Does Ohio's Oil and Gas Statute Preempt Local Ordinances?

Document Type

Article

Publication Date

3-11-2013

Keywords

shale, preemption, oil and gas, local regulation, energy

Abstract

Municipalities across Ohio are paying attention to the shale oil and gas boom. Some want to encourage it, but others want to control it. Many want to exercise their rights of self-governance to enact ordinances to protect the health and welfare of their citizens and their communities. Some are enacting drilling bans, or permit requirements. They are passing resolutions opposing what they see as the Ohio legislature’s special treatment of the oil and gas industry.

Ohio is known for strong Constitutional support of its abundant local governments. The Ohio Constitution, in Article XVIII, Section 3, says: “Municipalities shall have authority to exercise all powers of local self-government and to adopt and enforce within their limits such local police, sanitary and other similar regulations, as are not in conflict with general laws.” These words are known as the Home Rule provision. So, when an Ohio municipality wants to control land use decisions within its borders by setting spacing or set-back requirements for shale oil and gas wells, it sounds, at first blush, like that action should be allowed under the Home Rule provision. After all, Ohio values local control. But Ohio also values economic development and the application of law is sometimes values driven. So, local control? Not so much in the case of oil and gas production.

The Ohio legislature has worked hard to establish tight state control over shale oil and gas operations. Ohio Rev. Code section 1509.02 grants the Ohio Department of Natural Resources (Ohio DNR) ‘sole and exclusive authority’ to regulate oil and gas operations. It uses words like “sole and exclusive authority,” “matter of general statewide interest,” “uniform statewide regulation,” and “comprehensive plan” to indicate the legislature’s effort to enact a general law that, even under Home Rule, would preempt local regulation. The legislature was specific and inclusive in the activities it included within Ohio DNR’s authority. The statute includes “all aspects of the locating, drilling, well stimulation, completing, and operating of oil and gas wells within this state, including site construction and restoration, permitting related to those activities, and the disposal of wastes.” In fact, in repeated efforts to ensure that the statute would be interpreted as a general law, thus preempting local control, the legislature has expanded this list several times.

But is the statute a general law just because the legislature wants it to be one? Not necessarily. Here’s the Ohio Supreme Court’s latest wisdom on what counts as a general law. In 2002, in Canton v. State, the Court announced a four-part test for what makes a statute a “general law.” To be a ‘general law,’ with which local ordinances may not conflict, a statute must (1) be part of a statewide and comprehensive legislative enactment, (2) apply to all parts of the state alike and operate uniformly throughout the state, (3) set forth police, sanitary, or similar regulations, rather than purport only to grant or limit legislative power of a municipal corporation to set forth police, sanitary, or similar regulations, and (4) prescribe a rule of conduct upon citizens generally.

So, is Ohio Rev. Code sec. 1509.02, a general law? Although the Ohio Supreme Court has not yet answered that question, Ohio’s 9th Circuit Court of Appeals issued an opinion on the matter on February 6, 2013, in State ex rel. Morrison v. Beck Energy Corp. Beck Energy had obtained drilling permits, as required, from the Ohio DNR, for drilling project in Monroe Falls, Ohio. It did not, however, request or receive permits that were required by city ordinances regarding drilling, zoning, and construction. When Beck began drilling, the City of Monroe Falls obtained an injunction from the Summit County Court of Common Pleas preventing Beck from continuing operations within its borders until it complied with the city ordinances. Although the city argued that its ordinances should stand on Home Rule grounds, the court overturned the injunction, holding that some of the local ordinances were void because they conflicted with a general law, Ohio Rev. Code section 1509.02. The ordinances overturned included 1) a mandatory drilling permit; 2) a conditional-zoning-certificate requirement; 3) a zoning-certificate requirement; 4) a mandatory public hearing prior to drilling; and 5) a mandatory $2,000 performance bond. The court held that the Ohio statute gave control over these areas to the Ohio DNR and that these additional city requirements operated in conflict with the state law, a general law, thereby rendering them void. The court did find that some of the City’s ordinances were not in conflict with the general law, and those survived.

But Beck was decided by an Ohio appellate court. When trying to determine how courts might rule on important matters, one often looks for insight from neighboring states. Ohio’s neighbors, Pennsylvania and New York, have recently faced similar questions concerning the intersection of state oil and gas laws and local efforts to control activities within municipal boundaries. In Pennsylvania, the legislature enacted Act 13, an attempt to revamp its oil and gas laws, and preempt local regulation. Like the Ohio legislature, Pennsylvania’s legislature was very clear about its intent to preempt local regulation of oil and gas operations. But, in July 2012, in Robinson Township v. Commonwealth of Pennsylvania, the Commonwealth Court in Pennsylvania held that “the provisions of Act 13 that would override local zoning and environmental laws are "unconstitutional, null, and void." Those provisions violated the state’s Home Rule provision. So, despite strong support from Pennsylvania’s Governor, and the best efforts of the Pennsylvania legislature to vest the state with complete control of oil and gas decision-making, the Pennsylvania Constitution preserved the locality’s ability to regulate. This case was immediately appealed to the Supreme Court of Pennsylvania, but although it was argued on October 17, 2012, no decision has yet emerged.

Like Ohio and Pennsylvania, New York has a Home Rule provision and a statute stating that New York state rules supersede local ordinances regulating oil and gas. But New York municipalities have been enacting local ordinances anyway, some of them including outright drilling bans. Several New York courts have upheld the local drilling ordinances. But, in part because New York’s Governor issued a hydraulic fracturing moratorium, by Executive Order, on December 11, 2010, the local ordinances have yet to be addressed in New York’s highest court.

Our neighbor states’ lower and appellate courts so far have supported their states’ home rule provisions, valuing local control over the states’ efforts to encourage oil and gas production via unified state control. As evidenced by the recent Beck Energy case, Ohio has been different. Like Pennsylvania and New York, the Ohio statute seeks to preempt local regulation. Unlike the courts in Pennsylvania and New York, though, Ohio’s appellate court preferred to support the state’s efforts to regulate all aspects of oil and gas operations rather than to preserve local regulatory authority under Home Rule. Like our neighboring jurisdictions, though, the state’s highest court, the Supreme Court of Ohio, has not heard yet a case on this matter. Ohio’s Supreme Court has been protective of local authority. It often upholds local ordinances on Home Rule grounds. But oil and gas production may be different. The state’s interest in promoting economic development through state control of oil and gas operations may encourage the court to see things differently.

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Working papers series, Cleveland-Marshall Legal Studies Paper No. 13-254

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