limestone exploration. That sort of low-frack, no-frack project has remained permissible by NYS DEC throughout the conflict over high-volume fracking — but it would be no longer automatically green-lighted in the Town of Dryden, which has drafted its ban to overreach far beyond just shale gas.
Beware the excusing of all socio-political business risk. If you work to create an environment in which all is justifiably uncertain, you help devolve NY and the USA to the status of an unstable Third World regime. Fossil fuels opponents may short-sightedly cheer that sort of anarchy. But I think, in the end, it will wind up hurting even renewable enterprises — and certainly people and the environment.
Do we know anybody that might want to zone out large- or small-scale windmills, hydropower, solar, geothermal — or the necessary transmission infrastructure?
Banning would prevent the use of property for drilling, but not prevent other uses such uses as residence, farming, logging, trapping, etc. Therefore banning for drilling does not take 100% of value of property, and therefore is not a taking according to our laws. If any action by government that effected use of property was unconstitutional, then zoning ordinances would be illegal.
The Landman from Mason Dixon Energy was busy in Dryden in 2005-07 selling leases for Ansbro Petroleum (now Anschutz). He specifically sold leases to develop the Trenton Black River formation and promoted the “million dollar well” in the Spencer-Van Etten area as an example. He also clearly explained that Ansbro was not in the business of cutting trees and building roads, and they would drill in fields close to paved roads. We found out soon after these leases were signed that the program was very different from what the Landman sold and communication from Ansbro and Mason Dixon to landowners stopped. They locked us in using deception and stopped communicating once they had their quota of acreage under lease. Then we watched the Marcellus program unfold to our south.
Do not be so quick to judgement that landowners in Dryden and elsewhere are short sighted or unable to see the need for a diverse energy portfolio that includes domestic natural gas. Imagine signing a contract with a developer to build a self-storage facility on a corner of your agricultural/wooded acreage only to discover that they really intend to build a Walmart and Home Depot, and the language in your contract is so open ended that there is little you can do about it. That is why opposition to Anshutz in Dryden is so strong.
YB, I see you now acknowledge my chronology, which differs significantly from your original misinformation.
And I suppose that’s progress.
Nonetheless, in Dryden, and in the southern Finger Lakes, I believe history shows Anschutz had a TBR-inspired leasehold that suddenly took on unforeseen shale gas significance sometime around Jan. 2008. Certainly their drilling behavior was all TBR. Same for CHK, and same for TLM — prior to the first full Marcellus application on Feb. 15, 2008, a full four years ago.
Since then, due to both economics and NYS regulatory delay, the Anschutz leases have proven undevelopable and unmarketable — unlike similarly vintaged leases in PA and OH, which were sold at a serious markup to CHK.
The leases were written to cover all formations, but that’s hardly unusual.
If you simply refuse to believe that’s what happened, I can do nothing to change this. You would need to get inside Philip Anschutz’s head, circa 2005-2007, and that’s not gonna happen.
Let me ask this: If Dryden doesn’t object to TBR, or to methane recovery at the local landfill, or to simple natgas supply or transport, why has it all been banned, running forward?
It’s because that town is gullible, ignorant, short-sighted, selfish, and abusive to the private sector, and to the full public interest. The appellate courts will say so, but using different language.
Your ignorance also shows. Leases aren’t sold to the landowner. They are bought — though it’s true there is inevitably salesmanship involved.
If you don’t like it, then don’t sign.
But leave the rest of NYS, including Dryden, free to make up its own mind.
I agree on the chronology and my mistaken substitution of the word buying with selling. If you took the risk of engaging me in my field of expertise, I would be more tactful in my response. This is not a cut and dry, pro versus anti issue and your ‘my way or the highway’ attitude lessens the value of your input.
Many pro-drilling landowners with leases are very unhappy with the use of Force Majeure clause, objection to lease cancellation actions when primary terms were not renewed and other means to extend leases without negotiating new terms with landowners. Again this is occurring with little to no communication with the landowners. As landowners we are vested partners in the use of our land. The actions of many energy companies when buying and renewing leases has pushed many people who signed leases with good intentions into a defensive position. All landowners in NYS should be aware of this and join a Landowers Assocation with solid legal representation before negotiating a lease.
Fair enough.
On your point of raising landowners’ bargaining power, protection, knowledge, and sophistication by promoting the rise of the coalitions, I agree strongly — even though I own no land to speak of.
Local drill bans like Dryden’s eviscerate that kind of private-sector solution, however. Their answer to tennis elbow is to forbid tennis.
YB reading your responses to NYShale you seem like a very intelligent fellow. What I can’t comprehend is that with all the information out there, that you would even consider signing any paperwork, especially from Landmen, without consulting an Attorney.When there are big profits to be made there are all kinds of scams and scammers that come knocking.In the end its shame on you for not protecting ” Your” interest in “Your” property. The old adage “Buyer beware” certainly holds true here. In response to the town of Dryden making decisions for every landowner is absurd and unconstitutional. Before such a ban is voted upon the Town Board should have held open Town meetings to discuss this with every resident able to be heard, then place a vote. It seems to me that people that live in city limits with no stake in the game voted to ban it, but folks that live on the outskirts that have property differ. In the end, landowner rights to prosper from the use of their properties have been breached. The courts will have no choice but to overturn these lame attempts from Anti’s groups to disrupt what our constitution promises.
I have an attorney and special conditions were added to my lease to protect the land. I will not discuss details of my lease in an open forum or the due diligence I performed before signing, but I assure you I am not a gullible landowner that drooled over the signing bonus. Also you would be very suprised at the landowners in Dryden (agricultural and forested land, not the village homeowner) that actively or quietly supported the ban based on their experience leasing with Anschutz. There are more than a few people that support developing natural gas (and continue to) but do not trust Anschutz and are very concerned with the industrial scale of shale gas extraction. These people are your allies not your enemy and their concerns are real.
I am networked with many other landowners with leases, both before and after I signed, and therefore not very issue I raise is my own. There were no landowner associations in NY before the shale gas industry hit PA. You are correct on buyer beware but do not so willingly embrace an industry that swept into NY like a lake effect storm to get acreage under lease just before the shale gas program hit. Opposition would not be so strong and many supportive people would not be so wary if they had disclosed their real intent of developing shale gas using horizontal drilling and not limestone using vertical drilling. Two very different programs. I don’t think the Landmen knew what they were promoting and thus they were very credible.
This is a polarizing issue and over reaction on both sides is occurring. There is very little trust and that needs to change before we can move forward, otherwise this indusry will be battled in the courthouse for years and only the law firms will expererience the boom.
I too was involved in a lease 12 years ago with Fortuna energy( @ $3.00 per acre) long before there were landowner Associations or the mention of Hydro Fracking. There has been gas exploration in our State( NY) and my region for over 50 years.While the technique used was vertical back then,Horizontal hydro Fracking has come to be the most effective way of extracting the most NG/LNG from each well head.The current hefty property Leases/ w up to 20 % monthly profit sharing obviously reflect the amount progress this form of drilling has meant to drilling companies and landowners alike. There are literally thousands of wells being drilled safely as I speak and all you’ll hear about in the media are the ones that have any kind of negative issues attached to them. There are risks associated with this industry and you or I would be naive to think that everything associated with NG extraction will be squeeky clean. The call for tighter regulation and oversight is here. These drilling companies can and should not take their profession for granted as they have done in the past and cut corners. The DEP or DEC have enormous responsibilities to enhance the production of this resource for the good of this economy and country, but also to strictly regulate it, police it and sanction the offenders. I’m sorry that local landowners have bad blood with this Anschutz Company. A town meeting with the company heads are in order to quell fears and clear concerns. I’m sure this company will want to work with Landowners to achieve mutual goals. I wish you well and hope that resolution can be achieved.
Thank you. We need more respectful interaction between opposing views as both sides have very legitimate points and many people are not aligned strongly with either view. The tone of the gas drilling debate in NY mirrors the overall negative/personal debate in the US over just about any issue. When the economy is down and people are struggling, the tone gets nasty.
The media and antis are certainly focusing on the problems and insighting fear just as the pro energy lobby is minimizing or denying problems to advance their agenda. This is not unexpected so we should not overreact to it. I challenge people to resist succumbing to the emotion of the fight and really question what you believe to be truth or fact. We need to do this the right way in NY and not the fast way. PA was overwhelmed by the shale gas industry and have spent the last several years trying to catch up. I would rather miss the initial boom and do it right as there is an estimated 40 years of drilling and 30 year lifespan of a well. Oil companies don’t abandon unstable oil countries ruled by dicators and they won’t abandoned NY because of regulations and restricted areas. It’s messy right now and will be for awhile, but in the end we will have a more effective and safer program.
The Court was absolutely right to protect the rights of All residents from the risk to health, safety, property value and quality of life that Fracking exposes them to. The threats are Real and the “Accidents”, Pollution, and Illness’ associated with this Industry need to be Banned. As far as counter suits for the Lease money And “Possible profit on that investment”, That is BS plain and simple. These companies leased under false pretenses and deceptive promises that are routinely broken. They Deserve to be bankrupted and dismantled!
The big fat fallacy in your argument is that there IS a threat to health, safety, yada yada. There is not! If there were, it would not be successfully happening hundreds of thousands of times–again and again and again in other locations. We’ll check in with you to see if lawsuits for takings in oh, about 3 months from now and see what you think. Prepare to open your wallet to pay landowners for stripping away their Constitutional rights.