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Pennsylvania Ruling on Marcellus Expected Soon

Attorneys involved with a legal challenge to portions of Act 13, Pennsylvania's omnibus Marcellus Shale law, say a decision by the Commonwealth Court could come within a month and will have far-reaching consequences regardless of which way the court rules.

Seven municipalities and others argue that the law -- specifically Chapter 33, which pertains to local ordinances relating to oil and gas operations -- is unconstitutional. A seven-member panel of judges heard oral arguments on June 6. Act 13, which Gov. Tom Corbett signed into law in February, gave shale-rich counties in the state the ability to impose a 15-year impact fee on unconventional gas wells and made upgrades to environmental regulations (see NGI, Feb. 20). And although industry supporters doubt this will happen, the lawsuit poses a big question: What happens to Act 13 if Chapter 33 is ruled unconstitutional?

"From the industry's standpoint, it would be terrible, quite frankly," Lou D'Amico, president of the Pennsylvania Independent Oil and Gas Association (PIOGA), told NGI. "One of the reasons we were so supportive of Act 13 is because it gave us some hope to eliminate some of these multiple efforts by various counties and municipalities to have different ordinances than what the state has. It's one thing to meet the requirements of the Commonwealth of Pennsylvania. But meeting the requirements of the 2,500-plus municipalities would be a nightmare for anybody that's operating in multiple areas."

PIOGA General Counsel Kevin Moody told NGI that state law allows for portions of every statute to be severable, with two exceptions: the court finds that the valid provisions of the statute are so essentially and inseparably connected with, and so dependent upon, the void provision or application, that it cannot be presumed the General Assembly would have enacted the remaining valid provisions without the void one; or the court finds that the remaining valid provisions, standing alone, are incomplete and are incapable of being executed in accordance with legislative intent.

"I think it's probably unlikely that the whole statute could continue because the preemption of local regulations and uniform statewide rules are part and parcel of the whole impact fee compromise," Moody said Friday. "If the sections fall, that would make the parts that depend on the fee provisions fall. It could be a domino effect that could end up invalidating the whole Act."

John Smith, the lead attorney for the plaintiffs with the Canonsburg, PA-based firm Smith Butz LLC, doesn't see it that way. "I don't believe it would fall apart," Smith told NGI. "Act 13 is very broad and large. We've only asked the court to invalidate, from a constitutional standpoint, a handful of provisions, namely Chapter 33. The other chapters -- the impact fee and things like that, the environmental safeguards -- we've not asked the court to weigh in on. We've just challenged how they put together their zoning provisions."

Smith predicted that regardless of the Commonwealth Court's ruling, the losing side is sure to appeal to the Pennsylvania Supreme Court. And once the legal challenges are exhausted, "if they ultimately find that the section is unconstitutional, then that section would not be applied under the law. As to what the legislature will do, I'm not sure. The court has the final say."

But industry supporters doubt the courts will ultimately side with the plaintiffs. "Frankly, I don't see how the court ultimately can rule in favor of the municipalities," D'Amico said. "They're blowing a lot of smoke here about their powers being undermined by the commonwealth, but any powers they have are at the discretion of the commonwealth. So anything the commonwealth changes, I think ultimately the courts are going to uphold."

Moody concurred. "We are very surprised that this has gone on this long," he said. "We certainly hope that the Commonwealth Court will do the right thing and issue its decision pretty soon." He added that there is another reason to be optimistic. Last Thursday a three-judge panel of Commonwealth Court judges denied a petition by a municipality to invalidate the state's agricultural code (Commonwealth et al v. Packer Township et al., No. 432-MD-2009).

"In that case, the municipalities said they have sovereignty, they have the right to regulate and to have whatever ordinances they want," Moody said. "Their argument is basically the same as their argument in the Act 13 litigation; that was their template. And the Commonwealth Court has rebuffed that argument twice, so I don't know how they can come to a different conclusion in the Act 13 litigation."

As for when the court is expected to make a decision, Moody said the Commonwealth Court typically makes a ruling within 90 days of oral arguments. But since this case is being expedited, "we would expect this to be much less, 60 days or less. It could be anytime now."

Meanwhile, Smith said the plaintiffs are garnering more support from other municipalities, but there was a potential divide among them because some were upset over the creation of a drilling moratorium in Montgomery and Bucks counties (see NGI, July 9). "There's been a little bit of an outrage because apparently they want to take the time to study and figure out what's going on, and some of the legislators on this side [of the state] are asking 'where was our study?' There is no stopping. We're happy for Bucks and Montgomery. It's just a matter that the rest of the counties want to be treated equally and fairly."

The plaintiffs in the case include five municipalities in the Pittsburgh area -- Cecil, Mount Pleasant, Peters and Robinson townships in Washington County, and South Fayette Township in Allegheny County -- Nockamixon Township and Yardley Borough in Bucks County, the Delaware Riverkeeper Network, a few township officials and a doctor from Monroeville, PA (see NGI, April 2). The defendants include the state, the Pennsylvania Department of Environmental Protection (DEP), DEP Secretary Michael Krancer, the state Public Utility Commission and Attorney General Linda Kelly.

In April Commonwealth Court Judge Keith Quigley granted a 120-day injunction on portions of Act 13 on the grounds that the plaintiffs needed more time to prepare their legal challenge and to amend local ordinances (see NGI, April 16). Smith said the state had appealed Quigley's injunction to the Pennsylvania Supreme Court and was trying to have it overturned.

According to court documents, seven parties have been designated as amicus curiae in the case, meaning they are welcome to advise the court on its decision. Those parties are the Pennsylvania Independent Oil and Gas Association, the Marcellus Shale Coalition, Chesapeake Appalachia LLC, MarkWest Liberty Midstream & Resources LLC, Penneco Oil Co. Inc., the state House Democratic Caucus and the Conservation Voters of Pennsylvania (Robinson Township et al. v. Commonwealth et al., No. 284-MD-2012).

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