In August 2011, the Town of Dryden amended its zoning ordinance to ban all activities related to the exploration, production, and storage of natural gas and petroleum within the town limits.  Prior to the amendment, Anschutz Exploration Corporation, the predecessor in interest of Norse Energy Corporation USA (“Norse”) had acquired gas leases covering approximated 22,000 acres in Dryden.  In September 2011, Anschutz sued the town seeking to invalidate the ordinance on the ground that it was preempted by the Oil, Gas and Solution Mining Law (“OGSML”).

In February 2012, the trial court granted the Dryden’s summary judgment motion, finding that the amended ordinance was not preempted, and dismissed the complaint.  Anschutz appealed.  During the pendency of the appeal, Norse acquired Anschutz’s interests in the Dryden and was substituted in the proceeding.  

Affirming the lower court, the four judge panel concluded that the OGSML does not preempt, either expressly or impliedly, a municipality’s power to enact a local zoning ordinance banning all activities related to the exploration, production, or storage of natural gas and petroleum within its borders.

The court reasoned that the zoning ordinance did not regulate the “details or procedure of the oil, gas and solution mining industries.  Rather, it simply establishes permissible and prohibited uses of land within the Town for the purpose of regulating land generally . . . .”  The court noted: “While the Town’s exercise of its right to regulate land use through zoning will inevitably have an incidental effect upon the oil, gas and solution mining industries, we conclude that zoning ordinances are not the type of regulatory provision the Legislature intended to preempt by the OGSML.”

The Town of Middlefield, New York enacted a similar zoning law in June 2011.  That ordinance was also challenged on preemption grounds.  Opponents of the ordinance lost at the trial court, and the New York appeals court affirmed the decision, relying entirely on the reasoning in Dryden to uphold that Town’s ordinance.

The challengers of the ordinances are likely to appeal the decisions to the state’s highest court, the New York State Court of Appeals. 

The North American Shale Blog will continue to track the progress of this case and report on important developments.

David Mustine, Managing Director of Energy, Chemicals, & Polymers with JobsOhio, outlined many of the ways in which Ohio’s development of natural gas resources could impact businesses in the region.  According to Mustine, for example, the chemicals industry is a large consumer of natural gas, the polymers industry utilizes butane and propane that can replace oil in its operations, and incoming refineries will impact logistics providers.  Natural gas storage and processing facilities also should see significant increases in demand for their services going forward.

Additional coverage of this conference can be found here.  Our previous coverage of how future shale development will affect downstream businesses and operators can be found here.

The closest study of which we are aware comes from the U.K.  In response to two low-level earthquakes near Blackpool, England in April and May of 2011, an area well operator commissioned a number of studies regarding any link between the earthquakes and their operations.  Britain’s Department of Energy and Climate Change released earlier this month a report indicating that the operator’s activities likely induced the two small earthquakes, but that additional controls and monitoring could be implemented to prevent future seismic events from occurring.  Specifically, the report noted that “direct fluid injection into an adjacent fault zone” helped to trigger the seismic events, and it recommended that “seismic hazards should be assessed prior to proceeding with [fracturing] operations”.  An earlier version of this report noted that it took a rare confluence of several factors (primarily geologic ones) to produce this event.

At best, these studies have linked individual seismological events to limited instances of wastewater disposal into injection wells sited near fault lines or other seismologically sensitive areas.  Various media reports claiming a connection between hydraulic fracturing and earthquakes have rushed to conflate the disposal of wastewater from oil & gas activities (among many other industrial activities) with “fracking” as a cause of earthquakes.  For example, the U.S. Geological Survey recently published an abstract of a study it presented at a conference earlier this month; in the study the USGS examined earthquake data in the midcontinental U.S. since 1970, particularly the recent uptick in earthquakes in that region.  The abstract never mentions hydraulic fracturing.  Instead, it only states that recent changes in seismicity rates are “almost certainly man-made” and that some recent seismic events in Arkansas are likely linked to “deep waste water injection wells.” 

Nonetheless, numerous media outlets jumped at the abstract as a possible indicator that the federal government had found the smoking gun many environmental groups insist must be present.  The level of misinformation became so pernicious that the Deputy Secretary of the U.S. Department of the Interior released a statement several days later clarifying that “there is no evidence to suggest that hydraulic fracturing itself is the cause of the increased rate of earthquakes.”  Here is a larger excerpt from the Deputy Secretary’s April 11 statement:

USGS’s studies do not suggest that hydraulic fracturing, commonly known as “fracking,” causes the increased rate of earthquakes. USGS’s scientists have found, however, that at some locations the increase in seismicity coincides with the injection of wastewater in deep disposal wells.

Wastewater is a byproduct of oil and natural gas production from tight shale formations and coal beds. Generally, wastewater produced from many oil and gas production wells within a field may be injected through a single or just a few disposal wells.

In preliminary findings, our scientists cite a series of examples for which an uptick in seismic activity is observed in areas where the disposal of wastewater through deep-well injection increased significantly. These areas tend to be in the middle of the country – mostly in Colorado, Texas, Arkansas, Oklahoma and Ohio.

A similar reaction played out with respect to the Dec. 31, 2011 Youngstown, OH earthquakes that we previously discussed, even though Ohio DNR clearly noted in its March 2011 preliminary report that  a “number of coincidental circumstances appear to make a compelling argument for the recent Youngstown-area seismic events to have been induced [by operation of the injection well].”  And none of the operations analyzed in the studies discussed above conducted any pre-drilling seismological information that might have warned the operators or regulators of future seismic activity.  Ohio, among other states, is proposing regulations and increased agency staffing to address this problem going forward.

Takeaways:   Be skeptical of what you read regarding any linkage between fracking and earthquakes.  Correlation does not equal causation.  And instances exhibiting a correlation between hydraulic fracturing activities, including injection well disposal, and seismic activity are rare and site-specific – especially as to site geological conditions.