On December 19, the Pennsylvania Supreme Court ruled parts of the Marcellus Shale drilling law, established under Act 13 of 2012, a statute amending the Pennsylvania Oil and Gas Act, to be unconstitutional. One of the more controversial parts of the Act 13 legislation was a provision that would allow the state to mandate the municipal zoning requirements relative to oil and gas drilling activities in Pennsylvania.
This provision sought to shift the authority to control property zoning regulations relative to oil and gas development from the local municipalities to the state. Act 13 set out to establish uniform statewide land use rules. The intent of these rules was to provide a single standard that oil and gas producers could rely upon to plan for future oil and gas drilling investments in the state. As a consequence of the December 19th ruling, oil and gas producers must now deal with zoning regulations on a municipality by municipality basis.
Chief Justice Ronald Castille wrote in his majority decision that “the protection of environmental and esthetic interests is an aspect of Pennsylvanians’ quality of life and a key part of the local government’s role.” He also stated that although the state’s regulatory powers are broad, they are “limited by constitutional demands, including the Environmental Rights Amendment.”
While this part of Act 13 was being litigated, the existing zoning laws have been controlled by the local municipalities. In the short run, this decision should not have a significant impact on oil and gas drilling activity. Some in the industry believe that without the zoning requirement imposed by Act 13, the impact fee that is charged on a well by well basis could be challenged as unconstitutional. However, the current ruling did not address that aspect of the law. Senate President Pro Tempore Joe Scarnati, R-Jefferson, and House Speaker Sam Smith, R-Jefferson, issued a joint statement saying they were "stunned by a ruling which will so harshly impact the economic welfare of Pennsylvanians." They also criticized the opinion written by Chief Justice Castille for relying on "inaccurate anecdotes and unproven science."
This ruling may also impact the value of land owners’ mineral rights. It remains to be seen how development in a number of municipalities will move forward now that this provision of Act 13 has been overturned. If the pace of oil and gas development declines in the municipalities that have challenged these zoning ordinances, the landowners’ mineral right values could significantly decline, as well. . It could also impact existing permits for wells that have not been drilled. Will the local municipalities now challenge the validity of these existing permits? This ruling will make it critical for municipalities and oil and gas development companies as well as midstream companies to work together to responsibly develop the Marcellus and Utica shale gas reserves that reside in their communities.
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