Fulbright Briefing: Pa. Commonwealth Court Overturns Significant Portions of Act 13; Appeal Filed Next Day

By Kenneth S. Komoroski, Matthew H. Sepp and Michael P. Gaetani

The Pennsylvania General Assembly enacted the Oil and Gas Act ("Act 13"), which substantially revises the Oil and Gas Act of 1984, 58 P.S. § 601.101 et seq., and was signed into law by Governor Tom Corbett on February 14, 2012. Act 13 provides for the assessment of impact fees on oil and gas operations and the distribution of those fees to counties, municipalities, and to a legacy fund. Act 13 also established enhanced environmental protection provisions. Finally, Act 13 expanded upon the preemption provisions of the Oil and Gas Act of 1984 and established greater specificity for requirements to be included in local ordinances. Act 13 was designed to provide, among other things, statewide uniformity in local municipal ordinances that impact oil and natural gas operations.

On March 29, 2012, seven townships, an environmental association, and several individuals filed a twelve-count petition for review seeking to declare Act 13 unconstitutional because, among other things: (1) Act 13 violated the concept of substantive due process (Counts I-III); and (2) Act 13 provided insufficient guidance to the Pennsylvania Department of Environmental Protection ("DEP") as to when to grant a waiver from the setback requirements established by Section 3215(b)(4) (Count VIII).

A. Commonwealth Court Declares Major Provisions of Act 13 Unconstitutional

On July 26, 2012, the Pennsylvania Commonwealth Court issued a 4-3 decision in the case of Robinson Twp. et al. v. Commonwealth et al., Case No. 284 M.D. 2012, declaring unconstitutional major provisions of Act 13 [enhanced version available to lexis.com subscribers]. Specifically, the Commonwealth Court granted summary relief to Petitioners on four of their twelve counts, declaring Sections 3304 of Act 13 (dealing with uniformity of local ordinances) and 3215(b)(4) (dealing with the DEP's power to waive setback requirements) as unconstitutional.¹ The Court also permanently enjoined enforcement of Section 3304 and its application through other sections. Finally, the Court dismissed eight of the Petitioners' twelve counts and ruled that an environmental association and three individual Petitioners did not have standing.

1. Section 3304 of Act 13 Violates Substantive Due Process

Petitioners argued Act 13 violated the concept of substantive due process because it allowed, among other things, "gas operations in all zoning districts which are incompatible with the municipalities' comprehensive plans that denominates[sic] different zoning districts, making zoning irrational."² Substantive due process is a concept derived from the Fifth and Fourteenth Amendment of the United States Constitution and Article 1, Section 1 of the Pennsylvania Constitution which prohibits the federal and state governments from depriving any person of life, liberty, or property, without due process of law. Substantive due process prohibits laws enacted by the legislature pursuant to its police powers from resulting in unfair, arbitrary, or unreasonable treatment of an individual.

The Court adopted petitioners' argument that Section 3304-requiring municipal zoning ordinances to be amended to allow oil and gas operations in allzoning districts-violated the principles of due process under Article 1, §1 of the Pennsylvania Constitution and the Fourteenth Amendment of the United States Constitution. The Court recognized that zoning ordinances divide municipalities into districts in which uniform regulations are provided for the uses of building and land, the height of buildings, and so on. Permitted, conditional, and prohibited uses of property and buildings are set forth for each zoning district (i.e., residential, commercial, industrial) as part of the zoning ordinance and "out of this process, a zoning ordinance implements a comprehensive zoning scheme."³

Turning to Act 13, the Court stated that Section 3304's requirement that municipal ordinances be amended to include oil and gas operations in all zoning districts unconstitutionally interfered with a municipality's own comprehensive plans for growth and development.⁴ Specifically, the Court held that Act 13 allowed "incompatible uses in zoning districts and [did] not protect the interests of neighboring property owners from harm, alter[ed] the character of the neighborhood, and ma[de] irrational classifications."⁵ Describing Section 3304 as an affront to substantive due process, the Court stated it would allow for a "pig in the parlor instead of the barnyard."⁶

2. Section 3215(b)(4) of Act 13 Violates the Non-Delegation Doctrine

With respect to the waiver from setback requirements established by Section 3215(b)(4), the Court held that this provision violated the non-delegation doctrine established in Article 2, §1 of the Pennsylvania Constitution.⁷ In so doing, the Court looked to the basic principle that legislation must contain adequate standards that will guide and restrain the exercise of delegated administrative functions.

Here, Section 3215, entitled "Well location restrictions," provided specific setback requirements between the wellbore or the disturbed area of a well site and the water source. Section 3215(b)(4) permitted the DEP to waive these distance restrictions. The Court found that Section 3215(b)(4) "gives no guidance to DEP that guide[s] and constrain[s] its discretion to decide to waive the distance requirements from water body and wetland setbacks. Moreover, it does not provide how DEP is to evaluate an operator's 'plan identifying additional measures, facilities or practices to be employed ... necessary to protect the waters of this Commonwealth.'"⁸ Finally, the Court held that Section 3215(b)(4) "gives DEP the power to make legislative policy judgments otherwise reserved for the General Assembly."⁹ As a result, Section 3215(b)(4) was ruled unconstitutional as a violation of the non-delegation doctrine provided for in Article 2, §1 of the Pennsylvania Constitution.

B. Commonwealth Court Rejects Petitioners Remaining Challenges

The Commonwealth Court, however, did not agree with all of Petitioners' arguments. The Court sustained the Commonwealth's preliminary objections on several grounds, including, among others, that:

• Although Act 13 "does treat the oil and gas industry differently from other extraction industries, it is constitutional because the distinction is based on real differences that justify varied classifications for zoning purposes" (Count IV);
• Even if Petitioners sufficiently alleged an interest that was going to be unconstitutionally taken, the Commonwealth Court could not hear the challenge "because the exclusive method to challenge the condemnor power to take property is the filing of preliminary objections to a declaration of taking" (Count V);
• The Commonwealth has the affirmative duty to conserve and maintain the Commonwealth's natural resources, and therefore, the municipalities "were relieved of their responsibilities to strike a balance between oil and gas development and environmental concerns under [Pennsylvania's Municipalities Planning Code]" (Count VI);
• Act 13's delegation of some responsibilities to the Public Utility Commission, i.e., authority to issue non-binding advisory opinions regarding the compliance of local zoning ordinances with the requirements of Act 13, does not violate the principle of separation of powers because the Commission only has the authority to give non-binding advisory opinions (Count VII); and
• Act 13's Section 3304 is not unconstitutionally vague because it provides specific information regarding local ordinance requirements¹⁰ (Counts IX & X).

Finally, the court emphasized that Sections 3301 through 3303 remain in full force and effect.¹¹ Section 3302 prohibits municipalities from enacting non-zoning ordinances purporting to regulate oil and gas operations. Section 3303 prohibits local regulation of the same features covered by state environmental laws.

C. Dissenting Opinion Criticizes Majority's Failure to Recognize Act 13's Protections for Local Ordinances and Benefits for State

Judge Brobson filed the dissenting opinion, in which two other judges joined. Although agreeing with the majority regarding Count VIII (insufficient guidance to the DEP), the dissent takes issue with the majority's finding that Section 3304 was unconstitutional. In particular, Judge Brobson draws a distinction between the majority's "pig in a parlor shop" analogy, stating that "this particular pig ... can only operate in the parts of this Commonwealth where its slop can be found. The natural resources of this Commonwealth exist where they are, without regard to any municipality's comprehensive plan."¹² Recognizing that the legislature has determined that it was in the best interest of all Pennsylvanians to "ensure the optimal and uniform development of oil and gas resources in the Commonwealth, wherever those resources are found," the dissent also points out the significant protections aimed at maintaining the integrity of local zoning plans. For instance, Section 3304(b) limits where and under what circumstances certain oil and gas operations may be allowed within a particular zoning district of a municipality, so that, for example, a compressor station is not forced upon a residential area.¹³

The dissent also took issue with the majority's broad reading of substantive due process cases in order to find Section 3304 unconstitutional. The dissent states that "although the inclusion of one incompatible use within a zoning district of otherwise compatible uses might be bad planning, it does not itself render the ... law constitutionally infirm."¹⁴ Finally, the dissent viewed Section 3304 as a valid exercise of the legislature's police power, guided by the principle of "reasonable development of oil and gas resources" contained in Section 3302 (which was found to be valid). After conducting its own substantive due process balancing test, the dissent found that Section 3304:

strikes a balance both by providing for the harvesting of those natural resources, wherever they are found, and by restricting oil and gas operations based on (a) type, (b) location, and (c) noise level. The General Assembly's decision, as reflected in [Section 3304], does not appear arbitrary, unreasonable, or wholly unrelated to the stated purpose of the law ... There is no doubt that Petitioners have legitimate concerns and questions about the wisdom of Act 13 ... but it is not our role to pass upon the wisdom of a particular legislative enactment.¹⁵

D. Appeal Immediately Filed

On July 27, 2012, the chairman of the Public Utility Commission and the secretary of the Department of Environmental Protection, leaders of two of the state agencies sued by the municipalities challenging Act 13, filed an appeal with the Pennsylvania Supreme Court, challenging the Commonwealth Court's decision ruling certain provisions of Act 13 as unconstitutional. Under Pennsylvania Rules of Appellate Procedure, that appeal operates as an automatic stay of the Commonwealth Court's decision.¹⁶

This article was prepared by Kenneth Komoroski (kkomoroski@fulbright.com or 724 416 0420), Matthew H. Sepp (msepp@fulbright.com or 724 416 0421) and Michael P. Gaetani (mgaetani@fulbright.com or 724 416 0429) from Fulbright's Energy Practice and Fulbright's Shale and Hydraulic Fracturing Task Force.

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 [1] Petitioners' twelve-count petition alleged Act 13 is unconstitutional because : (1) it is an improper exercise of the Commonwealth's police power that is not designed to protect the health, safety, morals and public welfare of the citizens of Pennsylvania; (2) it allows for incompatible uses in like zoning districts in derogation of municipalities' comprehensive zoning plans and constitutes an unconstitutional use of zoning districts; (3) it is impossible for municipalities to create new or to follow existing comprehensive plans, zoning ordinances or zoning districts that protect the health, safety, morals and welfare of citizens and to provide for orderly development of the community; (4) it is a "special law" that treats local governments differently and was enacted for the sole and unique benefit of the oil and gas industry; (5) it is an unconstitutional taking for private purposes and an improper exercise of the Commonwealth's eminent domain power; (6) it denies municipalities the ability to carry out their constitutional obligation to protect public natural resources; (7) it violates the doctrine of Separation of Powers because it entrusts an Executive agency, the Commission, with the power to render opinions regarding the constitutionality of Legislative enactments, infringing on a judicial function; (8) it delegates power to the Pennsylvania Department of Environmental Protection without any definitive standards or authorizing language; (9) it is unconstitutionally vague because its setback provisions and requirements for municipalities fail to provide the necessary information regarding what actions of a municipality are prohibited; (10) it is unconstitutionally vague because its timing and permitting requirements for municipalities fail to provide the necessary information regarding what actions of a municipality are prohibited; (11) it is an unconstitutional "special law" in violation of Article 3, §32 of the Pa. Constitution because it restricts health professionals' ability to disclose critical diagnostic information when dealing solely with information deemed proprietary by the natural gas industry while other industries under the federal Occupational and Safety Act have to list the toxicity of each chemical constituent that makes up the product and their adverse health effects (individual physician was the only petitioner who brought this claim); and (12) Article 3, §3 of the Pa. Constitution prohibition against a "bill" having more than a single subject because restricting health professionals' ability to disclose critical diagnostic information is a different subject than the regulation of oil and gas operations (individual physician was the only petitioner who brought this claim).

[2] See Robinson Twp. et al. v. Commonwealth et al., p. 26.

[3] Id. at p. 29.

[4] Id. at pp. 33-35.

[5] Id. at p. 35

[6] Id. at pp. 28, 33.

[7] "Article 2, §1 of the Pennsylvania Constitution provides that the legislative power of the Commonwealth is vested in a General Assembly consisting of a Senate and a House of Representatives. Although this article prohibits delegation of the legislative function, the Legislature may confer authority and discretion upon another body in connection with execution of a law but that legislation must contain adequate standards which will guide and restrain the exercise of the delegated administrative functions." Id. at p. 48 (citation omitted).

[8] Id. at pp. 51-52.

[9] Id. at p. 52. Although the Court ruled section 3315(b)(4) unconstitutional, the Court did suggest that the General Assembly possessed the power to cure the defects by subsequent amendment that provides "sufficient standard" relating to the DEP's ability to waive specific setbacks. Id.

[10] Id. at pp. 5-7.

[11] Id at pp. 35-36. Section 3301, entitled "Local ordinances relating to oil and gas operations", is the definitional section.

[12] Id. at Dissent at p. 3.

[13] Id. at p. 4.

[14] Id. at p. 6.

[15] Id. at pp. 8-9.

[16] Pa.R.App.P. 1736(b).

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