Tuesday, January 22, 2008

Local Governments Pre-empted by Oil and Gas Act

The Commonwealth Court of Pennsylvania has issued two decisions that reject local municpalities' attempts to regulate oil and gas extraction. In Huntley & Huntley, Inc. v. Borough Council of Oakmont, 929 A.2d 1252, the Court ruled that a municipality could not regulate the location of a gas well through the denial of a conditional use permit and in Great Lakes Energy Partners v. Salem Township, 931 A.2d 101 the township's ordinance attempting to regulate surface and land development associated with oil and gas drilling was invalidated.

In Huntley, the Commonwealth Court reasoned that the Oil and Gas Act, 58 P.S. Sec.601.101 et seq. pre-empts the municipality's attempt to regulate the natural gas drilling. A provision in the Oil and Gas Act provided that "all local ordinances and enactments purporting to regulate oil and gas well operations... are hereby superseded...[and] no ordinances...shall contain provisions which impose conditions, requirements, or limitations on the same features of oil and gas well operations regulated by this act or that accomplish the same purposes as set forth in this act." The Court stated that this section of the law clearly provides that municipalities may not impose conditions, requirements or limitations on the same features of oil and gas operations as those that are regulated by the act. Since the issue in Huntley was the location of the location of the well and since Section 205 of the Oil and Gas Act specifically addresses the placement and location of wells, the municipal ordinance addressed a feature already in the Act. Thus, the ordinance was pre-empted.

In the other case, Great Lakes Energy Parnters, a group of oil and gas companies filed a complaint for declaratory judgment and an injunction arguing that the township's ordinance was pre-empted under the Oil and Gas Act. In that case the ordinance regulated surface and land development associated with oil and gas drilling operations. The Commonwealth Court upheld the trial court's decision that the ordinance contravened provisions in the Oil and Gas Act by attempting to regulate the same aspects of those operations.

The impact of these cases is still unclear. Both of these municipalities have sought an appeal to the Pennsylvania Supreme Court. However, there is a growing judicial trend to find that local regulations that go beyond items of local concern and attempt to regulate the same activity as state law, will be susceptible to invalidation.

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