LEGAL ISSUES INVOLVED WITH THE DRILLING FOR NATURAL

GAS AND THE SITING OF ELECTRIC GENERATING

FACILITIES IN THE STATE OF NYOCTOBER 18, 2012

Wendy A. Marsh, Esq.Hancock Estabrook, LLP

100 Madison Street, 1500 AXA Tower ISyracuse, NY 13202

Phone: (315) 565-4500wmarsh@hancocklaw.com

Program Overview

New York State regulation of high volume hydraulic fracturing in New York State

Municipal regulation of drilling activities

Landowners’ involvement in the drilling process

Regulation of other electric generating facilities under Article X of the NYS Public Service Law

Thoughts on the future

“Hydrofracking”

What is it?

State Regulation

State Environmental Quality Review Act– Environmental Impact Statement – Public Comment– Findings

SEQRA History– Generic Environmental Impact Statement (GEIS) on the

Oil, Gas and Solution Mining Regulatory Program• 1992

Potential Environmental Impacts Associated with Hydrofracking

Chemicals in the process water

Noise

Traffic

Well casing problems

Etc.

SGEIS

First Supplemental Draft Generic Environmental Impact Statement (SDGEIS)– September 2009

Revised draft SDGEIS– September 2011

Public Comment Period ended on January 11, 2012

Next Step in the Process

NYSDEC Regulations

Oil, Gas, and Solution Mining Law– Application requirements– Permit Conditions– Technical requirements

Proposed regulations– Permitting process– Surface activities on state-owned lands– SPDES Permits

NYSDEC Regulations

Proposed rules released on September 28, 2011

Public comment ended on January 11, 2012

Recent requirement to study health impacts

Likely need to begin the regulatory process over

State Regulatory Process Summary

NYSDEC to complete SEQRA

NYSDEC to issue final regulations for hydrofracking activities

Litigation over SEQRA

Litigation over regulations

Local Authority

Can a municipality regulate hydrofracking?

Some Things Can’t Be Completely Regulated Locally

Adult Entertainment

Sand and Gravel Mining

Wind Turbines

WHY CAN’T YOU REGULATE LOCALLY?

Some authority is preempted

Constitutional Law

Statutory Law

New York courts have examined this limitation

Matter of Frew Run Gravel Prods. v.

Town of Carroll

71 N.Y.2d 126 (1987)

ARTICLE 23 OF THE ECL – MINERAL RESOURCES Title 27: Mined Land Reclamation Law

Frew Run Legal Issue

MLRL states:

“For the purposes stated herein, this title shall supersede all other state and local laws relating to the extractive mining industry; provided, however, that nothing in this title shall be constructed to prevent any local government from enacting local zoning ordinances or other local laws which impose stricter mined land reclamation standards or requirements than those found herein.”

ECL 23-2703[2]

Frew Run Holding

The Mined Land Reclamation Law does not preempt municipalities

from banning sand and gravel mining

ARTICLE 23 OF THE ECL – MINERAL RESOURCESTitles 1 – 21: Oil, Gas & Solution Mining

Anschutz Exploration Corporation v. Town of Dryden

35 Misc.3d 450(2012)

Dryden Facts

August 2, 2011 Zoning Ordinance Amended

Ban all activities related to the exploration for, and production or storage of, natural gas and petroleum

Anschutz owned gas leases covering approximately 22,200 acres in the Town and had invested approximately $5.1 million in activities

20

Legal Issue

Is the ability to prohibit activities associated with the exploration for, and production or storage of natural gas and

petroleum

PREEMPTED BY THE OIL, GAS AND SOLUTION MINING LAW

(OGSML)?

Dryden Legal Issue

OGSML states:

“The provisions of this article shall supercede all local laws and ordinances related to the regulation of the oil, gas and solution mining industries; but shall not supercede local government jurisdiction over local roads or the rights of local government under the real property tax law”

ECL 23-0303[2]

Dryden Holding

Judge Rumsey reviewed the Frew Run Court of Appeals decision and determined:

– The supercedure clauses are “nearly identical”

– Neither contains a clear expression of legislative intent to preempt local control over land use and zoning

– The ban was upheld for the same reasons as set forth in Frew Run

Cooperstown Holstein Corporation v. Town of

Middlefield

35 Misc.3d 767 (2012)

Middlefield Facts

Town of Middlefield Board amended its zoning law in June 2011 to:

Prohibit “heavy industry . . . and all oil, gas or solution mining and drilling”, which, according to the court, effectively banned oil and gas drilling with the Town.

Plaintiff had two oil and gas leases

Middlefield Legal Issue

Same as Dryden:

Does OGSML prohibit local municipalities from enacting legislation which may impact upon the oil, gas and solution drilling or mining industries other than that pertaining to local roads and the municipalities’ rights under the real property law?

Middlefield Decision

Detailed review of the legislative history and intent of OGSML, to hold that it “finds no support within the legislative history leading up to and including the 1981 amendment of the ECL as it relates to the supersession clause which would support plaintiff’s position . . . .”

“[T]he state’s interests may be harmonized with the home rule of local municipalities in their determination of where oil, gas and solution drilling or mining may occur. The sate maintains control over the “how” of such procedures while the municipalities maintain control over the “where” of such exploration.”

Is The Ban a Taking?

This legal issue has not yet been raised or litigated

Appeals

Both decisions at the Supreme Court level

Both appealed to the Third Department

No decisions yet from the Third Department

City of Binghamton

Elvin Jeffrey, Vestal Gas Coalition, Arena Hotel Corporation, Nelson Holdings Ltd., and Binghamton-Conklin Gas Coalition

Steering Committee v. Matthew T. Ryan, in his official Capacity as Mayor, City of Binghamton, and The City

Council, City of Binghamton

Broome County Supreme CourtIndex No. CA2012-001254

RJI No: 2012-0695-MOctober 2, 2012

Binghamton Facts

City Council enacted “Prohibition of Gas and Petroleum Exploration and Extraction Activities, Underground Storage of Natural Gas, and Disposal of Natural Gas or Petroleum Extraction, Exploration, and Production Waste” in December 2011

Binghamton Legal Issue

Was the prohibition merely a moratorium?

Court held that Respondent City failed to provide any evidentiary proof that would provide a justification, based upon the health and safety of the community, for the banning of gas exploration, storage and extraction.”

The law was held to be a moratorium, and the City must satisfy the well established legal requirements that show a dire emergency; that the moratorium is reasonably calculated to alleviate a crises; and that they are taking steps to solve the problem.

Binghamton Decision

Local law overturned because it failed to meet the criteria for a properly enacted moratorium

The Judge did agree with the holdings in the previous cases that the OGSML did not preempt the local law

Landowner Regulation

Land Contracts / Lease Agreements

Compulsory Integration in New York State

Litigation

Courts decide on SEQRA Process and NYSDEC regulations

Courts decide the preemption arguments

Economic Reality

Wind Energy Regulation :What can be learned?

Law of the past:

SEQRA Review at local level

Site Plan / Special Use Permit issued at local level

License / Host Community Agreement at local level

Potential Wind Environmental Impacts

Visual Impacts Shadow Flicker Noise Impacts Wetlands Birds and Bats Habitat Agricultural Impacts Traffic Property value Archeological Etc.

Complete Local Control of the Process

ARTICLE X OF THE PUBLIC SERVICE LAW Siting of Major Electrical Generating Facilities

TAKES AWAY THE LOCAL CONTROL

ARTICLE X OF THE PUBLIC SERVICE LAW

Applies to Siting of Major Electrical Generating Facilities– 25 MW or Greater

NYS Board on Electric Generation Siting and the Environment reviews projects and grants or denies “Certificate of Environmental Compatibility and Public Need”

ARTICLE X OF THE PUBLIC SERVICE LAWSITING BOARD

5 Permanent Members are the Chair of the Department of Public Service, Commissioners of DEC, DOH, and Economic Development, and the Chair of NYSERDA

2 ad hoc public members from municipality where facility is proposed

ARTICLE X OF THE PUBLIC SERVICE LAW

SUPERSESSION PROVISION Siting Board may grant a Certificate in

contravention of local law if it determines that the law is “unreasonably burdensome in view of the existing technology or the needs of or costs to taxpayers”

Stop Shopping - No other state or local permits required for certified facility

ARTICLE X OF THE PUBLIC SERVICE LAW PRELIMINARY SCOPING STATEMENT

Need to identify the local laws and regulations to be preempted by the Siting Board

Notice to the residents in the municipality where facility is proposed 3 days before filing of the scoping document

ARTICLE 10 OF THE PUBLIC SERVICE LAWPUBLIC PARTICIPATION

- “To facilitate the pre-application and application processes and enable citizens to participate in decisions that affect their health and safety and the environment, the department and such person shall provide opportunities for citizen involvement.”

- “Such opportunities shall encourage consultation with the public early in the pre-application and application processes.”

- “The primary goals of the citizen participation process shall be to facilitate communication between the applicant and interested or affected persons. The process shall foster the active involvement of the interested or affected persons.”

ARTICLE 10 OF THE PUBLIC SERVICE LAWINTERVENOR ACCOUNT

Preliminary scoping statement shall be accompanied by a fee in an amount equal to $350 for each thousand kilowatts . . . but no more than $200,000

to defray pre-application expenses incurred by municipal and local parties for expert witness, consultant, administrative and legal fees

Not for litigation

ARTICLE X OF THE PUBLIC SERVICE LAWAPPLICATION

Fee in an amount equal to $1,000 for each 1000 kW of capacity, not to exceed $400,000 for intervenor fund

SEQRA

Type II Action

ARTICLE 10 OF THE PUBLIC SERVICE LAWDECISIONS

The Siting Board shall make the final decision upon the record

The Siting Board shall not grant a CECPN without making explicit findings:

- Probable environmental impacts - Beneficial addition or substitution of capacity- Project is in public interest- Adverse environmental effects will be minimized or

avoided to the maximum extent practicable- EJ impacts avoided, offset, or minimized

What Does This Mean?

Municipalities will continue to bear the burden of the visual impacts, but not have the financial benefits afforded in the Host Community Agreements

Decisions about siting are no longer local decisions that are ultimately made by the majority of the voters in a municipality

The Future?

Q & A

Wendy A. Marsh, Esq.Hancock Estabrook, LLP

100 Madison StreetSyracuse, New York 13202

(315) 565-4500 wmarsh@hancocklaw.com

www.hancocklaw.com