Ohio towns play wait-and-see in wake of drilling ruling

By Ellen M. Gilmer and Mike Lee

Almost three weeks after Ohio’s top court struck down a town’s restrictive drilling ordinances, lawyers and local officials are predicting another round of court cases to settle how much control local governments have over oil and gas development.

The state Supreme Court ruled that the Akron-area town of Munroe Falls could not require Beck Energy Corp. to get separate drilling permits, finding that only the state can issue drilling permits. But it left open whether cities can use zoning to control where drilling happens, and whether the outright drilling bans in some towns can continue to stand.

In the weeks following the highly anticipated decision, attorneys have rushed to interpret how and when that issue will be decided. Will Ohio follow in the footsteps of New York and Pennsylvania, which have preserved some local powers over drilling; follow Colorado and Texas, which have taken a harder line; or chart a new path?

“We’ve reached the first fork in the road, and it appears that the Ohio Supreme Court has generally decided which path they’re going to take: Legitimate local zoning regulations are unlikely to be wholly pre-empted,” BakerHostetler attorney Ryan Babiuch said. “There will be a new wave of litigation that could flesh that out.”

Ohio’s oil and gas production is growing rapidly, so it’s a crucial question. Since development began in the Utica Shale formation in 2010, the industry has drilled more than 1,300 wells, and oil production has more than tripled to 42,900 barrels a day in December.

In the primary Munroe Falls opinion, three justices assailed the city’s attempt at a permitting scheme that required drillers to pay an $800 application fee, hold a public meeting and wait a year after City Council zoning approval before moving forward on a project (EnergyWire, Feb. 18). But they quickly followed that up by highlighting the decision’s own limitations.

“We make no judgment as to whether other ordinances could coexist with the General Assembly’s comprehensive regulatory scheme,” Justice Judith French wrote in the opinion. “Rather, our holding is limited to the five municipal ordinances at issue in this case.”

A concurring opinion by Justice Terrence O’Donnell adds that “whether a municipality has authority to enact zoning ordinances that affect oil and gas wells within its territory is a question yet to be decided.”

Since the court didn’t reach a majority decision, the two opinions must be interpreted together, and they clearly signal that zoning and other issues are still in play, Babiuch said.

A test case in Broadview Heights?

The first test may come from Broadview Heights, a city of 20,000 south of Cleveland.

Residents there worked with the Community Environmental Legal Defense Fund to pass a “community bill of rights” in 2012 that bars future oil and gas drilling. State permit-holder Bass Energy Co. sued the city, and the case is now in Cuyahoga County court. A related suit asserting the residents’ right to self-governance is also before the court.

According to John Keller, a Cleveland-based attorney who represented Beck Energy in Munroe Falls and is representing Bass Energy in Broadview Heights, the Supreme Court’s recent decision means a definite win in the Broadview Heights case.

“That ship has sailed,” he said, noting that both sides have pushed the court for summary judgment, and he expects a decision in the next couple of months.

But defenders of the Broadview Heights bill of rights say their case is entirely different from the circumstances in Munroe Falls. The city’s ordinance does not attempt a permitting system like Munroe Falls did; it instead purports to assert the constitutional rights of the residents to reject development.

“Our case, this is still about our rights, the people in Broadview Heights,” said community organizer Tish O’Dell, who is a plaintiff in the self-governance case. “[Munroe Falls] highlights that the drillers have more rights than the people, and how much longer will people accept that?”

O’Dell’s attorney Terry Lodge agreed, noting that their case “is based literally on different parts of the Ohio Constitution.” But, he added, the courts may not see it that way.

“I’m not crazy,” he told EnergyWire “I fully understand that this is a very novel assertion of ancient legal principles. The current legal structure of our federal and state systems is very much geared toward protecting property interests.”

Still, if a court strikes down Broadview Heights’ bill of rights, the question of zoning will likely remain unanswered. Supporters of the city’s approach are quick to acknowledge that it’s a fundamental challenge to the status quo — a far cry from the traditional zoning powers the justices imagined in the Munroe Falls ruling.

Watching for new challenges

According to lawyers following the local control issue, a solid follow-up case to Munroe Falls may simply not exist yet. Zoning rules and drilling bans in some other Ohio cities, including Athens, Yellow Springs and Mansfield, have not faced industry challenges yet. And the collapse in oil prices means less industry fuel for challenges in those locales, which are not considered prime shale territory anyway, said BakerHostetler attorney Marty Booher.

Still, officials in towns in the Utica Shale region are watching the courts. Voters in Athens approved a ban on hydraulic fracturing last year. Athens’ law director Lisa Eliason said the city had no plans to re-evaluate it in light of the Munroe Falls decision. Carrollton, the seat of the biggest oil-producing county, had a ban on drilling inside its village limits even before the Utica Shale boom started, Village Administrator Denny Roudebush said.

Others are more sanguine. Unlike in Texas and Oklahoma, where oil and gas wells exist a few hundred feet from homes and offices, drilling companies have generally avoided built-up areas in Ohio.

“Right now, I don’t know anybody drilling in town,” said Dan Bing, the mayor of Lisbon, which sits near the Pennsylvania border. “It’s mostly out in the country areas.”

The small towns and villages may have a better chance of controlling drilling by using more conventional legal doctrines, said Nathan Johnson and Trent Doughterty, attorneys with the Ohio Environmental Council.

The Supreme Court’s wording on zoning may give towns a chance to defend their bans, as long as they’re couched as land-use decisions and not an attempt to regulate drilling, Dougherty said. Also, Ohio law allows communities to protect their water sources, even outside their boundaries, Johnson said.

For now, it’s a game of wait and see until a new challenge comes forward.

“There’s going to have to be probably multiple legal actions to determine this in the long term,” Dougherty said. “It’s definitely going to benefit lawyers.”