Supreme Court Drills Down on Hydraulic Fracturing and Vacates Several Sections of the Oil and Gas Act
On September 28, 2016, the Pennsylvania Supreme Court decided yet another milestone decision involving the Commonwealth’s controversial Oil and Gas Act. Described by some as a message to the oil and gas industry, the Court’s decision has important ramifications for the industry as well as for municipalities seeking to address certain aspects of oil and gas operations within their borders. Striking down several sections of the Pennsylvania Oil and Gas Act, the Court’s decision is seen as a blow to several provisions challenged as granting preferential treatment to the industry.
The Pennsylvania Oil and Gas Act, known as Act 13, was first enacted in 1984 to regulate the Commonwealth’s oil and gas industry. Broadly speaking, the Act sought to promote the efficient development of Pennsylvania’s oil and gas resources while providing protection for its citizens’ health and safety. The Pennsylvania Legislature amended the Act in 1992, by limiting the power of the municipal governments to regulate oil and gas activities. Specifically, the amendments limited municipal power by stating that “[n]o ordinances or enactments adopted pursuant to the [either the Municipal Planning Code or the Flood Plain Management Act] 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.” In 2012, the Act was further amended to add language expressly preempting municipal governments from the field of Oil and Gas: “environmental acts are of Statewide concern and, to the extent that they regulate oil and gas operations, occupy the entire field of regulation, to the exclusion of all local ordinances. The Commonwealth by this section, preempts and supersedes the local regulation of oil and gas operations . . . .”
As hydraulic fracturing started to boom in Pennsylvania, so did public concern about the purportedly negative effects of the practice. Municipal governments and others then began to question Act 13’s preemptive mandate. The issue ultimately reached the Pennsylvania Supreme Court in 2013. In Robinson Township v. Commonwealth of Pennsylvania, the Court was faced with its first opportunity to examine whether Act 13 and its various amendments could withstand constitutional scrutiny. Citing to the Environmental Rights Amendment to the Pennsylvania Constitution, Pennsylvania’s highest court held that the State Legislature “transgressed its delegated police powers” by preempting local oil and gas regulations. As such, the Court struck down the Act’s preemptive language on the basis that it impermissibly infringed on Pennsylvania citizens’ constitutional rights to “clean air and pure water . . . .”
Before it for a second time, the Act presented the Court with four new issues to scrutinize:
- Whether the Public Utilities Commission (“PUC”) and Commonwealth Court were the proper venues of review for local oil and gas regulations
- Whether nondisclosure agreements accompanying the provision of trade secret information by operators, vendors, and service providers to healthcare professionals were proper
- Whether the Pennsylvania Constitution required oil and gas operators to provide notice to private citizens of oil and gas related spills; and
- Whether the Act’s grant of eminent domain powers to private corporations violated either the U.S. Constitution or Pennsylvania Constitution. The Supreme Court dealt blows to the Act on each issue.
First, the Court found that certain sections of the Act that granted the PUC , and sometimes the Commonwealth Court, the authority to review challenges to local oil and gas regulations were unconstitutional as a result of their connection to other provisions of the Act previously vacated by the Court. As a result of the Court’s decision, challenges to local oil and gas regulations by industry and private citizens must now be brought before the appropriate local governing body or the appropriate court of common pleas instead of the PUC and Commonwealth Court.
Second, the Court turned to sections of the Act that required oil and gas companies to provide trade secret information regarding the chemicals they used in the hydraulic fracturing process (i.e., fracking fluid). Specifically, the sections required companies to provide healthcare professionals with trade secret information in times of medical emergencies and when needed with the caveat that the healthcare professionals were required to verbally, or in writing, agree to confidentiality agreements. The Court found these sections violated the constitution by reason of their status as “special laws,” which provided a unique benefit to the oil and gas industry to the exclusion of all others.
Third, the Court reviewed a section of the act that required the Pennsylvania Department of Environmental Protection to notify public water facilities, but not private individuals, of oil and gas related spills that threatened their water supplies. Although the Court found that the section violated the constitution by reason of its status as a “special law,” the Court did not vacate the section. Rather, the Court opted to stay the section’s mandate for 180 days so as to give to provide the opportunity for a legislative remedy.
Fourth, the Court reviewed a section of the act that provided private corporations involved in the transportation, sale, or storage of gas with eminent domain powers for the purpose of underground gas storage. Ultimately, the Court held that the section violated the Fifth Amendment of the U.S. Constitution and Article I, Section 10 of the Pennsylvania Constitution because it allowed for the taking of private property for private purposes.
The court’s second review of the Pennsylvania Oil and Gas Act should be seen as a major victory for municipal governments who would seek to more closely control and monitor oil and gas operations. It strikes down several sections of the Act that limited municipal power and again affirms Pennsylvanians’ constitutional right to clean air and water. Arguably, the Court’s treatment of the Act’s provisions regarding the review of local oil and gas regulations will have the most significant impact on how municipalities interact with industry and private citizens regarding hydraulic fracturing. Now, instead of having to defend their regulation in front of the PUC or Commonwealth Court, municipalities will defend themselves in front of the more accessible local governing bodies or courts of common pleas.
In addition to the its impact on how challenges to regulations are reviewed, the Court’s decision also provides municipalities with the opportunity to strengthen their regulations with regard to the provision of information on potentially dangerous chemicals and notice of spills at oil and gas operations. With a careful eye toward bills that might be pursued by the State Legislature, municipalities should begin reviewing their regulations for consistency with the Court’s decision.
A proactive review of municipal ordinances to assess whether they will withstand challenges is an important step that impacted municipalities should strongly consider. If you need assistance with developing or reviewing your municipal ordinances relating to oil and gas regulation, please contact the attorneys at Siana Law.
Michael G. Crotty, Esquire, is a partner with Siana Law. He enjoys the experience of effectively and zealously representing municipal clients in the areas of municipal collections, administration and management, labor and employment, land use and zoning, regulatory compliance, risk management, ordinance drafting, and civil rights claims.