On July 17, 2014, the Commonwealth Court of Pennsylvania ruled on the issues regarding Act 13 that the Pennsylvania Supreme Court had remanded to it in the Supreme Court’s December 2013 decision. The Commonwealth Court held constitutional Act 13 provisions providing (1) notice requirements related to spills should be made to public drinking water systems, without the same notice requirement for private drinking water systems [Section 3218.1], (2) physician non-disclosure requirements, prohibiting healthcare professionals from disclosing to others regarding the composition and quantities of hydro fracturing constituents [Section 3222.1], and (3) granting certain natural gas transport, storage, or sale corporations the power of eminent domain [Section 3241(a)].
However, the Commonwealth Court determined that Section 3305, which provided the Pennsylvania Utility Commission (“PUC”) with the ability to review zoning ordinances for compliance with Pennsylvania law and to withhold distribution of impact fee funds to communities with noncompliant ordinances, was unconstitutional. As a result of the Supreme Court decision to strike down portions of Act 13, the Commonwealth Court found that municipal ordinances related to drilling remain under the jurisdiction of the respective county Courts of Common Pleas, and that Section 3305 was not severable from the remainder of Act 13.
The PUC has appealed the ruling on Section 3305 to the Pennsylvania Supreme Court.
Click here to read the Commonwealth Court decision.
In two recent developments, the Pennsylvania Public Utility Commission (“PUC” or “Commission”) appears to have settled, at least for the time being, the long outstanding question of whether midstream natural gas services might generally be regulated as “public utility” services. As summarized below, these developments indicate that, until specific facts and circumstances dictate otherwise, the PUC will not, as a rule, exercise its “public utility” jurisdiction over these operations.
On August 20, 2012, the PUC entered into a Joint Stipulation (“Stipulation”) with the Pennsylvania Independent Oil and Gas Association (“PIOGA”) in a case before the Commonwealth Court of Pennsylvania that centered on this “public utility” regulatory question. By way of background, PIOGA initiated the Commonwealth Court proceeding in late 2011 with a Petition for Review of two PUC Orders that, in the context of a PUC proceeding by Laser Northeast Gathering Company, LLC (“Laser”), arguably would have provided the basis for characterizing all midstream natural gas gathering services as “public utility” services. Specifically, as argued by PIOGA, although Laser ultimately withdrew its application for “public utility” status, the Commission’s Orders in the underlying case ultimately could have established precedent for future determinations by the PUC that all other such midstream developers are “public utilities” subject to the PUC’s jurisdiction. For this reason, PIOGA sought the Commonwealth Court’s reversal of the PUC’s Laser orders on the grounds that natural gas gathering services do not meet the definition of “public utility” services under the Commission’s regulations.
[Note: This article was first posted here, in The Shale Play Today: August 2012.]
Despite the Commonwealth Court’s recent decision striking down Act 13’s limits on municipalities enacting zoning ordinances more restrictive than the state’s uniform requirements, the Pennsylvania Public Utility Commission (“PUC”) has begun enforcement of Act 13’s impact fee provisions. Specifically, the PUC has started to review some municipalities’ ordinances that seek to regulate drilling activity.
The results of the PUC’s reviews could prevent some municipalities from receiving their share of the new drilling impact fee this fall if PUC officials determine the municipal ordinances are out of compliance with Pennsylvania law. The provisions of Act 13 that were upheld give the PUC broad powers to enforce Act 13’s requirements. If a local ordinance is found to conflict with state law, municipalities would be ineligible for fee revenues until the ordinance is amended or the decision is reversed by the Pennsylvania Supreme Court. As such, the PUC is now attempting to distinguish which municipalities’ ordinances fall under the zoning section that was struck down, which might be inappropriate under the upheld provisions of Act 13, and which are in compliance. Complicating this process is whether the Pennsylvania Supreme Court will hear the appeal of the Commonwealth Court’s ruling on an expedited basis, as it is expected that the Supreme Court will take the appeal.
Lastly, the PUC has received several requests for advisory opinions from municipalities throughout Pennsylvania as to the scope and limits of the PUC’s power under Act 13. The PUC has not yet responded to any of the requests for advisory opinions nor are the advisory opinions binding on the municipalities. Thus, despite, the Commonwealth Court’s ruling, the PUC is moving full speed ahead with exercising its new authority under Act 13. This is evidenced by the recent report that the townships of South Fayette and Robinson, located in the southwest corner of Allegheny County, upon the written request of leaseholders, are having their drilling ordinances reviewed by the PUC. The PUC gives municipalities 20 days to file a response. The PUC then has 120 days to issue a ruling. The township’s impact fee revenues could be withheld until the PUC’s review is completed or the ordinance is revised.
Click here to read a recent news article on this subject.
Posted by Kevin M. Eddy. Mr. Eddy is an associate with Spilman Thomas & Battle, PLLC. His primary area of practice is litigation, with an emphasis on the transportation, construction, and oil and gas industries.