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Range Challenges Township's Marcellus Drilling Ban

In a challenge that could have repercussions in small towns across Pennsylvania's Marcellus Shale, Range Resources on Tuesday filed an appeal of South Fayette Township's ban on drilling in conservation areas and all residential zones, including suburban communities and rural farmland.

"They're banning the development of natural gas within the township, which is something that has been looked at many, many times in Pennsylvania," Range spokesman Matt Pitzarella told NGI's Shale Daily. "There's very clear law on that."

Commissioners in South Fayette, on Pittsburgh's southwestern edge, approved their Oil and Gas Ordinance in November (see Shale Daily, Nov. 22, 2010). The commission ordered that wells in the township be located at least 2,500 feet from schools and 1,000-1,500 feet from homes. As much as 80% of the 13,000-acre township was barred to drillers by the zoning revision.

South Fayette solicitor Jonathan Kamin told the Pittsburgh Post-Gazette this week that the ordinance allows drilling in "many zoning districts" throughout the township, though they may not be areas that Range would prefer.

But provisions of the ordinance "regulate and restrict the development of oil and natural gas in a manner and means that violate the legal rights of Range and others similarly situated and the mineral rights (i.e., oil and gas) owners," according to Range's 35-page appeal. According to Range, which owns about 4,000 acres of natural gas leasehold interests within the township, the ordinance is preempted by Pennsylvania state law, is a substantive due process violation, violates the state's Municipalities Planning Code, results in a regulatory taking and is an exclusionary zoning of oil and gas development.

"We believe that this has kind of been coming for some time, because there's quite a bit of uncertainty with local governments," Pitzarella said. "It's something that the governor's shale commission has discussed. The Association of Township Supervisors has even indicated a desire to have baseline standards or some degree of municipal uniformity. But at the same time this was something that we felt also needed to be addressed."

If the appeal before the township's Zoning Hearing Board doesn't resolve the issue, Range is prepared to take it to Pennsylvania's courts, he said.

Several of Pittsburgh's suburbs in the "South Hills" area, including Bethel Park, Upper St. Clair and McKeesport, have passed regulations similar to South Fayette's Oil and Gas Ordinance. Pennsylvania law prohibits localities from banning drilling outright, but they do have the ability to severely restrict natural gas operations through their zoning ordinances.

Other locations have attempted to work with companies to produce zoning systems that will allow some drilling while retaining some community control, according to Pitzarella. Last year Range worked with Cecil Township in Washington County, PA, to craft a zoning ordinance that allows that township to regulate sound and light levels and hours of operation, while requiring Range to train first responders, provide traffic controls and more -- without attempting to shut down drilling operations. South Fayetteville didn't give Range the same kind of cooperation, he said.

"The vast majority of the time, more than 99% of the time, we can work out these matters with local governments and reach compromise and come up with standards that are acceptable for everyone that's involved. But in this case there was really no budging...There are townships that we even agree to disagree with on certain issues, but in this case it is truly death by a thousand paper cuts. When you apply all of the standards that they have -- there's onerous setbacks and minimum acreage which you can place a drill pad on, and zoning overlays -- when you apply all of those things, there's absolutely nowhere that can be drilled in the township."

Range has also been involved in an ordinance dispute with Mt. Pleasant Township in western Pennsylvania (see Shale Daily, June 28). Under terms of that ordinance, a driller would need approval from the township's three-member board for all new natural gas wells, and supervisors could also impose conditions on a driller.

Range earlier this year announced that it was selling its Barnett Shale properties for $900 million, with the Marcellus to get the lion's share of the company's 2011 capital budget (see Shale Daily, March 2).

According to NGI's Shale Daily, Range currently holds approximately 1.05 million net acres in the Marcellus, placing only behind Chesapeake Energy, which holds approximately 1.75 million net acres. Rounding out the top five acreage holders in the play are Consol Energy with 750,000, Seneca Resources with 745,000 and Chevron with 714,000.

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