On July 26, 2012, in a decision of major significance to the Marcellus Shale industry, the Pennsylvania Commonwealth Court in the case of Robinson Township et al. v. Commonwealth of Pennsylvania Public Utility Commission et al., No. 284 M.D. 2012 (Pa. Commw. Ct. 2012), declared Section 3304 of Act 13 of Pennsylvania’s Oil and Gas Act to be unconstitutional on substantive due process grounds. Section 3304 imposes a statewide uniform zoning regulatory scheme applicable to oil and gas operations in Pennsylvania’s 67 counties and 2,563 municipalities. With Section 3304’s uniformity no longer in effect, and absent a reversal of the decision by the Pennsylvania Supreme Court, the oil and gas industry will be left with an inconsistent array of zoning regulations that will likely increase the time and costs involved in developing, producing, transporting and processing Marcellus Shale natural gas.

In its 4-3 split decision, the court reasoned that, because Section 3304 required municipalities to violate their comprehensive plans for growth and development, it violated substantive due process "because it does not protect the interests of neighboring property owners from harm, alters the character of neighborhoods and makes irrational classifications – irrational because it requires municipalities to allow all zones, drilling operations and impoundments, gas compressor stations, storage and use of explosives in all zoning districts, and applies industrial criteria to restrictions on height of structures, screening and fencing, lighting and noise." (Emphasis added).

The dissenting opinion asserted, however, that the will of the Legislature should not be superseded by locally enacted comprehensive plans which reflect only that municipality’s land use and development goals and objectives. Because municipalities are creatures of the state and have no inherent powers of their own, the powers conferred upon municipalities (including zoning) can be amended, expanded or taken away entirely by the Legislature. The dissent further asserted that the court mischaracterized the effect of Section 3304 because Section 3304 does not permit all oil and gas uses and operations in all zoning districts without statutorily defined standards, limitations or restrictions, and further found Section 3304 to be a valid exercise of the Commonwealth’s police power. For these reasons, the dissent would uphold Section 3304.

While local governments and anti-fracking forces are applauding the court’s decision, any celebrations are premature, as the Commonwealth has appealed the Commonwealth Court’s ruling. In a separate ruling in the case, the Commonwealth Court struck down Section 3215 of Act 13 on the grounds that it improperly delegated legislative power to the Pennsylvania Department of Environmental Protection to waive well setback requirements, based on a case striking down zoning provisions of Pennsylvania’s Gaming Act. It will be interesting to see if the Supreme Court’s decision striking down the zoning provisions that bestowed zoning authority for casinos on the Pennsylvania Gaming Control Board will factor in the Supreme Court’s decision in the Act 13 case. If it does, the case may turn on whether the Supreme Court finds that Section 3304 provides constitutionally sufficient standards upon which local zoning decisions for oil and gas activities may be based.

Until the fate of Section 3304 is decided by the Pennsylvania Supreme Court, the oil and gas industry should expect municipalities to vigorously ramp up their efforts to regulate the industry through their zoning ordinances.