Court Gives Property Owners a Win in Oil/Gas

30 Sep

WIN FOR PENNSYLVANIA RESIDENTS – PA SUPREME COURT LANDMARK DECISION OPENS THE DOOR FOR CHALLENGES AGAINST THE OIL/GAS INDUSTRYBy M. Bobbie Kalia, Esq., September 29, 2016

The Pennsylvania Supreme Court yesterday struck down portions of the State’s oil and gas law known as Act 13 in a landmark 4-2 ruling.  This key decision comes pursuant to review of the Commonwealth Court’s 2012 decision in Robinson Township v. Commonwealth, which it largely affirmed.  Three key areas were addressed by the PA Supreme Court yesterday, marking the first significant ruling favoring environmentalists and landowners in a series of Court rulings that have primarily favored the oil and gas industry thus far.

The Supreme Court addressed three areas of the revised state law, Act 13, passed by the legislature in 2012 and signed into law by former Governor Tom Corbett.

  1. Most importantly, the State’s Supreme Court landmark ruling yesterday struck down as unconstitutional the oil and gas industries’ right to uniform zoning restrictions across the state. A lawsuit was initially filed in 2012 challenging the law.  In 2014 by the lower court blocked the provision that granted the State’s utility commission power to review the zoning restrictions and impose penalties against municipalities that attempted to enforce harsher restrictions than those of the State.  In its ruling yesterday, the Supreme Court addressed the power of the Public Utility Commission (PUC) to interfere with right of local government to place harsher zoning restrictions on oil and gas companies.  For the first time, the Court used the Environment Rights Amendment, Article I, Section 27 of the Constitution to support its decision, recognizing the importance of each Pennsylvania resident’s “environmental rights” and their need for protection of these important rights to resources such as clean air and clean water.  The court further concluded that such a role includes the ability to limit oil and gas development as needed to protect these important public natural resources and that it is the obligation of the government to “refrain from unduly infringing upon or violating the right.”  The PUC will no longer have a right to decide whether Act 13 violates local ordinances.  This determination will be left to individual municipalities, which the Court referred to as “trustees of an environmental public trust.”  A major hit to the oil and gas industry, because, until now, the oil and gas industry has used the PUC as blanket authority granting the industry its rights to shield itself from public scrutiny of the industries’ actions.  Again, a long awaited victory for environmentalists and landowners whose properties are impacted by the pipeline, as it marks the first time a Pennsylvania State Court has addressed the PUC’s role or right to interfere with local communities.
  1. The second major impact from the decision, denied the use of eminent domain by oil and gas companies for gas storage facilities, primarily set up underground, stating that although there may be some minimal benefit to the public by these facilities, the benefit is primarily to the oil and gas company. This ruling is significant because it paves the way for Courts to finally address the issue of the validity of the industries right to use eminent domain for oil and gas purposes based upon the idea that it benefits the public.  A hotly debated issue that has been argued by environmentalists and landowners not only since the oil and gas industry came to Pennsylvania, but throughout the country.
  1. Finally, the Court examined the industries’ incomplete disclosure procedures with regards to what is known as the use of the “medical gag rule”. The Court ruled that now oil and gas companies must provide complete disclosure of all chemicals used to produce oil or gas to health care providers; a complete list which could previously only be obtained after the requesting medical provider signed a nondisclosure agreement.  Act 13 requires an oil or gas company release a list of chemicals it uses in the process of producing oil or gas on a website that can be accessed only by medical providers and physicians.  This enables the medical professional to properly treat against exposure or take precautions as needed.  Until the Court’s ruling, oil and gas companies’ disclosure of the chemicals it uses has been grossly incomplete, stating that a full list could only be disclosed to medical providers or physicians if they would sign a nondisclosure agreement for protection of company trade secrets.  The Court ruled that to allow this restriction only used by the oil and gas industry would be unconstitutional and full disclosure is now required.

So what does this decision mean to a homeowner being approached by a pipeline company or facing eminent domain?  The Supreme Court’s decision sets forth a much needed and long awaited victory in the battle against the oil and gas industry in what is known as the “Marcellus Shale Gas Rush.”  It certainly opens a doorway to fight the company threatening to take a landowner’s property for those that are willing to spend the time, money and face the potential risks, for the benefit of a win against the oil and gas industry in the Courts.  However, it is important for a landowner to take into consideration that it is a long, costly fight and the Court’s decision, although unprecedented in its nature, does not ensure a guaranteed win.  Prior to vesting in the decision, a landowner must consider his or her individual resources, whether their family or business will survive such a commitment, what is the ultimate outcome the landowner is looking for and whether the fight is for principal or personal reasons.  Each individual’s case against an oil or gas company is usually different in one way or another and these individual circumstances may plan an important role in the possibility of a successful argument against the company.

If you stand on principal, then fight is the only answer.  There are many organizations working to stop the oil and gas industry from turning Pennsylvania into as a State filled with what the pipeline refers to as “spaghetti cities” due to the multitude of pipelines running through one area; sometimes 4 pipelines deep in an easement space.  Working with an organization can aid a landowner in getting fully informed on pending cases, discussions with State Senators and Representatives and other helpful information when taking on the industry.

If principal is not your main, then it is highly advised that the landowner determine those protections and issues that are of individual concern and consider working with an attorney to ensure those protections and issues are addressed in their individual Permanent Easements.  Many times, an attorney will be able to negotiate all the landowner’s concerns into the easement agreement and increase the compensation guaranteed to the landowner without immediate out of pocket costs incurred to the landowner.   It is important to note that once the compensation has been spent, the protections within the easement agreement will ensure the landowner’s rights are protected in situations such as environmental spills.

Regardless of how Pennsylvania residents choose to approach their issues with the oil and gas industry, one thing is for certain, the Supreme Court’s decision creates an important opening in the law those fighting the oil and gas industry have been long waiting for, making it clear that the war between parties has only just begun.

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