The Pennsylvania Supreme Court’s ruling striking down the uniform zoning ordinance provision of the Act 13 of 2012 amendments to the state Oil and Gas Act was widely considered a win for local governments, but another potential ramification of the ruling could put a damper on their victory celebration.
While the justices tossed out several provisions of Act 13, they remanded the case to the Commonwealth Court to determine whether some or all of the remaining amendments must also be tossed out.
One of the remaining provisions requires oil and gas operations to pay impact fees to the state government, which then disburses a portion of that money to certain counties and municipalities. Under the measure, the state also retains a portion for itself.
If the Commonwealth Court chooses to invalidate either that provision or Act 13 in its entirety, attorneys told the Law Weekly, those impact fees will cease. It’s all a matter of how much the Commonwealth Court chooses to tackle in its review of Act 13 on remand.
“I do believe that [issue] is going to be litigated before the Commonwealth Court,” said Michael K. Vennum, a partner in Burleson LLP’s oil and gas title, land use and regulatory practice in Pittsburgh who is not involved in the case. “If I’m one of the E&P [exploration and production] companies who’s a party to that, I’m going to say, ‘No, we’re not going pay any more impact fees. Impact fees were part and parcel of being assured we had uniform rules throughout all the municipalities in the state. Now you’ve taken that certainty out.’”
But some attorneys told the Law Weekly there is another school of thought that says the industry may not be so quick to push for the demise of the impact fee provision for fear that the legislature would then enact a severance tax in its place, which could possibly end up costing the industry more.
Meanwhile, attorneys said, the invalidation of the impact fee provision would also create logistics problems.
Jeffrey J. Norton, an energy lawyer at Eckert Seamans Cherin & Mellott in Harrisburg, said that if the lower court does overturn the impact fee provision, the question then becomes whether the fees that have already been paid must be refunded to the oil and gas companies.
A determination that the money must be refunded would present perhaps the most perplexing issue, Norton said: How do you recover money that’s already been disbursed and, in many cases, already spent?
“It’ll be opening up a can of worms or Pandora’s box,” Norton said.
Section 2302(a) of Act 13 states that “the governing body of a county that has a spud unconventional gas well located within its borders may elect whether to impose a fee on unconventional gas wells that have been spud in the county.”
According to the most recent report by the Public Utility Commission, the agency collected more than $202 million in impact fees in 2012 and disbursed nearly $108 million to counties and municipalities, though a portion of that exceeding the limit local governments may receive under the act was reallocated to the state Housing Affordability and Rehabilitation Enhancement Fund.
The bulk of the remaining money went to the Marcellus Legacy Fund and natural gas energy development, with the remainder being divied up among various state agencies, including the PUC and the Department of Environmental Protection, according to the report.
A split Supreme Court overturned Section 3304 of 58 Pa. C.S., known as Act 13 of 2012, in December, affirming the decision of a deeply split en banc Commonwealth Court panel.
The lower court found in July 2012 that requiring municipalities to bring their zoning ordinances into compliance with Act 13 means forcing local governments to violate substantive due process by allowing incompatible uses in their districts.
While four out of six justices in Robinson Township v. Commonwealth found Section 3304 to be unconstitutional, only one of them, Justice Max Baer, based his finding on due process grounds.
The other three justices who agreed to toss out the zoning mandate—Chief Justice Ronald D. Castille and Justices Debra Todd and Seamus P. McCaffery—ruled that it violated the Environmental Rights Amendment to the state constitution.
Justice Correale F. Stevens did not participate in the consideration or decision of the case.
Article I, Section 27 of the state constitution states that the legislature has an obligation to restrain actions of private parties that are likely to harm the environment and degrade public natural resources.
In a plurality opinion, Castille said the state “fails to respond in any meaningful way to the citizens’ claims that Act 13 falls far short of providing adequate protection to existing environmental and habitability features of neighborhoods in which they have established homes, schools, businesses that produce or sell food and provide health care, and other ventures, which ensure a quality of human life.”
The court also ruled to invalidate as unconstitutional Section 3215(b)(4) of Act 13, which permits the DEP to waive mandatory setbacks for oil and gas wells from bodies of water and wetlands, along with Section 3215(d), which permits municipalities where gas wells are proposed to submit comments to the DEP, and Section 3303, which states that local ordinances may not regulate oil and gas operations.
The court also invalidated Sections 3305 through 3309 to the extent that they seek to apply or enforce Sections 3215(b)(4) and (d), 3303 and 3304.
But the justices remanded the case back to the Commonwealth Court for a determination as to whether the remainder of Act 13, including the impact fee provision, is severable from the sections that were invalidated.
“Notably, neither the parties nor Act 13 itself address the potential severability of provisions found unconstitutional,” Castille wrote. “Nevertheless, our holding that Sections 3215(b)(4) and (d), 3303 and 3304 violate the Environmental Rights Amendment does not automatically require finding Act 13 unconstitutional in its entirety.”
Castille noted that while there is a presumption under 1 Pa.C.S. § 1925 that the provisions of every statute be severable, the lower court still needed to examine whether the remainder of Act 13 could stand absent the invalidated sections.
“In this opinion, we decide this issue in part, to the extent that its application is obvious and necessary to provide direction to the parties going forward,” Castille said. “Nevertheless, we believe that further inquiry into the continued viability of the entire statute or of discrete provisions, including additional provisions deemed unconstitutional on remand, if any, and guided by additional, targeted briefing from the parties, is salutary and necessary.”
For now, it remains to be seen whether any of the parties in the Robinson Township case will push for an invalidation of the impact fee provision before the Commonwealth Court.
Co-counsel for the plaintiffs in Robinson Township, Jordan B. Yeager of Curtin & Heefner in Doylestown, Pa., said his clients would not be the ones making that argument.
“It’s not something we would be pursuing,” Yeager said.
Counsel for the PUC and the DEP, Matthew H. Haverstick of Conrad O’Brien in Philadelphia, declined to comment.