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February 22, 2012

Court Upholds Municipal Zoning Law Banning Fracking

On February 21, in Anschutz Exploration Corporation v. Town of Dryden, a state trial court judge upheld a provision of the Town of Dryden Zoning Law that prohibits all petroleum and natural gas exploration, production and storage in that town.  Dryden sits atop the Marcellus Shale formation and is one of several New York municipalities that have adopted local laws intended to prohibit or limit high volume horizontal hydraulic fracturing, more commonly known as “fracking.”

The plaintiff oil and gas company unsuccessfully argued that the challenged provision of the Town’s Zoning Law was contrary to the New York Oil, Gas, and Solution Mining Law (“OGSML”).   That law supercedes “all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries; but shall not supersede local government jurisdiction over local roads or the rights of local governments under the real property tax law.”  (Environmental Conservation Law (“ECL”) § 23-0303(2).)

The trial court found the operative language did not clearly foreclose local land use authority, and was almost identical to language in the State’s Mined Land Reclamation Law (“MLRL”), ECL § 23-2703(2), which the Court of Appeals has held does not supercede local zoning authority. In the absence of a clear statement from the Legislature that it intended to displace local zoning authority, Justice Rumsey determined that the Court of Appeals decision, Frew Run Gravel Products v. Town of Carroll, 71 N.Y.2d 126 (1987), controlled.  In Frew Run, the Court of Appeals held that local zoning laws were not laws relating to the extractive mining industry, but were laws regulating the appropriate use of land which had an incidental effect on extractive mining.  The trial judge concluded that Dryden’s zoning law prohibiting all oil and gas exploration, production, and storage in the Town was not a local law relating to regulation of the oil, gas and solution mining industries and, therefore, was not preempted.  This decision is highly likely to be appealed.

Although not addressed specifically in the decision, it would appear to leave open the option of allowing fracking in some zoning districts and prohibiting it in others.  Also left open is whether a zoning law could allow fracking subject to the grant of a special permit.  Finally, it remains to be seen how this decision will affect the draft rules regulating fracking which have been proposed by the New York State Department of Environmental Conservation.

For more information about local government control and governmental regulation of fracking, contact Steven Barshov or Christopher Amato.

UPDATE:

On February 4, 2012, the Supreme Court, Otsego County similarly upheld a local zoning ordinance banning fracking. The court’s decision in Cooperstown Holstein Corporation v. Town of Middlefield  rested on the same reasoning as the Dryden decision.

 

 



February 14, 2012

Federal Tax Incentive for Contaminated Site Remediation Expires

By: Jonathan Kalmuss-Katz — Filed under: Brownfield Cleanup — Posted at 9:55 am

On December 31, 2011, one of the biggest federal tax incentives for contaminated site remediation lapsed, leaving in doubt its application to remedial expenses incurred in the current calendar year.  If the incentive is not retroactively extended by Congress, then such remedial expenditures would have to be capitalized and deducted over a period of years or decades, as opposed to being fully deducible in the year they are incurred.

The “Brownfield Expensing Tax Incentive” had provided for the accelerated deduction of remedial costs at “qualified contamination sites,” which are: (a) held by the taxpayer for trade, business, or income generation purposes, (b) contaminated by a hazardous substance or petroleum, and (c) neither listed nor proposed for listing on the Superfund National Priorities List.  Taxpayers also require a certificate of eligibility from the state environmental agency in which the property at issue is located (in New York, the Department of Environmental Conservation), though New York sites need not be enrolled in the state’s Brownfield Cleanup Program (“BCP”) or Spill Response Program to be certified as eligible.

The incentive previously lapsed due to legislative inaction three times since its 1997 enactment, but following each expiration Congress retroactively extended it during the next calendar year, leaving no gap in the coverage of eligible expenses.  It remains to be seen whether the current Congress will do the same.

On a state level, the tax credits available under for New York’s BCP are also in danger of expiring in the absence of a legislative extension.  Brownfield Tax Credits are only available for cleanups that receive a Certificate of Completion (“COC”) by March 31, 2015; obtaining a COC often takes three or more years from a site’s admission into the BCP.  Pending legislation in the New York State Senate would remove this sunset date, in addition to enacting other BCP amendments.

For more information on tax incentives for Brownfield remediation, contact David Yudelson or Christine Leas.



February 3, 2012

Court Invalidates New York State Permit for Municipalities’ Stormwater Discharges

By: Vicki Shiah — Filed under: Citizen Suits, Clean Water Act, New York Environmental Law — Posted at 3:18 pm

In a significant blow to New York’s stormwater pollution control program, last month a state court invalidated the Clean Water Act general permit covering discharges from urban and suburban municipalities’ separate storm sewer systems.

The January 10, 2012 decision from Judge Joan Lefkowitz of the Supreme Court, Westchester County held that the 2010 General Permit for Stormwater Discharges from Municipal Separate Storm Sewer Systems (“MS4 General Permit”) violated the Clean Water Act (“CWA”) and the provisions of New York law that implement it.

The MS4 General Permit replaces individual State Pollutant Discharge Elimination System (“SPDES”) permits for hundreds of municipal storm sewer outfalls outside of New York City.  Because these outfalls share common characteristics, the Department of Environmental Conservation (“DEC”) issued a general permit that governs the discharge of stormwater by municipalities across the state.

To obtain coverage under the MS4 General Permit, municipalities must submit a Notice of Intent (“NOI”) to DEC and comply with the General Permit terms.  NOIs must propose an initial Stormwater Management Plan (“SWMP”) to effectuate pollution reductions, which must be developed and implemented within three years of gaining permit coverage.

Judge Lefkowitz struck down the MS4 General Permit on three grounds.

First, the Court held that the MS4 General Permit fails to require a reduction of pollutant discharge to the “maximum extent practicable”, as required by the Clean Water Act and its New York equivalent, because it “creates an impermissible self-regulatory system.”  Relying heavily on a 9th Circuit decision which declared NOIs to be “functionally equivalent to detailed applications for individual NPDES permits,” the Court emphasized that the MS4 General Permit does not require DEC to review a municipality’s SWMP prior to approving coverage.  Thus, “the initial determination of what particular control measures would be implemented and whether those measures would in fact reduce pollutant discharge to the level mandated by the applicable statute or regulation were left to each operator to make after it had already been authorized to discharge.”

Applying the same “functional equivalent” rationale, the Court also held that the NOI is effectively a permit application without an opportunity for a “public hearing,” as required for CWA permit applications.  The Court acknowledged that the MS4 General Permit itself was subject to extensive public review prior to issuance, but this was insufficient because, under the permit, neither the public nor DEC is able to review the specific pollution reduction measures contained in a municipality’s SWMP until after the municipality obtains coverage allowing it to discharge.

Finally, the Court held that the MS4 General Permit is unlawful because, while it requires MS4s to reduce pollutant loads to water bodies that violate State water quality standards, the permit does not mandate compliance within the nine month timeframe required by law.

While the plaintiff environmental groups in this case have proclaimed a victory, DEC’s time to appeal  has not yet expired.  If it is ultimately upheld, Judge Lefkowitz’s decision may have repercussions not only for municipalities, but also for construction sites and industrial activities covered by DEC’s Construction Stormwater General Permit and Multi-Sector General Permit.  SPR will be tracking developments related to this decision and will provide updates as applicable.

For more information about stormwater permitting, please contact Michael Bogin.