Might Ohio Court's Ruling Restrict Ability of Michigan Municipalities to Regulate Drilling?

The Ohio Supreme Court injected itself in the debate of state preemption of local ordinances designed to regulate oil and gas drilling with its recent decision in State v. Beck Energy Corporation.

In a close 4-3 decision, with some hotly worded dissents, the court ruled that Ohio’s laws regulating oil and gas wells barred local governments from imposing its ordinances on the development of wells within their borders. As Ohio has a Home Rule Amendment to its state constitution, and Michigan is considered a "Home Rule" state, the court’s ruling may be instructive.

The court considered how Ohio’s statute that regulates oil and gas drilling (Chapter 1509) interacted with a local government’s power under "Home Rule." For the majority, the decision appeared to be an easy one.

Beck Energy successfully obtained a permit under the Chapter 1509. When it came time to begin its work, the local municipality attempted to impose its own authority, insisting that the company needed to obtain various approvals, pay a fee, and provide a performance bond.

The company argued that the city’s ordinances conflicted with Chapter 1509, which preempted all local ordinances governing oil and gas drilling. The city disagreed, providing that compliance with its ordinances did not conflict with Chapter 1509 and represented a valid exercise of its Home Rule powers to protect the general welfare of the community.

The majority agreed with the company, finding that the local ordinances restricted an activity that the state law allowed and that the state law unambiguously regulated the same activity and, as a result, Chapter 1509 preempted all such local ordinances.

The primary dissenting opinion took task with the majority’s conclusion that an actual conflict existed between local ordinances and Chapter 1509. Instead, while Chapter 1509 governed the technical aspects of oil and gas drilling, the local ordinances addressed wholly local concerns like “traffic control, traffic volume, property values, enhancement of municipal revenue, costs of municipal improvement, land use, nuisance abatement, and the general welfare and development of the community as a whole.” As there is a “strong presumption” that local ordinances are valid, the dissent insisted that the court must try to harmonize the two.

Joining the dissent, Justice O’Neill was less circumspect about the majority’s ruling. He also noted that without any local controls, "a drilling permit would be granted in the exquisite neighborhoods of Upper Arlington, Shaker Heights, or Village of Indian Hill – local zoning dating back to 1920 be damned."

The Ohio Supreme Court’s decision seems to buck the trend of courts trying to find common ground between statewide oil and gas drilling regulation and traditional local municipality control. As the dissent noted, courts in Colorado, Pennsylvania and New York found ways for both state and local control to exist. Further, Oklahoma, California and Wyoming codified concurrent state and local control of drilling.

As I noted before, Michigan courts have yet to establish the correlation between Home Rule and statewide regulation of oil and gas drilling. A future ruling will most likely look to see if the local ordinance governs primarily local interests or whether it involves only matters that are just related to local affairs and if the activity is governed explicitly by state statute and expressly preempted. Whether Michigan will adopt the Ohio Supreme Court’s or other states’ positions on this balancing act remains to be seen.

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