Shale Daily / NGI All News Access

Key Drilling Ban Cases Heating Up in New York Courts

Supporters and opponents of shale development in New York State will get their day in court on Thursday, when a state appellate court in Albany takes on two key cases that could ultimately decide how much power municipal governments may wield in regulating oil and natural gas activities.

Meanwhile, a lower court judge in Livingston County, NY, ruled against Lenape Resources Inc. in a lawsuit against The Town of Avon for enacting a drilling ban there.

According to Appellate Division Third Department records, a four-judge panel led by Presiding Justice Karen Peters will hear the Dryden and Middlefield cases back-to-back, beginning with a 30-minute hearing for Norse Energy Corp. USA v. Town of Dryden (No. 515227) at 9:30 a.m. Justices Elizabeth Garry, Edward Spain and Leslie Stein also serve on the panel.

"It's a good panel," said attorney Thomas West of The West Firm PLLC, which represents Norse in the Dryden case. He told NGI's Shale Daily on Wednesday, "We'll take any panel on this issue because we think it's pretty straightforward. We think they are intelligent judges who hopefully will see the merits of our position and set the record straight."

In both cases, the industry and their supporters assert that the two municipalities ran afoul of New York's Oil, Gas and Solution Mining Law when they enacted bans on oil and natural gas operations. The municipalities counter that the state's Mined Land Reclamation Law gives them the power to enact such bans.

"There's a clear fork in the road," West said. "The court has an opportunity to render an analysis based upon the Oil, Gas and Solution Mining Law alone, or fall into a trap. When they look at its language, at what it regulates -- including not only the 'how' but the 'where' of drilling -- [they will see] broad policies to prohibit waste and to protect the correlative rights of the landowners to produce oil and gas. Absolutely nothing like that exists in the Mined Land Reclamation Law."

Scott Kurkoski, an attorney with the Binghamton, NY, firm Levene Gouldin & Thompson LLP, is to represent the plaintiffs in the second case, Cooperstown Holstein Corp. v. Town of Middlefield (No. 515498). Kurkoski could not be reached for comment Wednesday.

West said he believes the appellate court may render a decision on both cases in six to eight weeks.

Anschutz Exploration Corp. (AEC) filed a lawsuit against Dryden in 2011, after the town passed an ordinance and a zoning requirement that prohibited all oil and natural gas development activities (see Shale Daily, Sept. 21, 2011). But a Tompkins County judge disagreed with AEC's argument that Dryden violated the Oil, Gas and Solution Mining Law and ruled against the company in February 2012 (see Shale Daily, Feb. 23, 2012). Norse Energy Corp. ASA replaced AEC as lead plaintiff in the Dryden case last fall (see Shale Daily, Oct. 5, 2012).

In the Middlefield case, dairy company Cooperstown Holstein Corp. filed a lawsuit against the town for a June 2011 zoning ordinance -- similar to Dryden's -- that bans oil and natural gas operations and some forms of heavy industry (see Shale Daily, Sept. 19, 2011). An Otsego County Supreme Court judge has ruled against the dairy (see Shale Daily, Feb. 29, 2012).

Twelve amicus briefs have been filed in both cases the Dryden and Middlefield cases.

Last week Acting Livingston County Supreme Court Judge Robert Wiggins cited the lower court rulings in the Dryden and Middlefield cases, and he used them as the basis to issue a ruling against Lenape. The company had sued Avon in December for enacting a local drilling ban, and and it has sued the New York Department of Environmental Conservation (DEC) for failing to rein in the town over the ban (see Shale Daily, Dec. 3, 2012).

"Three judges have now gone down the rabbit hole instead of analyzing the Oil, Gas and Solution Mining Law on its own," West said. "It remains to be seen whether the [appellate court] will fall into that trap, or give the law the analysis it deserves."

Attorney Michael Joy with the Pittsburgh office of the law firm Reed Smith LLP, who is lead counsel for Lenape, told NGI's Shale Daily that Wiggins' ruling was interesting "because for the first time in upholding any of the various moratoria and bans in New York, he articulated a sensible reason for the decision.

"That said, we don't agree with the decision. But the court took an extraordinary step: a trial court judge in New York State has essentially told the highest court in the state that its underlying rationale in the case, which many people are looking to for support, is flawed. The trial court called out the highest court in the state and said their decision was wrong, but nevertheless the judge said he was constrained to follow it."

Joy said he didn't anticipate that Lenape would appeal. "We appreciate what the court did. They provided the clarity that we asked for. We don't agree with the decision. It's not the decision we anticipated, but we now have certainty and understanding we didn't have before, and that enables the company to go about its business planning."

West also doubted Lenape would appeal. "They have been severely impacted by the moratorium [on high-volume hydraulic fracturing] in New York State," West said. "I don't know if they have the resources to take an appeal. These appeals are very expensive and time consuming. I think everybody's going to be looking to the [appellate court] to give us some guidance."

Joy said he didn't think the appellate court would be swayed by the Avon ruling. "Regardless of who wins or loses those cases, ultimately this issue may have to go to the Court of Appeals in New York."

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