Wendy A. Marsh, Esq. Hancock Estabrook, LLP 100 Madison Street, 1500 AXA Tower I

1. Legal Issues Involved with the Drilling for Natural Gas and the Siting of Electric Generating Facilities in the State of NYOctober 18, 2012 Wendy A. Marsh, Esq. Hancock Estabrook, LLP 100 Madison Street, 1500 AXA Tower I Syracuse, NY 13202 Phone: (315) 565-4500 wmarsh@hancocklaw.com

2. Program Overview • New York State regulation of high volume hydraulic fracturing in New York State • Municipal regulation of drilling activities • Landowners’ involvement in the drilling process • Regulation of other electric generating facilities under Article X of the NYS Public Service Law • Thoughts on the future

4. “Hydrofracking” What is it?

5. State Regulation • State Environmental Quality Review Act • Environmental Impact Statement • Public Comment • Findings • SEQRA History • Generic Environmental Impact Statement (GEIS) on the Oil, Gas and Solution Mining Regulatory Program • 1992

6. Potential Environmental Impacts Associated with Hydrofracking Chemicals in the process water Noise Traffic Well casing problems Etc.

7. SGEIS • First Supplemental Draft Generic Environmental Impact Statement (SDGEIS) • September 2009 • Revised draft SDGEIS • September 2011 • Public Comment Period ended on January 11, 2012 • Next Step in the Process

8. NYSDEC Regulations • Oil, Gas, and Solution Mining Law • Application requirements • Permit Conditions • Technical requirements • Proposed regulations • Permitting process • Surface activities on state-owned lands • SPDES Permits

9. NYSDEC Regulations Proposed rules released on September 28, 2011 Public comment ended on January 11, 2012 Recent requirement to study health impacts Likely need to begin the regulatory process over

10. State Regulatory Process Summary NYSDEC to complete SEQRA NYSDEC to issue final regulations for hydrofracking activities Litigation over SEQRA Litigation over regulations

11. Local Authority Can a municipality regulate hydrofracking?

12. Some Things Can’t Be Completely Regulated Locally Adult Entertainment Sand and Gravel Mining Wind Turbines

13. WHY CAN’T YOU REGULATE LOCALLY? Some authority is preempted Constitutional Law Statutory Law New York courts have examined this limitation

14. Matter of Frew Run Gravel Prods. v. Town of Carroll71 N.Y.2d 126 (1987)

15. ARTICLE 23 OF THE ECL – MINERAL RESOURCES Title 27: Mined Land Reclamation Law

16. Frew Run Legal Issue MLRL states: “For the purposes stated herein, this title shall supersede all other state and local laws relating to the extractive mining industry; provided, however, that nothing in this title shall be constructed to prevent any local government from enacting local zoning ordinances or other local laws which impose stricter mined land reclamation standards or requirements than those found herein.” ECL 23-2703[2]

17. Frew Run Holding The Mined Land Reclamation Law does not preempt municipalities from banning sand and gravel mining

18. ARTICLE 23 OF THE ECL – MINERAL RESOURCESTitles 1 – 21: Oil, Gas & Solution Mining

19. Anschutz Exploration Corporation v. Town of Dryden35 Misc.3d 450(2012)

20. Dryden Facts August 2, 2011 Zoning Ordinance Amended Ban all activities related to the exploration for, and production or storage of, natural gas and petroleum Anschutz owned gas leases covering approximately 22,200 acres in the Town and had invested approximately $5.1 million in activities

21. Legal Issue Is the ability to prohibit activities associated with the exploration for, and production or storage of natural gas and petroleum PREEMPTED BY THE OIL, GAS AND SOLUTION MINING LAW (OGSML)?

22. Dryden Legal Issue OGSML states: “The provisions of this article shall supercede all local laws and ordinances related to the regulation of the oil, gas and solution mining industries; but shall not supercede local government jurisdiction over local roads or the rights of local government under the real property tax law” ECL 23-0303[2]

23. Dryden Holding • Judge Rumsey reviewed the Frew Run Court of Appeals decision and determined: • The supercedure clauses are “nearly identical” • Neither contains a clear expression of legislative intent to preempt local control over land use and zoning • The ban was upheld for the same reasons as set forth in Frew Run

24. Cooperstown Holstein Corporation v. Town of Middlefield35 Misc.3d 767 (2012)

25. Middlefield Facts Town of Middlefield Board amended its zoning law in June 2011 to: Prohibit “heavy industry . . . and all oil, gas or solution mining and drilling”, which, according to the court, effectively banned oil and gas drilling with the Town. Plaintiff had two oil and gas leases

26. Middlefield Legal Issue Same as Dryden: Does OGSML prohibit local municipalities from enacting legislation which may impact upon the oil, gas and solution drilling or mining industries other than that pertaining to local roads and the municipalities’ rights under the real property law?

27. Middlefield Decision Detailed review of the legislative history and intent of OGSML, to hold that it “finds no support within the legislative history leading up to and including the 1981 amendment of the ECL as it relates to the supersession clause which would support plaintiff’s position . . . .” “[T]he state’s interests may be harmonized with the home rule of local municipalities in their determination of where oil, gas and solution drilling or mining may occur. The sate maintains control over the “how” of such procedures while the municipalities maintain control over the “where” of such exploration.”

28. Is The Ban a Taking? This legal issue has not yet been raised or litigated

29. Appeals Both decisions at the Supreme Court level Both appealed to the Third Department No decisions yet from the Third Department

30. City of Binghamton Elvin Jeffrey, Vestal Gas Coalition, Arena Hotel Corporation, Nelson Holdings Ltd., and Binghamton-Conklin Gas Coalition Steering Committee v. Matthew T. Ryan, in his official Capacity as Mayor, City of Binghamton, and The City Council, City of Binghamton Broome County Supreme Court Index No. CA2012-001254 RJI No: 2012-0695-M October 2, 2012

31. Binghamton Facts City Council enacted “Prohibition of Gas and Petroleum Exploration and Extraction Activities, Underground Storage of Natural Gas, and Disposal of Natural Gas or Petroleum Extraction, Exploration, and Production Waste” in December 2011

32. Binghamton Legal Issue Was the prohibition merely a moratorium? Court held that Respondent City failed to provide any evidentiary proof that would provide a justification, based upon the health and safety of the community, for the banning of gas exploration, storage and extraction.” The law was held to be a moratorium, and the City must satisfy the well established legal requirements that show a dire emergency; that the moratorium is reasonably calculated to alleviate a crises; and that they are taking steps to solve the problem.

33. Binghamton Decision Local law overturned because it failed to meet the criteria for a properly enacted moratorium The Judge did agree with the holdings in the previous cases that the OGSML did not preempt the local law

34. Landowner Regulation Land Contracts / Lease Agreements Compulsory Integration in New York State

35. Litigation Courts decide on SEQRA Process and NYSDEC regulations Courts decide the preemption arguments Economic Reality

36. Wind Energy Regulation :What can be learned? • Law of the past: • SEQRA Review at local level • Site Plan / Special Use Permit issued at local level • License / Host Community Agreement at local level

37. Potential Wind Environmental Impacts Visual Impacts Shadow Flicker Noise Impacts Wetlands Birds and Bats Habitat Agricultural Impacts Traffic Property value Archeological Etc.

38. Complete Local Control of the Process

39. ARTICLE X OF THE PUBLIC SERVICE LAWSiting of Major Electrical Generating Facilities

40. TAKES AWAY THE LOCAL CONTROL

41. ARTICLE X OF THE PUBLIC SERVICE LAW • Applies to Siting of Major Electrical Generating Facilities • 25 MW or Greater • NYS Board on Electric Generation Siting and the Environment reviews projects and grants or denies “Certificate of Environmental Compatibility and Public Need”

42. ARTICLE X OF THE PUBLIC SERVICE LAWSITING BOARD 5 Permanent Members are the Chair of the Department of Public Service, Commissioners of DEC, DOH, and Economic Development, and the Chair of NYSERDA 2 ad hoc public members from municipality where facility is proposed

43. ARTICLE X OF THE PUBLIC SERVICE LAWSUPERSESSION PROVISION Siting Board may grant a Certificate in contravention of local law if it determines that the law is “unreasonably burdensome in view of the existing technology or the needs of or costs to taxpayers” Stop Shopping - No other state or local permits required for certified facility

44. ARTICLE X OF THE PUBLIC SERVICE LAW PRELIMINARY SCOPING STATEMENT Need to identify the local laws and regulations to be preempted by the Siting Board Notice to the residents in the municipality where facility is proposed 3 days before filing of the scoping document

45. ARTICLE 10 OF THE PUBLIC SERVICE LAWPUBLIC PARTICIPATION - “To facilitate the pre-application and application processes and enable citizens to participate in decisions that affect their health and safety and the environment, the department and such person shall provide opportunities for citizen involvement.” - “Such opportunities shall encourage consultation with the public early in the pre-application and application processes.” - “The primary goals of the citizen participation process shall be to facilitate communication between the applicant and interested or affected persons. The process shall foster the active involvement of the interested or affected persons.”

46. ARTICLE 10 OF THE PUBLIC SERVICE LAWINTERVENOR ACCOUNT Preliminary scoping statement shall be accompanied by a fee in an amount equal to $350 for each thousand kilowatts . . . but no more than $200,000 to defray pre-application expenses incurred by municipal and local parties for expert witness, consultant, administrative and legal fees Not for litigation

47. ARTICLE XOF THE PUBLIC SERVICE LAWAPPLICATION Fee in an amount equal to $1,000 for each 1000 kW of capacity, not to exceed $400,000 for intervenor fund

48. SEQRA Type II Action

49. ARTICLE 10 OF THE PUBLIC SERVICE LAWDECISIONS The Siting Board shall make the final decision upon the record The Siting Board shall not grant a CECPN without making explicit findings: - Probable environmental impacts - Beneficial addition or substitution of capacity - Project is in public interest - Adverse environmental effects will be minimized or avoided to the maximum extent practicable - EJ impacts avoided, offset, or minimized

50. What Does This Mean? Municipalities will continue to bear the burden of the visual impacts, but not have the financial benefits afforded in the Host Community Agreements Decisions about siting are no longer local decisions that are ultimately made by the majority of the voters in a municipality