June 26, 2012

The Commonwealth Hears Voices on Act 13

Earlier this month, the Legal Director and two legal interns from CCJ made the trek to Harrisburg to hear the latest battle for the future of gas drilling in Pennsylvania. Not only would we be present to what the judges said was an unusually well-attended hearing, but we’d witness the ways in which the debate is sometimes set as being between those who know best, and those who just shouldn’t be standing up and speaking out. At times I found myself infuriated by the statements of those defending the Commonwealth’s willingness to trade short-term gains in gas revenues and jobs, for the long terms effects of giving an entire industry the keys to our resources, no questions asked. I was similarly taken though by the questions and comments of several of the justices, who may have revealed their hands on the issue as being confounded by the state’s willingness to take such a foolish action.

On June 6, at the Judicial Center in Harrisburg, an en banc panel of seven Commonwealth Court judges spent over an hour questioning lawyers on both sides of the debate regarding the legality of the state’s new law amending provisions on natural gas drilling in the Oil and Gas Act, known commonly as Act 13. The judges were trying to determine if the new law overreaches the state’s authority by compelling municipalities across the state to either amend or create zoning regulations that allow facilities, such as wells and pipelines, to be built at the discretion of the industry without concern for local residential health issues. The decision concerned both a motion for summary judgment for the respondents, in which case the act would stand, and a request by the petitioners for further injunction against the enforcement of the zoning provisions. Petitioners are those who bring a grievance before a court for remedy through a petition and respondents are those who respond in court to allegations or motions made in the petition.

Act 13 was passed in February 2012 and created new requirements for municipal zoning when regulating natural gas drilling activities. The new rules would standardize gas drilling zoning requirements across the state, including in areas where it’s currently prohibited. The law places a penalty, ineligibility to receive fees assessed on the local wells, upon any municipality that fails to update zoning regulations to comply with the Act. However, most counties in Pennsylvania would not be compliant with these regulations because it makes little sense to allow for pollution emitting facilities to be built in close proximity to where their citizens live. The zoning provision was scheduled to take effect in August, but a prior Commonwealth Court judgment granted a 120-day injunction on the effective date, until further decisions could take place or municipalities could properly address any discrepancies in their zoning regulations. This injunction, said Danial Santo of the American Institute of Certified Planners at a municipal event on pipeline development in Canonsburg, was enough of a solution to allow for municipalities to react by December, but problems exist beyond timing. For a state already dealing with a budget crisis forcing localities to tighten their belts, compelling every single municipality to stop their projects and re-write their code to comply is both costly and time-consuming. Act 13, if allowed to take effect in April, would likely have ended with most PA municipalities empty-handed, while their natural gas was taken out from under them. Now that sufficient time built in to its implementation, municipalities still face the difficulties surrounding how it will affect their day to day lives as gas facilities encroach further in to their lives.

The Hearing

On the morning of the hearing, the courtroom bustled with full benches and standing-room-only patrons before the first hearing, which would be about the Act 13 amendments. The hearing began with a comment by President Judge Dan Pellegrini about the level of interest in the hearing, drawing a chuckle from the crowd of attorneys in attendance. This would be the first chance for lawyers representing the municipalities and environmentalists to argue against limitations on municipalities’ power as repugnant to the Pennsylvania constitution. The petitioner’s brief, which is submitted to the judges before these arguments so the judges can prepare questions, also argued that allowing industry in to residential areas would infringe upon the rights and safety of local residents.

The main arguments concerning the legality of Act 13, centered on the law’s constitutionality, and whether the compliance provision can be classified a regulatory taking. In more brief arguments, the parties also addressed whether Act 13 could be considered a “special law” favoring natural gas interests in Pennsylvania. The legal team for the petitioners consisted of Susan Kraham, Jordan Yeager, Jonathan Kamin, and John Smith. The legal team for the state consisted of Matt Haverstick of the Pennsylvania Utilities Commission and the Department of Environmental Protection, Howard Hopkirk of the Office of the Attorney General.

Walter Bunt represented various gas companies including MarkWest and Penneco as an amici, legal Latin for someone not a party to the case, who offers information to assist the court in its decision. Mr. Bunt raised the question of whether municipalities can have standing, especially in cases where there is no injury-in-fact. Standing refers to the capacity to bring suit in court against another party. State laws typically define standing as requiring that the party bringing the suit has sustained an injury or harm, and the harm can be addressed through some type of remedy. Bunt argued that because the state created the local governments, the local governments are not separate from the legislature and thus are not able to bring a suit against themselves. Bunt also attempted to thwart the takings argument by stating that the compliance provision created a penalty for non-compliance but was entirely voluntary. Throughout Mr. Bunt’s statements the justices seemed to bristle at his comments, and for good reason. Not only did he belittle all of the local interests in one grand and pointless metaphor comparing municipalities to his own children’s powerlessness, but also he butted heads with any justice that dared speak of a counter-argument to his prepared statements.

Bunt’s main focus throughout the argument was that even if municipalities had any power at all, which he said they do not; the Act doesn’t force anyone to do anything. At one point Judge Pellegrini stopped Bunt to ask, “Is anyone in Pennsylvania already compliant with Act 13?” To which he could only follow with silence and a brief “I have no idea.” This embodies the attitude of the industry and the state for me in a single statement. There is little concern for the interests of local citizens in Pennsylvania in the shadow of our newfound mineral boom, so long as the industrial interests are happy. It gives me hope though to see such an interest, and a dedicated team of lawyers on the side of justice, fighting to keep the decisions of Pennsylvanian’s a valued commodity.


The petitioners’ initial argument, made by John Smith, was that under Article 1, Section 1 of the Pennsylvania Constitution, the state may zone but it must do so in a way that doesn’t undermine the overall zoning scheme. He went on to argue that Act 13 would undermine the scheme by preempting zoning districts, and thus municipalities, from making decisions based on the health, safety, and welfare of the citizens they’re charged to protect. Both Judge Kevin Brobson and the respondents countered this argument by stating that because municipalities are “creatures” of the state the restriction on the state is in reference to property development and not statewide zoning. Both parties made note of §3304 of the Act, which mandates compliance with the statute and the two parties diverged on whether municipalities have a right to zone at all under the Pennsylvania Constitution.

Counsel for the PUC and the Attorney General felt that the petitioners sought to shift power vested in the legislature to the municipalities. Haverstick also made note that under a challenge on the basis of constitutionality, Act 13 would face, and easily pass, a rational basis review. Rational basis review only requires that the state provide proof that the legislation is rationally related to a legitimate governmental interest for it to stand as constitutional. Rational basis review is meant to err on the side of the law being constitutional because there is nothing glaringly unconstitutional about the way the law is constructed. Judge Pellegrini closed his questioning on the topic by asking whether irrational zoning, which may be deemed unconstitutional for municipalities, can so apply to the legislature. The parties again showed their divide on the belief that any party but the legislature has the power to set the overall zoning scheme for the state, even in cases where a municipality has never zoned on a particular issue such as natural gas facilities. Jonathan Kamin, for the petitioners, concluded his statements by positing that the municipalities are given their constitutional zoning powers by the legislature, but until their existence ceases they cannot be forced to change their zoning scheme in a way that is irrational.

Regulatory Taking

Another major argument centered on whether the compulsory and punitive provision of Act 13, §3304, constitutes a regulatory taking. A regulatory taking occurs when a governmental regulation affects a property to such a degree that the regulation amounts to an exercise of a government’s eminent domain power without actually divesting the property owner of title to the property. Eminent domain is the seizure of a private citizen’s property without the owner’s consent, but with due monetary compensation.

Jonathan Kamin for the petitioners first raised the issue, citing US Supreme Court precedent in Village of Euclid, Ohio v. Ambler Realty Co., which not only stated that zoning is constitutional unless it is repugnant to protection of general welfare, but also that a taking occurs when the State mandates the use of private land. Kamin further argued that Act 13’s compliance provision amounts to forced permission by the municipalities to zone irrationally and constitutes an exercise of eminent domain powers without compensation to land owners who will be forced to comply.

Jordan Yeager furthered the argument by citing to several federal level cases, which establish that municipalities function as trustees of the state in their zoning decisions. Yeager argued that Act 13’s mandatory compliance forces local governments to give up that power which cannot be done unless the state chose to abandon the concept of municipalities completely. Judge Pellegrini seemed to agree with this presumption when he questioned the counsel for the Attorney General and stated that this Act could constitute a “massive taking.” In the rebuttal, the petitioners also noted that, as of a 2010 Pennsylvania Supreme Court decision, any eminent domain actions taken by the state must be of “paramount public purpose,” in order to be found constitutional. The suggestion then, with Act 13, is that the purpose of allowing natural gas drilling anywhere the industry so desires does not satisfy a paramount public purpose, but constitutes a “special law,” favoring drilling companies. It will be up to the court to decide whether they will even decide on that issue, but for a state entering a very long relationship with the natural gas industry some guiding precedent is certainly needed.

The Take-Away

At the end of the hearing the courtroom cleared out quite quickly with many questions asked, and few definitively answered. In the coming weeks the court will return a judgment as to whether the challenge to Act 13 can continue, or whether this is an action that Pennsylvania law and policy concerns can allow for. At the end of the day, oral arguments don’t give viewers much basis upon which to predict a definitive outcome, but there is no doubt that the ruling of Commonwealth Court will be greatly anticipated by lawyers, municipalities, and citizens across Pennsylvania. We at CCJ can only hope at this point that those voices in the court that seemed to take the side of protecting individual communities from purely business interests win out when the ruling comes down.