Drilling Down

Ruling Leaves Open Zoning Options for Oil and Gas

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YOUNGSTOWN, Ohio — While an Ohio Supreme Court ruling yesterday upholds the state’s right to regulate oil and gas development, it could also encourage some local control of the industry, says an attorney who heads his law firm’s energy division.

“The majority opinion does not close out the possibility of local zoning” used to regulate oil and gas development in the state, says Alan Wenger, chairman of the oil and gas law group at Harrington, Hoppe & Mitchell Ltd. “Companies cannot take much comfort in this decision.”

The case, Morrison v. Beck Energy Corp., centered around Beck Energy’s refusal to abide by five Munroe Falls municipal ordinances that compelled the company to obtain a conditional use “zoning certificate” before it could drill. Other ordinances were mandates such as additional filing fees, public hearings and a $2,000 bond specific to the oil and gas industry.

Beck argued that the Ohio Department of Natural Resources, not Munroe Falls, is the sole regulatory authority of oil and gas development throughout the state. While the Summit County Common Pleas Court ruled in favor of Munroe Falls and granted a permanent injunction, Beck won in the appellate courts.

The Ohio Supreme Court agreed, upholding Beck’s argument.

The Ohio Oil and Gas Association applauded the ruling in a statement issued Tuesday.

“We commend Ohio’s Supreme Court for its decision in Morrison V. Beck Energy today, which upholds state law concerning local government control over oil and gas activities,” Shawn Bennett, executive vice president of OOGA, said. “The court’s ruling affirmed that municipalities are prohibited from instituting rules and regulations that would discriminate against, unfairly impede or obstruct oil and gas activities that the state has permitted.”

“We strongly believe that oil and gas development is a matter of statewide interest and should be managed by professionals with the expertise to adequately regulate and oversee the industry,” Bennett said.

Nevertheless, Wenger points out to language in four of the seven opinions that is sympathetic to local zoning ordinances relative to drilling.

At issue, he says, were the five ordinances that required a new zoning certificate, filing fees and the $2,000 bond.

“Essentially, the ruling is that a municipality can’t act as a mini ODNR,” Wenger says. The last paragraph of the majority opinion states that Home Rule amendments do not allow for the “kind of double licensing at issue here. We make no judgment as to whether other ordinances could coexist with the General Assembly’s comprehensive regulatory scheme. Rather, our holding is limited to the five municipal ordinances at issue in this case.”

Justice Judith French wrote the majority opinion with Chief Justice Maureen O’Connor and Justice Sharon Kennedy concurring. Justice Terrance O’Donnell concurred in judgment only. Dissenting were Justices Judith Lanzinger, Paul Pfiefer and William O’Neill.

Wenger says that in reviewing the dissenting opinions and Justice O’Donnell’s opinion, the debate is still open when it comes to zoning regulations and oil and gas development within the state.

“The majority say that while the city’s requirements are pre-empted, general zoning and compatibility are not pre-empted by ODNR,” Wenger says. Four of the seven Justices also appear to accept precedents established in Colorado, New York, and Pennsylvania that allow local zoning to regulate oil and gas development.

O’Donnell, the apparent swing vote in this case, writes: “Whether a municipality has the authority to enact zoning ordinances that affect oil and gas wells within its authority is a question yet to be decided.”

Other dissenting opinions were more blunt. “Let’s be clear here,” O’Neill writes. “The Ohio General Assembly has created a zookeeper to feed the elephant in the living room. What the drilling industry has bought and paid for in campaign contributions they shall receive. Under this ruling, a drilling permit could be granted in the exquisite residential neighborhoods of Upper Arlington, Shaker Heights or the Village of Indian Hill – local zoning dating back to the 1920s be damned.”

Youngstown voters have four times rejected a proposed “community bill of rights” amendment to the city’s charter to limit oil and gas development and related activities in the city. Pursued by the citizens’ group FrackFree Mahoning Valley, the ballot issue went down to defeat twice last year, most recently the Nov. 4  general election, when the issue was defeated by its largest margin yet.

Had the charter amendment passed, businesses would have started to look elsewhere to invest to avoid “frivolous lawsuits” by environmentalists, Tom Humphries, president and CEO of the Youngstown Warren Regional Chamber, said following the most recent vote. “The wide margin of defeat tonight is a clear mandate that it is time to put this issue behind us so we can continue to attract investment and opportunity to Youngstown,” he remarked.

Published by The Business Journal, Youngstown, Ohio.