Preemption in Pennsylvania and the Power of Local Governments to Regulate Oil and Gas

The Marcellus Shale formation lies beneath approximately 60 percent of Pennsylvania’s total land mass, and the activities involved in developing the natural gas contained in it are creating thousands of new jobs and generating billions of dollars in revenue for state and local economies.  At the same time, however, residents of Pennsylvania’s municipalities have expressed concerns as to how Marcellus Shale development will impact their communities on a wide variety of issues, ranging from noise to road maintenance to the potential for groundwater contamination, among others. 

The regulatory framework facing the oil and gas industry is a particularly confusing one in light of the fragmented nature of local government in the Commonwealth, which includes 67 counties and 2,566 municipalities.  Allegheny County, for example, contains over 130 townships, boroughs, and cities—each with potential regulatory authority over well sites, pipelines and compressor stations.  The overlapping jurisdiction of state agencies, counties and municipalities creates a confusing regulatory thicket even for companies which have operated in the Commonwealth for decades.  Sorting through this is an even more daunting challenge for companies operating in Pennsylvania for the first time. 

Local municipalities seeking to regulate oil and gas production are limited by the legal doctrine of preemption, which dictates that municipalities cannot enact local ordinances that contradict state law.  Two recent Pennsylvania Supreme Court cases have to some extent clarified, but also left partially unanswered, the question of where this line is drawn.   Both cases addressed the extent to which the Pennsylvania Oil and Gas Act (the “Act”) preempts municipal regulation.  The Act establishes a regulatory regime through which the Commonwealth’s Department of Environmental Protection administers an oil and gas well permitting process.  Section 602 of the Act expressly preempts and supersedes local government authority over the “features” of the wells regulated by the Act. 

In the first case, Huntley & Huntley v. Borough Council of Oakmont, the Court upheld a local zoning ordinance that restricted the location of gas wells to particular zoning districts on the basis that such district designations are considered as lying within a municipality’s traditional zoning authority, and are not an attempt to regulate the features of the wells.  On the other hand, in Range Resources-Appalachia, LLC v. Salem Township, the Court invalidated a local subdivision and land development ordinance that imposed extensive requirements similar to the Act’s, such as permitting, groundwater protection, and plugging.   

Together these cases illustrate several key principles with regard to municipal regulatory efforts:  (1) they can restrict the location of oil and gas wells and associated facilities to particular zoning districts; (2) they cannot adopt a comprehensive regulatory scheme that parallels state law; and (3) they cannot single out the oil and gas industry for regulatory treatment different from that applied to other uses.   On the other hand, the Huntley & Huntley and Range Resources decisions are equally significant for what they did not say about the Act’s preemption of municipal regulation.  For instance, it remains unclear whether a municipality can impose well setbacks from property lines or habitable structures different from those imposed under the Act.  It is also unclear how and to what extent municipalities can permissibly regulate noise.  In light of the questions not answered by the Supreme Court, municipalities should be cognizant of the preemption issue as they evaluate possible measures to regulate oil and gas activities in their jurisdictions.  Oil and gas companies likewise need to recognize that drilling and related activities in Pennsylvania potentially can be subject to multiple layers of government regulation.

For more information regarding these issues, please contact Blaine Lucas at (412) 394-5657 or blucas@bccz.com.