Town Frack Ban Cases Heard in NY Supreme Court Appellate Division

court gavel Yesterday, what happened in an Albany, NY courtroom was very important for all New York landowners. Four judges from the New York State Court Appellate Division heard the appeal of one driller and one landowner against two New York towns—Dryden and Middlefield—that have voted to permanently ban fracking within their borders, exercising what they call “home rule” (see Important Developments in NY Fracking Ban Court Cases for background on the two cases). According to a 1981 state law, towns are specifically prohibited from regulating oil and gas activities. The two cases hinge on whether or not “to ban” is “to regulate.”

Lawyers for the towns argued that precedent allows them to determine land use in their borders—they’re not trying to say how drilling should be done, they’re saying whether it should be done, so that’s not regulating. Lawyers for Norse Energy (suing Dryden) and dairy farmer Jennifer Huntington (suing Middlefield) argued the ban violates state law and the land use case cited as precedent by the town’s lawyers (allowing towns to prohibit gravel mining) is vastly different from mining natural gas and oil.

How did it go? Whose arguments seemed to prevail? Depends on whom you ask…

Keeping Track of Who’s Who

For the comments below, it’s helpful to have a scorecard of who was arguing for whom. There were two cases heard yesterday, one after the other:

  • Norse Energy Corp USA v. Town of Dryden (No. 515227)
  • Cooperstown Holstein Corp. [Jennifer Huntington] v. Town of Middlefield (No. 515498)

The cases were argued before New York State Supreme Court, Appellate Division, Third Department. There’s one higher level of court left in New York: the Court of Appeals (see NY Judge Rules Town of Dryden can Ban Shale Gas Drilling for a handy chart of NY’s court system).

Tom West from The West Law Firm argued for Norse Energy (previously Anschutz Exploration, but Anschutz dropped out of the case). He was opposed by Deborah Goldberg of Earthjustice and Alan Knauf of Knauf Shaw, both arguing for the Town of Dryden.

Scott Kurkoski of Levene Gouldin & Thompson argued for Jennifer Huntinton/Cooperstown Holstein Corp. He was opposed by John Henry of Whiteman Osterman & Hanna, arguing for the Town of Middlefield.

The Third Department panel hearing both cases included Presiding Justice Karen Peters and Justices Edward Spain, Elizabeth Garry and Leslie Stein.

Let’s Argue

Here’s how Reuters reported the back and forth arguments:

During an hour of oral arguments before the Appellate Division, Third Department, Alan Knauf, who represents a group of residents in Dryden who support the ban, told the four-judge panel outright bans on drilling are not regulations of industry but an appropriate use of the towns’ zoning and land use authority.

"If the legislature wanted to pre-empt the clear tradition of local zoning ensured in the (state) constitution, they would have been very clear" in the oil and gas law, Knauf said.

Thomas West, the lawyer for Norse Energy, countered that the towns’ bans were pre-empted by the state Oil and Gas Law, which bars municipalities from adopting regulations on the oil and gas industry.

He said that upholding municipal bans could deter the natural gas industry from investing hundreds of millions of dollars in New York.

The oil and gas law says drilling "is so important to our energy policy that the (state) can pre-empt local laws if there is a greater common good for the state," West said.

The Third Department panel on Thursday focused largely on whether Frew Run Gravel v. Town of Caroll, a 1987 Court of Appeals decision in which the court upheld a municipal ban on mining, applied to gas drilling. That case involved the Mined Land Reclamation Law, which is distinct from the Oil and Gas Law.

Attorneys for the towns said New York’s mining laws and oil and gas laws are similar, so the Frew Run decision should control in the Dryden and Middlefield cases.

The plaintiffs’ attorneys argued that unlike mining, drilling requires large swaths of land that may span multiple towns, and said the language of the two laws varied significantly.(1)

Reporting from the AP:

At the heart of the cases is the interpretation of a state law passed in 1981 that says regulation of the oil and gas industry rests solely with the state Department of Environmental Conservation, which "supersedes" local laws and ordinances.

"Our argument is that the towns of Dryden and Middlefield are not trying to regulate the industry; they recognize that regulating the industry is a matter for the state," said Deborah Goldberg, an attorney for the environmental group Earthjustice. "But the town of Dryden is exercising its constitutionally protected local power to regulate land use through zoning."

Goldberg, representing Dryden, argued the state’s highest court, the Court of Appeals, had ruled that a law regulating the mining industry did not pre-empt local zoning rules, including a ban. Tom West, who represents Norse, argued that case doesn’t apply because state mining law is fundamentally different from its oil and gas statutes.

West said the oil and gas law is intended to prevent waste of the resource and protect the mineral rights of multiple landowners.

"When a municipality says you can’t drill here, you have the ultimate waste of the resource and destruction of the correlative rights of the landowners," West said.(2)

Reporting from Gannett:

Thomas West, an Albany-based attorney representing Norse, said allowing municipalities to ban drilling would create an unworkable situation for the gas industry, which is hoping to tap into the gas-rich Marcellus Shale stretching across the Southern Tier.

“You cannot justify investment in this state without regulatory certainty,” West told the panel of judges in a packed courtroom. “This municipal issue is very unpredictable.”

West and Huntington’s representative, Broome County-based attorney Scott Kurkoski, argued that a 1981 amendment to the state’s oil and gas law prohibits a town from regulating the gas industry, except for issues concerning local roads and taxes. The regulatory power falls to the state Department of Environmental Conservation, they argued.

But Alan Knauf, an attorney for the Dryden Resources Awareness Coalition, argued that a Court of Appeals decision regarding a state law that regulates sand and gravel mines showed that localities do have power when it comes to saying what can and can’t happen in their borders. The Supreme Court judges cited the case when they decided in favor of the towns last year.

“I don’t know of any policy in the state that is elevated to the point that everything else bows to it,” said Deborah Goldberg, managing attorney for environmental non-profit Earthjustice, which is representing Dryden in the case.

The 1981 amendment changed New York’s law to say it “shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industry.” But the towns and the plaintiffs argued over whether the law was intended to supersede local zoning laws, and whether they were considered “regulation” of the industry.

“If the Legislature had been clearer (in the amendment), we wouldn’t be here,” Presiding Justice Karen Peters said in court.

West, the Norse attorney, warned the appellate justices against falling into the “trap” of judging based on past decisions on sand and gravel, which are regulated under a separate portion of state law.

“The language of the two statutes are not identical,” West said. “They’re not even similar.”(3)

What Did Our Side Think?

Yes, yes, we know, news sites are not supposed to take “sides”. Bull. If you think Reuters, AP and the others don’t take sides, you’re “smoking something funny.” Besides, MDN is a news/blog site. We’ll keep it honest—we’ll report the bad and the good—but we are definitely on the pro- (but safe) side of the drilling debate. But then, you already know that!

So what did “our” attorneys think of how it went? For that, we turn to one of the best shale publications out there, NGI’s Shale Daily, who spoke to both attorneys following yesterday’s arguments:

Thomas West of The West Firm PLLC represents Norse Energy Corp. ASA in the Dryden case. He said the judges were extremely well prepared for the day’s hearings. "They seemed to understand all of the issues very well," West told NGI’s Shale Daily on Thursday. "They understood concepts like prevention of waste and protection of correlative rights, which are important to our piece of the puzzle.

"I think they understood the case very well. They pressed both sides very hard and therefore were not very telling in which way they’re leaning. So I think we just have to consider that fact that we did our best, they understand the issues, and now they have to do their job and make a decision."

Scott Kurkoski, an attorney with the Binghamton, NY, firm Levene Gouldin & Thompson LLP, represented dairy company Cooperstown Holstein Corp. (CHC) and its owner, Jennifer Huntington, in the Middlefield case.

"It went good," Kurkoski told NGI’s Shale Daily on Thursday. "You never really know until you get your decision, but I think we were happy being able to make all of the arguments that we wanted to make this morning, responding to the court’s questions."

"The court did question the total ban," Kurkoski said. "That’s always been an issue for us. We feel strongly that no court in the country has ever authorized a total zoning ban. And even though some states authorize some limited zoning, they never will allow a total zoning ban. And that’s what we’re doing here in Middlefield. They spent quite a bit of time on that issue, and you could see that the court was concerned about that."

Kurkoski said the defendants in the Middlefield case were relying on the state’s Mined Land Reclamation Law as the crux for their argument.

"They’re trying to use this mining case law as the precedent to decide this case the same way," Kurkoski said. "This morning we made the point very strongly that the laws are not the same. They have some similar language, but the language is different enough that it should control and give us a different result. Plus, the interests that we’re talking about are completely different."

Kurkoski added that at one point during the hearing, he made a pointed response to one of the judge’s questions.

"I said, ‘Judge, we’ve never had a sand and gravel crisis in this country, but we’ve had energy crises before. And it’s crucial for us to be able to produce energy in New York, to have a greater ultimate recovery of oil and gas, and protect Jennifer Huntington’s correlative rights, her rights to market and drill for her minerals.’"

Both attorneys…agreed that should the municipalities and their environmental allies lose, the cases would surely be appealed to the top court in the state, the Court of Appeals. "No question about that," Kurkoski said.

West added, "Certainly if we win, it will be appealed. If we lose, I don’t know. It all depends on whether or not there’s the sense whether we can even get it to the Court of Appeals. It should go to the Court of Appeals. We’ll just have to cross that bridge when we get to it."(4)

(1) Reuters (Mar 21, 2013) – N.Y. appeals court hears arguments in drilling ban cases

(2) AP/Bloomberg Businessweek (Mar 21, 2013) – NY court hears arguments on town fracking bans

(3) Binghamton (NY) Press & Sun-Bulletin (Mar 21, 2013) – Appeals heard on Dryden, Middlefield fracking bans

(4) NGI’s Shale Daily (Mar 22, 2013) – Pro-Shale Attorneys Say New York Appeals Hearings Went Well (get a special free trial to Shale Daily here, available only for MDN readers!)