Reed Smith Client Alerts

Auteurs: Lucas Liben

In Pennsylvania General Energy Co. L.L.C. v. Grant Township, Magistrate Judge Susan P. Baxter of the United States District Court for the Western District of Pennsylvania, in an unpublished opinion, held that several provisions of an ordinance enacted by Grant Township establishing a “Community Bill of Rights” were invalid or preempted by state law. The ordinance banned corporations from disposing of wastewater from hydraulic fracturing within Grant Township.

Plaintiff Pennsylvania General Energy Company (“PGE”) is involved in the exploration and development of oil and natural gas. In 1997, PGE drilled a deep gas well in Grant Township. In May 2013, PGE filed a permit application with the U.S. EPA seeking to convert the well into a brine injection well. Upon learning of PGE’s permit application, Grant Township enacted an ordinance entitled “Community Bill of Rights.” The ordinance provided that corporations should not have more rights than the people of its community, and that people have the right to regulate all activities pursuant to a right of local self-government.

PGE filed an action challenging the constitutionality, validity, and enforceability of the ordinance adopted by Grant Township, arguing that the ordinance violated several state statutes, including Pennsylvania’s Second Class Township Code – Grant Township is a second class township – and Pennsylvania’s Limited Liability Companies Law. Further, PGE argued that the ordinance violated state law as an impermissible exercise of police power because it is exclusionary. Grant Township filed a counterclaim, alleging that challenging the ordinance violated the rights of the people to “local community self government.”

The parties filed cross motions for judgment on the pleadings. Grant Township sought judgment upholding its ordinance on the basis that the right to local community self-government is “deeply rooted in our nation’s history and tradition.” The court rejected this argument, noting that Grant Township provided “no precedential statute or constitutional provision authorizing its actions other than its assertion that Plaintiff has no rights – from contracting to do business in Grant Township to bringing a lawsuit to complain about an ordinance – because it is not a person.” The court rejected Grant Township’s assertion that a corporation is not a “person” as contrary to more than a hundred years of Supreme Court precedent establishing that corporations are considered “persons” under the United States Constitution.

In PGE’s motion for judgment on the pleadings, it sought a declaratory judgment that the entire ordinance was unconstitutional, violated state law, and was preempted. The court only addressed those provisions specifically addressed in PGE’s Amended Complaint, and found that each provision was invalid as preempted or in violation of state law. Sections 3(a) and (b) of the ordinance prohibited any corporation from depositing waste from oil and gas extraction within Grant Township, and further provided that no permit issued by any state or federal entity would be valid in Grant Township. The court held that these sections were preempted by Pennsylvania’s Second Class Township Code, which provides that municipal corporations “possess only such powers of government as are expressly granted to [them] and as are necessary to carry the same into effect.” Because Grant Township was not expressly granted the authority to regulate the depositing of waste from oil and gas wells or to invalidate permits granted by the state or federal government, the court concluded it exceeded its legislative authority under the Code. The court also noted that “[a]lthough Defendant wishes it were not so, the development of oil and gas (which necessarily includes the management of waste materials generated at a well site) is a legitimate business activity and land use within Pennsylvania.” The court said that because the ordinance completely banned a legitimate use, it violated Pennsylvania law. The court did not address PGE’s constitutional challenges, given that all challenged provisions were held invalid or preempted by state law.

In a separate opinion, Judge Baxter denied Grant Township’s motion to dismiss the suit. Grant Township alleged that PGE lacked standing because the Pennsylvania DEP had not issued PGE a permit. Judge Baxter noted that Grant Township erred by focusing on whether PGE could drill in Grant Township, rather than focusing on the constitutional challenges before the court. Because the issues in the case involved whether the ordinance enacted by Grant Township infringed on PGE’s constitutional rights, violated state law, or was preempted, the lack of a DEP permit was irrelevant to standing for the legal claims pleaded.


Client Alert 2015-303