NORSE ENERGY v. DRYDEN et al.: Important Decision Affecting Hydrofracking in New York State Argued Before the State’s Highest Court

June 10, 2014

The highest court in New York State recently heard oral argument in Norse Energy Corporation USA v. Town of Dryden, et al., an important case involving zoning laws and hydrofracking. The lower court, the Third Department, upheld local zoning ordinances that effectively ban hydrofracking in the town of Dryden. A decision is expected this summer.

Factual Background

In August 2011, the Town of Dryden amended its zoning ordinances to ban all activities related to the exploration for, and the production or storage of, natural gas and petroleum. The zoning amendment, made against a backdrop of growing local concern about the proposed use of high volume hydraulic fracturing to recover natural gas from underground shale deposits, essentially prevented hydrofracking activities within Town limits.

Anschutz Exploration Corporation challenged the zoning amendment. Anschutz is a driller and developer of oil and gas wells that owned leases covering over 22,000 acres of land within Dryden’s borders. It sued Dryden in an effort to have the amendment declared invalid. During the pendency of the litigation, Anschutz assigned its interest in certain oil and gas leases to Norse Energy Corporation. Norse argued that the zoning amendment is preempted by the Oil, Gas and Solution Mining Law (ECL 23-23-0301 et seq. (OGSML)). Essentially, the OGSML regulates

Legal Issues

Dryden and the other Defendants moved for summary judgment declaring that the OGSML does not preempt the zoning ordinance amendment. Norse opposed the motion, and moved for summary judgment in its favor.

In a Decision and Order dated May 2, 2013, the Third Department held that the OGSML does not preempt, either expressly or impliedly, a municipality’s power to enact a local zoning ordinance “banning all activities related to the exploration for, and the production or storage of, natural gas and petroleum within its borders.” The Third Department began its analysis with the statute itself, noting that the OGSML contains an express preemption provision. The provision provides that it shall supersede all local laws or ordinances “relating to the regulation of the oil, gas and solution mining industries … [emphasis added].” Regulation, the court wrote, can be defined as “authoritative rules dealing with details or procedure.” The court found that the OGSML does not preempt Dryden’s amended zoning ordinance because nowhere does it seek to regulate the details or procedure of the oil, gas and solution mining industries. In other words, the zoning law has nothing to do with the technical operational activities of the oil, gas and mining industries. Rather, it falls within the area of traditional land uses that are the subject of a local municipality’s zoning authority. The court did acknowledge, however, the inevitable “incidental effect” that the zoning ordinance will have upon these industries.

Future Impact

There are other aspects to Dryden that could shift the hydrofracking debate in a new direction. The amended zoning ordinance, as written, bans traditional vertical drilling and other oil or gas exploration activities, some of which may have been ongoing for years within the Town’s borders before the amendment was passed. The Court of Appeals may choose to address the overbreadth issue, and potentially strike the amended ordinance on that ground alone.

There is also a constitutional element. Norse Energy owns lease rights covering thousands of acres of land. To the extent that the amended ordinance severely restricts or interferes with those lease rights, it may constitute a “taking” under the Fifth Amendment, such that it violates due process rights under the Fourteenth amendment, or other applicable law. Norse Energy would be entitled to just compensation.

No one can predict with certainty whether or how the Court of Appeals will address these issues. But one thing is clear. The scope of the impending decision will be of utmost importance to industry stakeholders, local businesses, landowner coalitions, residents, and interest groups on all sides of the hydrofracking debate as they navigate murky legal waters.