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ALBANY, N.Y.--When the New York state environmental conservation commissioner ordered a public health review of hydraulic fracturing last September, he said he hoped the move would avoid protracted litigation and put the state in “the strongest possible legal position” against potential lawsuits.
Now, some five months later, the state is not much further along in its regulation of the natural gas drilling practice, and the likelihood of litigation is all but certain, according to legal experts interviewed by BNA.
Landowners are planning to sue the state, regardless of the final outcome of state regulatory actions, claiming that their rights to natural gas drilling on their land are being taken away by the state. Environmental advocates are likely to sue if the state permits fracking without a new rulemaking process.
For example, a group called the Joint Landowners Coalition of New York is actively soliciting plaintiffs and has engaged a central New York law firm, Levene, Gouldin, and Thompson, to handle inquiries. The coalition is pursuing four different types of claims against the state, all based on so-called takings claims involving mineral and property rights.
Separately, Thomas S. West, a leading attorney for the oil and gas industry, told BNA that his firm is considering litigation and has been reaching out to clients and others whose mineral rights have been negatively affected by the state's actions.
West, who is the founder and managing partner of The West Firm, said litigation could cost the state “hundreds of millions of dollars.”
Kate Sinding, a senior attorney at the Natural Resources Defense Council, told BNA that “no matter what happens, you're looking at a litigation mess of some sort or another.”
The state's proposed fracking regulation expired Feb. 27, causing continued uncertainty over the future of the natural gas drilling process. The Department of Environmental Conservation is currently awaiting the results of a public health review that is being conducted by New York State Commissioner of Health Nirav Shah (40 DER A-24, 2/28/13).
Under the state's dual-track approach, DEC was proceeding with a rulemaking and an environmental impact statement known as a Supplemental Generic Environmental Impact Statement (SGEIS).
Joseph Martens, the DEC commissioner, has said he will not approve a final environmental impact statement for fracking until Shah's public health review is complete and that fracking regulations will not be finalized until a final environmental impact statement is complete.
“If it is determined that high-volume hydraulic fracturing could move forward in New York state, it could move forward after the final SGEIS and findings statement are released,” Emily DeSantis, a spokeswoman for DEC, told BNA in an email.
“The activity would be regulated by the permit conditions set forth in the final SGEIS. Any rulemaking would re-enforce those permit conditions, and the rulemaking process could take place after the SGEIS is finalized.”
If the state moves forward with issuing permits under the SGEIS without approving final regulations, it is likely that environmental groups will sue the state for not properly following the State Administrative Procedure Act, according to Sinding.
“As a matter of policy and politics, it's highly unlikely that they [the state] will decide to do that,” said Sinding.
But Susan Millington Campbell, head of the environmental group at the New York-based firm Hughes, Hubbard, and Reed, disagreed. Campbell, who represents oil and gas companies, as well as companies in other industries, told BNA “there's absolutely no necessity to have the regulations in place before they start issuing the permits.”
“There are plenty of activities that are permitted and/or licensed in this state with conditions,” she said. “And the conditions are specified in the permit or the license.”
Campbell predicted that fracking will be allowed in New York because of the difficult economic conditions facing the upstate New York region and the political pressure Gov. Andrew M. Cuomo (D) faces.
“My own view is fracking is going to be allowed in New York,” she said. “It's not a question of whether, it's a question of when.”
Unshackle Upstate, a business group focused on the upstate economy, has been urging the state to allow fracking. In a statement, Brian Sampson, executive director of the group, said “it's time for New York State to join the natural gas revolution.”
“Just over the border in Pennsylvania and to our west in Ohio and North Dakota, jobs are being created, municipalities are collecting record revenues, and communities are thriving,” he said. “Meanwhile, counties across the upstate region are struggling with high unemployment rates and unacceptable poverty. New York State must follow the lead of our neighbors to the south and allow the development of this tremendous resource.”
The group that has been the most transparent in its intention to sue the state is the Joint Landowners Coalition of New York, a Binghamton, N.Y., group representing landowners in the central part of the state, which sits above the Marcellus Shale formation.
The coalition sent a letter to supporters Feb. 8, seeking four different plaintiffs for potential lawsuits against the state--property owners who purchased oil, gas, or mineral rights prior to 2008; landowners under lease with an oil and gas company that has applied for a drilling permit; landowners who own oil, gas, or minerals and have had a gas well drilled on their property; and owners of vacant land purchased prior to 2008.
“The lawsuit against the state will focus on claims where the failure to grant HVHF [high-volume hydraulic fracturing] permits has deprived landowners of all economically viable uses of their real property or interfered with reasonable investment-backed expectations,” Dan Fitzsimmons, president of the coalition, said in a letter to supporters.
“While we would like to include a large number of plaintiffs in the action, the economic reality is that numerous plaintiffs would make the action too costly to prosecute. Mineral appraisals will be required for each property in the action. Accordingly, we plan to proceed with a limited number of plaintiffs to give ourselves the best opportunity to establish legal precedent in NY.”
Another area of litigation is already well under way. The New York State Supreme Court Appellate Division, Third Department, is scheduled to hear two cases March 21 on appeal from state trial courts.
In one case, a state Supreme Court in Otsego County upheld a 2011 zoning ordinance in Middlefield, N.Y., that banned fracking and all oil, gas, or solution mining and drilling within the town. The court rejected arguments by the plaintiff, a landowner in the town, who claimed the state Oil, Gas, and Solution Mining Law preempts local government bans on fracking (Cooperstown Holstein Corp. v. Middlefield, N.Y. Sup. Ct., No. 011-0930, 2/24/12).
In a second similar case, a state Supreme Court in Tompkins County, N.Y., upheld a zoning ordinance that banned fracking in Dryden, N.Y., ruling that the ordinance is not preempted by state law. The court ruled that the state mining law does not preempt local government regulation of land use (Anschutz Exploration Corp. v Dryden, N.Y. Sup. Ct., No. 2011-0902, 2/21/12).
“Those shouldn't have an implication on the broader question of the statewide program,” Sinding said. “We are optimistic that those cases will be upheld.”
The state has been anticipating the possibility of litigation since at least September 2012, when Joseph Martens, the DEC commissioner, asked for a public health review.
“I want to ensure that the Department has the most legally defensible review so that when the Department issues its final determination on this matter, protracted litigation is avoided, whatever the outcome,” Martens said in a statement at the time.
“The review will also ensure the strongest possible legal position for the Department given the near certainty of litigation, whether the Department permits hydrofracking or not. I believe this action addresses any legitimate request for additional due diligence and study as well as ensuring DEC's ultimate decision on hydraulic fracturing is beyond reproach, either as a matter of law or as policy.”
More information on New York's hydraulic fracturing rulemaking is available at http://www.dec.ny.gov/regulations/77353.html.
The letter sent by the Joint Landowners Coalition of New York is available at http://bit.ly/12prH9v.
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