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The Saga of Pennsylvania's Act 13 Comes to an End
With a bang, rather than a whimper, the saga of Pennsylvania’s Act 13 appears to have finally come to an end. On September 28, 2016, nearly three years after giving teeth to the long-dormant environmental rights amendment to Pennsylvania’s Constitution, Pa. Const. Art. I, § 27, to hold parts of Act 13 unconstitutional, the Pennsylvania Supreme Court again gave the petitioners – a group of local governments, citizens, and environmental non-profits – a sweeping victory.
 
Local Means Local: Public Utility Commission and Commonwealth Court jurisdiction over challenges to local government regulation is struck down.
 
The Court held that §§ 3305-3309 (the “Enforcement Provisions”) of Act 13 are not severable from §§ 3303-3304 (the “Preemption Provisions”), which the Court struck down as unconstitutional in 2013. As originally enacted on February 14, 2012, the Preemption Provisions contained strong preemptive language establishing uniform, statewide regulation of oil and gas. The Enforcement Provisions established a mechanism to enforce the Preemption Provisions before either the Public Utility Commission (“PUC”) or Commonwealth Court and implemented a modified “loser-pays” system intended to discourage both unlawful local regulations and spurious challenges. The Enforcement Provisions also restricted a local government’s access to “impact fees” generated from oil and gas development so long as any unlawful ordinance remained in effect. Thus, the Court concluded that the review mechanism established by Act 13 was inextricably tied to the uniform statewide regulation of oil and gas under the Preemption Provisions that the Court had previously held unconstitutional. Continued enforcement of the Enforcement Provisions would remove the fact-intensive land use inquiry (which the Court had previously restored to local governments by holding the Preemption Provisions unconstitutional) from local zoning hearing boards or local governments and transfer it to the PUC or Commonwealth Court. The Court accordingly concluded that, absent the Preemption Provisions, “the legislature would not have passed these sections into law merely to have the PUC and the Commonwealth Court engage in the same type of measured and deliberative review process for local ordinances which the [Municipalities Planning Code] already provides.”
 
“Gagged” No More: Confidentiality provisions for health professionals struck down as unconstitutional special laws.
 
The Court held that §§ 3222.1(b)(10)-(11) (the “Medical Confidentiality Provisions”) were unconstitutionally enacted as “special laws” in violation of Article III, Section 32 of Pennsylvania’s Constitution. The Medical Confidentiality Provisions establish a mechanism by which health professionals can receive confidential information regarding the identity and amount of chemicals used in the hydraulic fracturing process provided the health professional executes (or agrees to execute, in case of an emergency) a confidentiality agreement. The Medical Confidentiality Provisions do not define the scope of the confidentiality agreement and, most worrisome to the health professionals challenging their constitutionality, do not expressly authorize disclosure of the confidential information for purposes of diagnosis, treatment, consultation or research. The question facing the Court, then, was “whether these sections confer on the oil and gas industry, as a class, special treatment no afforded to any other class of industry, and whether this special treatment ‘rest[s] upon some ground of difference, which justifies the classification and has a fair and substantial relationship to the object of the legislation.’” (alteration in original). Although acknowledging legitimate grounds for enacting protections for trade secrets, the Court held that the Medical Confidentiality Provisions not only conferred special treatment on the oil and gas industry, but did so without any reasonable basis for distinction. The Court accordingly held the Medical Confidentiality Provisions unconstitutional as special laws.
 
All Wells Equal Before the Law: Notice provisions applying only to public drinking water facilities struck down as unconstitutional special laws.
 
The Court held that § 3218.1 (the “Spill Notice Provision”), like the Medical Confidentiality Provisions, was unconstitutionally enacted as a “special law” in violation of Article III, Section 32 of Pennsylvania’s Constitution. The Spill Notice Provision imposed mandatory notice provisions upon the Pennsylvania Department of Environmental Protection (“DEP”) for owners of public drinking water facilities, but imposed no such mandatory notice provisions for owners of private wells. In its review of this provision, the Court focused on the third of three elements: whether the contrasting notice requirements “have a fair and substantial relationship to the overall objectives the General Assembly’s [sic] sought to achieve through its enactment of Act 13.” Concluding that Act 13 has a “specific intent to provide private well owners the unqualified right to restoration or replacement of any water from their wells in the event it becomes polluted or depleted as the result of oil and gas operations,” the Court “fail[ed] to see how th[at] clear legislative purpose is fulfilled by the exclusion of private well owners from receiving notice of a spill.” The Court accordingly held the Spill Notice Provision unconstitutional as a special law, but stayed its mandate for 180 days to allow the General Assembly time to devise a legislative fix.
 
Not Your Reservoir: Storage provisions held unconstitutional as authorizing private takings of private property.
 
Finally, the Court held that § 3241 (the “Storage Provision”) authorized private corporations to take private property in violation of the United States and Pennsylvania Constitutions. The Storage Provision authorized “a corporation empowered to transport, sell or store natural gas or manufactured gas” to appropriate interests in private property for purposes of injection, storage and removal. The Commonwealth Court had interpreted this provision as being limited in application to corporations qualifying as public utilities and thus avoided the constitutional questions. On appeal, however, the Court held that the Storage Provision is not capable of such a limited interpretation. Concluding, rather, that the Storage Provision “confers a broad power on private corporations to take private property of other landowners,” the Court held it to be unconstitutional in violation of the United States and Pennsylvania Constitutions.
 
With the Court’s most recent opinion, the provisions that the oil and gas industry lobbied for prior to Act 13’s passage are mostly gone: uniform, statewide regulation; expedited review before the PUC or Commonwealth Court; and balanced trade secret protections have all been held unconstitutional. What remains are the “impact fee” and the legacy of the Court’s 2013 opinion bringing the Environmental Rights Amendment to the forefront of Pennsylvania environmental litigation. Time will tell what legacy this has for the strength of Pennsylvania’s oil and gas industry.


If you have any questions regarding an issue, please contact us.

 
Energy Law Scott Rotruck
304.291.7973
srotruck@spilmanlaw.com Joseph V. Schaeffer
304.291.7952
jschaeffer@spilmanlaw.com James A. Walls
304.291.7947
jwalls@spilmanlaw.com