In a case with a significant potential impact in several states, an Ohio appeals court on Tuesday ruled that a municipality in Summit County exceeded its authority when it ordered a Utica Shale driller to stop operations, dealing a blow to local ordinances, or "home rule" laws.
The Ninth Appellate District Court, a three-judge panel, ruled unanimously that state laws regulating the oil and natural gas industry preempt local ordinances and ordered a lower court to reverse its May 2011 ruling that favored the City of Munroe Falls over Beck Energy Corp. Earlier that year, the city ordered Beck to stop work on a natural gas well, alleging that the company had violated several local ordinances.
"We...conclude the trial court abused its discretion by enjoining its drilling operations until Beck Energy had complied with all the ordinances cited by the [city] in its complaint," Judge Mary Jane Trapp wrote in a 23-page opinion. "Beck Energy, however, must apply for pertinent permits in compliance with the ordinance governing rights-of-way and excavations if its activity impacts in any manner the city's streets."
Judges Timothy Cannon and Thomas Wright concurred.
It was unclear if the city planned to appeal the decision. "We haven't made that decision yet," Thomas Saxer, an attorney with the Akron, OH-based firm Amer Cunningham Co. LPA, told NGI's Shale Daily on Thursday. "I haven't had a chance to look at the ruling yet, so a comment now would be premature."
Tom Stewart, executive vice president of the Ohio Oil and Gas Association (OOGA), doesn't think the city should appeal. "They would be foolish to do so," he told NGI's Shale Daily. "Once again, the court has affirmed the concept that local government has neither the expertise nor the resources to adequately regulate this industry."
John Solomon, an attorney with the Akron firm Vorys, Sater, Seymour & Pease LLP, which represented Beck, could not be reached for comment. A spokesperson for Beck was also unavailable.
The judges disagreed with Munroe Falls' and the lower court's assertion that the state only has the authority to permit wells and to decide their location and spacing. They also said the city had no authority to require a public hearing before the issuance of a drilling permit, and they said the city's zoning ordinances interfered with state permits.
Several grassroots organizations are lobbying the state government to grant local governments home rule powers, which they could then use to regulate oil and gas activities (see Shale Daily, Sept. 5, 2012). OOGA and other industry groups are opposed to the idea.
Home rule is also being debated in New York and Pennsylvania. Last year in New York, the State Assembly considered bill A3245, which would empower localities to regulate oil and gas drilling and mining activities (see Shale Daily, Jan 10, 2012). Meanwhile, Pennsylvania's omnibus Marcellus Shale law, Act 13, gave local governments the power to impose a 15-year impact fee on unconventional gas wells in exchange for adopting state zoning rules (see Shale Daily, Feb. 15, 2012).