Uncertainty for the Energy Industry: A Fractured Look at Home Rule
Polley, Jarit C., Energy Law Journal
In Northeast Natural Energy, L.L.C. v. City of Morgantown (Northeast v. Morgantown), the Circuit Court of Monongalia County, West Virginia granted summary judgment for Northeast Natural Energy and Enrout Properties, holding West Virginia state legislation preempted the City of Morgantown's (the City) municipal ban on hydraulic fracturing (fracing).1 Local ordinances banning fracing, such as the one adopted by the City of Morgantown, West Virginia's City Council,2 are based on municipal home rule provisions in their respective state's constitution 3 or statutes.4 Home rule provisions vest autonomy in local governments, allowing them, in varying degrees, to frame and adopt their own charters and enact ordinances constrained only by their respective state legislation, state constitution, federal laws, and the United States Constitution.5 If a conflict between state legislation and a local ordinance is irreconcilable, state courts must determine if the home rule provision is preempted.6
The issue in this comment is whether state oil and gas laws preempt local communities from regulating fracing within their own boundaries pursuant to municipal home rule provisions in that state's constitution or statutes. Hundreds of communities across the country have enacted ordinances that attempt to regulate or even ban hydraulic fracturing outright, as the City of Morgantown did.7 The court in Northeast v. Morgantown narrowly construed the City's power in favor of state preemption.8 However, in other states the outcome may be more favorable to those who oppose fracing. This creates a potential problem for natural gas developers that have leased mineral rights and have obtained permission to explore and develop these minerals before an ordinance banning fracing is promulgated. The problem then becomes whether or not the ban will be classified as a compensable constitutional taking, or a valid exercise of a state's police power.
This comment will briefly summarize, in Section II, the history and nature of the home rule and local concerns with fracing; in Section III, it will discuss the facts, issue, and outcome of Northeast v. Morgantown;9 and in Section IV, it will analyze the authority granted to local governments in home rule states on which they premise municipal fracing bans, and it will look at the potential outcomes in other municipal home rule states with shale reserves.10 Finally, this comment will address, in Section V, the ramifications of the uncertainty created by home rule fracing bans, as these bans, if upheld, may constitute a regulatory taking. Accordingly, due to lack of clarity regarding whether hydraulic fracturing may one day be classified as a nuisance, adversely affected parties have little certainty in their recourse.
While fracing is not a new technology, it has recently emerged as one of the most promising means of natural gas extraction in the domestic energy market.11 Immense domestic shale reserves, which were once considered to be too difficult and too costly to reach, are now being developed all over the United States.12 Jobs, income, and tax revenue raised by fracing are beneficial to the economy.13 Despite the economic benefits of fracing, some feel the potentially adverse environmental effects of the process outweigh them.14
Natural gas extraction is generally governed by state regulation.15 Emerging environmental concerns have sparked grassroots movements16 that have led communities to enact local bans on hydraulic fracturing.17 Local ordinances have recently been enacted in several states banning fracing within municipalities' corporate limits.18 As a result, a mineral lessee may find itself with permits issued by state regulatory agencies allowing it to explore and develop, but may be unable to do so due to a municipal fracing ban in the form of an outright ban or zoning regulation.
A. Local Concerns with Fracing
Since fracing is mistakenly perceived in many areas to be a relatively new process of mineral extraction, 19 there are concerns regarding the environmental impacts and risks associated with it. …