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Latest Act 13 Ruling Seen Having Few Implications For PA Oil/Gas Industry Operations

A decision from the Pennsylvania Supreme Court on Wednesday that again struck down parts of the state's oil and gas law, known as Act 13, was applauded by environmental advocates, while the energy industry and others met it with indifference, saying the opinion won't have much effect on daily operations.

Struck down as unconstitutional are provisions included in the 2012 law that prevented doctors from sharing information about chemical drilling additives with their patients; a requirement that regulators only notify public water authorities instead of private water well owners in the event of a hazardous spill, and eminent domain privileges for natural gas storage operators.

The high court deemed the provisions "special law" that benefited the industry instead of public interest, validating a long-time charge by the plaintiffs’ attorneys and environmental advocates. The Justices also reaffirmed a lower court ruling that denied the state Public Utility Commission's (PUC) ability to withhold impact fees from communities if local ordinances didn't comply with state drilling laws, ruling it unconstitutional.

"I think a lot of what the court struck was just legislative portions of the law that benefit the industry over citizens," said John Smith of Smith Butz LLC, who represented some of the townships that challenged Act 13 in 2012. "This is taking more away from the state and industry and giving it back to local governments. All these things weren't necessarily desired by the industry when the law was written."

Seven townships, a doctor and others challenged the law’s constitutionality four years ago. A year later, in Robinson Township et al v. Commonwealth of Pennsylvania, the state Supreme Court struck down crucial provisions in a landmark ruling that returned to municipalities their right to change or enforce local zoning laws (see Shale DailyDec. 20, 2013Dec. 27, 2013). The court remanded parts of that case to the state Commonwealth Court, which ruled in favor of the industry in 2014 on storage eminent domain, spill reporting and the medical gag order (see Shale DailyJuly 17, 2014). The plaintiffs appealed to the high court and won Wednesday.

While Wednesday's ruling could give industry opponents more firepower, it is insignificant for the industry's daily operations, said Michael Krancer, an energy attorney at Blank Rome LLP, who served as secretary of the Department of Environmental Protection (DEP) when Act 13 was passed.

"I really don't think these four points made here mean anything. It's not a big deal in the grand scheme of things," Krancer said. "There's a lot of rhetoric in this opinion that the opponents will use...I think this is the Supreme Court going into an academic exercise here."

Krancer said the Act 13 provision that provided eminent domain to gas storage operators first became law with the Oil and Gas Act of 1984. "The Supreme Court has portrayed this as some special deal in 2012. It's ridiculous, it's been there since 1984."

PUC spokesperson Nils Hagen-Frederiksen said the PUC is reviewing the court's decision but added that the commission has yet to issue orders denying impact fees based on a review of local zoning ordinances. DEP spokesperson Neil Shader also said the agency is reviewing the opinion but didn’t say how it might be affected. Smith said operators conduct pre-drilling water testing that would make it easy for the agency to know what water supplies might be affected in the event of a spill or leak. Krancer added that the DEP has usually notified both public and private water users regardless of the law.

Smith added that in striking the public water notification, that part of the law has been stayed for six months to give the state legislature time to rewrite it. Whether lawmakers view that as a "directive or request" from the court "only time will tell," Smith said. Krancer added that he believed the court's decision to strike down the medical gag provision removed vendors' obligations to share information altogether, rather than having to share it under a confidentiality agreement as the law was originally written.

"I'm not sure that's a win for anybody, but if it is, it's a little strange."

The Marcellus Shale Coalition had nothing to say about which aspects of the ruling might affect the industry more than others.

"We're disappointed in aspects of the court's ruling, which will make investing and growing jobs in the commonwealth more, not less, difficult without realizing any environmental or public safety benefits," MSC President David Spigelmyer said in a statement.

The environmental advocacy organization PennFuture applauded the court's decision and called it a "win for the rights of citizens, public health and safety."

The 2013 ruling, however, hinged largely on a reading of Article I, Section 27 in the state's constitution, which provides for people's right to clean air, pure water and natural scenery. Drilling opponents have used that aspect of the case to challenge local drilling permits and even executive actions in recent years (see Shale DailyJan. 22, 2015Dec. 1, 2014). The validity of the amendment and how it can be used against oil and gas development is set to be decided in another case. But Krancer said Wednesday's ruling completely ignored the amendment, saying the opinion was a "lot of inside baseball on constitutional law" rather than something that could have a serious impact on the industry.

Smith said Wednesday's decision brings the Act 13 challenge to an end with a win for local governments and communities across the state.

"The legislature ignored all these constitutional rights of citizens," he said of Act 13. "I've never seen a ruling, that in such a vast fashion, knocked down so many unconstitutional aspects. The court had no trouble striking these down and calling out the industry and the legislature for running roughshod over everybody's rights."

Krancer said Act 13 was a bipartisan effort that updated a nearly 30 year-old law at the time. While Krancer agreed with Smith in saying the Robinson Township case is over, he said aspects of Act 13, its application and unrelated cases that involve the 2013 landmark ruling, will continue to be litigated for years.

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