This post was also written by Peter Schnore.

The Pennsylvania Supreme Court’s December 2013 decision regarding the constitutionality of the 2012 law amending Pennsylvania’s Oil and Gas Act (Act 13) came as a disappointment to the oil and gas industry. Conversely, the decision was a holiday gift to those governments, groups and individuals seeking greater levels of industry regulation.

The Court struck down a number of significant Act 13 provisions on constitutional grounds that include:

• The local zoning pre-emption provisions.
• Restrictions on what local governments can regulate so as to promote the efficient development of oil and gas resources.
• Provisions that require the PA Department of Environmental Protection (DEP) to grant waivers of certain well setback requirements.
• Provisions that restrict a municipality’s right to appeal DEP waivers while allowing such appeals by oil and gas companies.

Significantly, while a Court majority struck these provisions, the justices disagreed on why the provisions were unconstitutional. A majority of justices did not share a common voice on this subject.

Justice Castille, delivering the Court Opinion, stated that the unconstitutional provisions of Act 13 violate individual’s rights and breach the Commonwealth’s trustee duties under the Environment Rights Amendment of the Pennsylvania Constitution. In a landmark decision, Justice Castille compared environmental rights to a due process constitutional right.

Governor Corbett’s administration recently took the unusual step of asking the Court to reconsider its decision. The administration contends that the Court improperly applied factual findings to determine the environmental impact of hydraulic fracturing (‘fracking’). They also believe the Court’s finding strips the DEP of its flexibility to impose conditions on permits for drilling near waterways, protecting important public resources. It is unlikely the Court will consider the administration’s requests on so recent a decision.

While unintended, the Court decision exacerbates an existing problem. Pennsylvania has 67 counties and 2,563 municipalities. Exploration and production companies must now comply with a myriad of zoning ordinances and land use regulations set in place by the Commonwealth’s fractured municipal structure. Municipalities and the oil and gas industry will both struggle to determine how development will affect the quiet enjoyment of surrounding properties.

This environment is familiar to the real estate development community in Pennsylvania. The multitude of government and quasi-government agencies with oversight and approval of real estate development make it difficult, time consuming and expensive to determine just what the rules are in a given community. Real estate developers often express sticker shock with the complexity, cost and length of the entitlement process, completing the process only to find that an agency will not allow a project to proceed.

How will the Oil and Gas Industry react? In the long term, they will likely make another attempt at favorable legislation. In the short term, drillers will have to immerse themselves in Pennsylvania’s conventional land use development practice. Like real estate developers, the Oil and Gas industry will now have to deal with the large patchwork of local subdivision regulations and local politics.

Ultimately, the PA Legislature faces a significant challenge. They must find a solution that encourages the economic benefits of the oil and gas industry, recognizes real environmental concerns and balances the interests of the general population. Perhaps it is time to truly evaluate Pennsylvania’s archaic government structure so that the “Welcome to Pennsylvania” signs at our borders have real meaning to both business and the public.

The Real Estate Practice Group of Reed Smith has a deep, experienced roster of attorneys who have assisted developers in the often contentious entitlement processes found across the nation. Please contact the authors for additional information on how we can guide you through the development entitlement maze.