2014 New York Hydraulic Fracturing Caselaw Update
By Seth Pullen
As we approach the end of 2014, it may be useful to reflect on the impact of several important
court cases decided in New York this year relating to oil and gas. While the decisions have
mainly been against the industry and landowners, other cases are now dealing with the
consequences of local laws, particularly in the tax area.
Mark S. Wallach, as Chapter 7 Trustee for Norse Energy Corp. USA v. Town of Dryden et al.
and Cooperstown Holstein Corporation v. Town of Middlefield (23 N.Y.3d 728). On June 30,
2014 the Court of Appeals held that towns may ban oil and gas production activities within town
boundaries by adoption of local zoning laws. This is based on an interpretation that the
supersession clause of the state Oil, Gas and Solution Mining Law (OGSML) does not preempt
municipal land use regulation powers. On October 16, 2014, the Court of Appeals denied a
motion for reargument of the case (2014 N.Y. LEXIS 2858).
The Court of Appeals rejected the argument put forth by the plaintiffs, and supported by IOGA,
that the plain language of the supersession clause preempts any local regulation or prohibition of
oil, gas or solution mining activities. Essentially, the Court of Appeals adopted the arguments of
the Towns of Dryden and Middlefield that prohibition of an activity is not “regulation” of that
activity. This argument relied an application of the Court of Appeals decision in Matter of Frew
Run Gravel Products v. Town of Carroll (71 N.Y.2d 126 [1987]), which interpreted language in
the state Mined Land Reclamation Law (MLRL) preempting local regulations, but specifically
allowed for stricter local zoning ordinances and mining laws. The Court treated the MLRL and
OGSML preemption provisions, as essentially equivalent, even though the Legislature had
amended the MHRL to reflect Frew and related decisions, while leaving the OGSML preemption
intact.
The inconsistency of holding that prohibition does not constitute regulation was pointed out in a
dissenting opinion by Judge Pigott, joined by Judge Smith. The dissent argued that the zoning
ordinances passed by the Towns of Dryden and Middlefield banned oil and gas activities within
the town, without specifying zones where oil and gas uses are permitted or prohibited, making
them regulations of oil, gas and solution mining activities, rather than simply land use
restrictions. Unfortunately, the majority opinion and not the dissent carries authority, so unless
the Legislature acts, municipalities now have the authority to ban oil and gas production
activities.
In a subsequent case, Lenape Resources, Inc. v. Town of Avon et al. (2014 N.Y. App. Div.
LEXIS 6712), the Fourth Department of the Appellate Division citing the Dryden and
Middlefield decision to note that municipal bans of hydraulic fracturing are allowed, but decided
the case on mootness grounds because the town had enacted a now-expired moratorium rather
than a permanent ban. As moratoria on hydraulic fracturing expire, producers and landowners
should be alert to potential new moratoria or bans.
Joint Landowners Coalition of New York, Inc. et al. v. Cuomo, et al. (unpublished, Supreme
Court for Albany County Index No. 843-2014). This Article 78 proceeding sought to force the
