COLUMBUS, Ohio - A closely watched lawsuit in Ohio is asking a question that's burning in cities and towns throughout shale country: Can regulations in states eager for the jobs and tax revenues that come with gas and oil drilling trump local restrictions that communities say protect them from haphazard development?
The case was brought by Munroe Falls, an Akron suburb of 5,000. It involves a well that Beck Energy Corp. began to drill -- with the state's permission -- on private property in the city in 2011. In the process, the company sidestepped 11 local laws on road use, permitting and drilling, the city contends.
The legal disagreement over whether Beck's permit can pre-empt Munroe Falls' local regulations reached the Ohio Supreme Court this summer. Both pro- and anti-drilling forces are watching the case because it's further along in the courts than similar lawsuits in other states and the outcome could encourage or deter the implementation elsewhere of local laws to limit drilling.
The case has implications for the spread of hydraulic fracturing, or fracking, the controversial method of injecting sand, water and chemicals to free the gas from shale rock deep underground. The case in Munroe Falls centers on a traditionally drilled well, but the centralized oil and gas regulation that's in question regulates both kinds.
In the rich shale oil states of New York, where fracking is not yet legal and many communities have instituted pre-emptive bans, and Pennsylvania, where fracking is widespread, similar cases have been decided in favor of shared regulation, with municipalities overseeing such things as land use and aesthetics and the state overseeing safety and construction. The lawsuit cites Texas, California, Oklahoma and Colorado as states that use a shared system.
"If this goes the way that I hope and pray it would go, it would restore some home rule to municipalities that has been taken away by the state," said Munroe Falls Mayor Frank Larson. "It would uphold our right to be able to zone certain areas and exclude certain uses and to allow those uses in other areas."
The 2004 state law under which Beck's state permit was issued consolidated oil and gas production operations under the Ohio Department of Natural Resources. The company said in court filings that the idea was "to end the confusion, inefficiency and delays under the earlier patchwork of local ordinances, and to ensure that Ohio's oil and gas resources are developed on a uniform statewide basis."
Munroe Falls and its allies in the suit -- including cities, villages, environmental groups and a host of local businesses -- argue the law empowered the state to regulate drilling methods but gave it no authority to protect the interests of local communities. That "constitutional prerogative," cities argue, has lain with Ohio's local governments for nearly a century.
"ODNR is the permitting authority. We understand that," Larson said. "But we do have ordinances that regulate the excavation, the right of ways and that, and that's what this is all about."
Beck, joined by the American Petroleum Institute, the Ohio Oil and Gas Association, and several major business groups, says the law "gave sole exclusive regulatory authority" to the state -- which means local zoning laws wouldn't apply. To obtain its state permit, Beck complied with 29 separate permit conditions addressing fencing, parking, noise, erosion, drainage, landscaping and site restoration, the company notes.
"The city wants to use its zoning ordinance and drilling ordinances to impose onerous and time-consuming requirements and effectively prevent all drilling," Beck said.
The industry notes in court filings that before regulation was centralized, enforcement of drilling regulations differed among municipalities that lacked the expertise or the geologists necessary to meaningfully oversee the process.
The state argues it issues drilling permits under the 9-year-old law in the same way it issues permits to sell alcohol, use a boat, operate a trailer park or work as a private investigator. Defaulting to local laws gives municipalities "effective veto power over decisions made at the state level," they say.
So far, Ohio's lower courts have been divided. The trial court sided with Munroe Falls, saying the new state law didn't give Beck the ability to "flout" local regulations.
"Ohio created a uniform system for the permitting of oil and gas wells throughout the state. It did not authorize drilling companies, permit-in-hand, to ignore any and all local regulation," that decision said.
Ohio's 9th District Court of Appeals disagreed, saying Munroe Falls' drilling regulations directly conflicted in places with state regulations -- a circumstance in which the law says state law trumps local law.
"In our view, the city's requirement for a permit directly conflicts with the statute, as it could prohibit what the state has permitted," the appellate court said.
Justices have not yet set oral arguments.