On October 25, 2012, Senior Judge Keith B. Quigley of the Commonwealth Court of Pennsylvania issued a terse Order1 against the Pennsylvania Public Utility Commission (PUC), ordering it to cease and desist from acting on any requests for review of local ordinances under Act 13 of 2012.2

Act 13, adopted in February of 2012, replaced the previous Pennsylvania Oil and Gas Act with comprehensive provisions that not only strengthened the environmental regulation of oil and gas operations, but also established impact fees to be paid by owners or operators of natural gas wells drilled for gas production from unconventional formations.3

The Act also restricts the scope of permissible local zoning ordinances under Section 3304 of the Act by specifically preventing municipalities from excluding certain oil or gas operations in any municipal zoning districts. It is this aspect of the Act that was challenged in the Robinson Township case and which resulted in a July 26, 2012 ruling by the Commonwealth Court declaring Section 3304 of the Act, “unconstitutional, null and void.” It specifically enjoined enforcement of its provisions and “the remaining provisions of Chapter 33 that enforce 58 Pa. C.S. §3304.” The Commonwealth Court’s Opinion is now on appeal to the Pennsylvania Supreme Court.

Section 3304 of the Act prohibited municipalities from excluding oil and gas activities in all zoning districts so that, with certain safeguards, oil and gas exploration, production, processing and transmission could not be totally excluded in any zoning district, even in residential districts.

The October 25 Order was issued in response to the Robinson Township Plaintiffs’ application to permanently enjoin the enforcement by the PUC of all provisions of Act 13 that limited the scope of local ordinances. After the July 26 decision, the PUC had concluded that the injunction rescinded only its authority to rule on ordinances challenged under Section 3304 and that it retained the power and duty to review ordinances under other provisions of the law, as well as under the provisions of the Municipalities Planning Code. This PUC position was explained in an October 18, 2012 Opinion and Order regarding a zoning ordinance of South Fayette Township.4 In that Opinion, the PUC construed the July 26 Commonwealth Court decision as affecting only Section 3304 and the other provisions of the Act to the extent that they specifically targeted enforcement of Section 3304.

In striking down Section 3304 in the July 26 decision, the Commonwealth Court had also held that Sections 3301-3303 remained in full force and effect. These sections, among other things, prohibit all municipal regulation of oil and gas activities that are otherwise regulated by the Commonwealth under Section 3302. In addition, Section 3303 provides that the Commonwealth “preempts and supersedes the local regulation of oil and gas operations regulated by environmental acts.” [58 P.S. §3303]

Because the PUC was acting under the authority of Section 3305, which gives it the power to review ordinances which violate the Act, or which violate the Pennsylvania Municipality Planning Code, and because the South Fayette Township matter concerned enforcing Sections 3302 and 3303, it reasoned in its October 18 Opinion and Order that Commonwealth Court’s July 26 decision did not apply.

Commonwealth Court, however, in its October 25 Order, rejected this argument, citing the language of its July 26 Order enjoining not only Section 3304, but also stating “the remaining provisions of Chapter 33 that enforce …§3304 are similarly enjoined.” In construing this prohibition, the October 25 Order stated:

Section 3305 is a provision enforcing Section 3304 as it grants the PUC authority to review proposed local ordinances at the request of municipalities and to issue orders after review of local ordinances at the request of aggrieved parties. The language of the Court’s July 26, 2012 Order does not distinguish between the basis for the PUC review (e.g., whether an aggrieved party alleges the local ordinance violates the MPC as opposed to Chapter 32); it enjoins any Section enforcing Section 3304. Section 3305 is a vehicle by which Section 3304 is enforced.

The result of this October 25 Order is the rescission of the expedited review process that Act 13 established at Section 3305. This section requires a quick PUC decision on an ordinance with a right of appeal from that decision directly to Commonwealth Court.5 The general statutory preemption of local ordinances set forth in Section 3302, superseding “all local ordinances purporting to regulate oil and gas operations regulated by Chapter 32,” clearly remains in effect. However, unless the recent Commonwealth Court’s October 25 decision is reversed by the Pennsylvania Supreme Court, the remedy to challenge an ordinance is to proceed under the more cumbersome land use appeal process established in the Pennsylvania Municipalities Planning Code. This process requires a hearing and decision at the local level by either a zoning hearing board or the governing body of the municipality. An appeal from that level lies to the county court and, from there, ultimately to Commonwealth Court. This process can easily take a year or more before an appeal reaches the Commonwealth Court level.

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1 Robinson Twp., et al. v. Pa. PUC, et al., No. 284 MD 2012
2 See 58 P.S. §3305. This section authorizes PUC review of local ordinances alleged to be in violation of the Act, giving it authority to declare an offending municipality ineligible to receive any funds collected under Chapter 23 of the Act, which provides for assessment of impact fees against natural gas operations.
3 “Unconventional” formations are defined by the Act as those below the Elk Sandstone formation, where hydraulic fracturing or similar procedures are necessary to produce gas at economic flow rates or volumes. Most Marcellus and Utica shales are unconventional formations under this definition.
4 Docket No. M-2012-2311408
5 §3305 requires a decision by the PUC within 120 days after request for review is filed. If an appeal is filed with Commonwealth Court, it is a "de novo” proceeding, which allows the court to consider evidence which had not been presented to the PUC.