New energy law balances authority between cities and the state

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Energy law balances authority between cities and the state

Q: The governor recently signed Senate Bill 809 that deals with the regulation of some oil and gas activity. Does the bill change how the industry is regulated?

A: Oklahoma has enacted a statute permitting local governments to establish certain reasonable regulations for oil and gas well site locations to protect the health and safety of its citizens. The statute gives some control to local authorities to reasonably establish certain geographic restrictions for well site locations and to regulate noise, odor and road use. The law provides that a municipality may not “ban” oil and gas operations, such as drilling, hydraulic fracture stimulation and water disposal. This statute is similar to a statute passed in Texas in May. The statute also emphasizes the exclusive authority of the Oklahoma Corporation Commission (OCC) to regulate oil and gas operations in Oklahoma.

Q: We’ve heard a lot lately about earthquakes and oil and gas activities. How does SB 809 impact that issue?

A: First, the OCC retains jurisdiction over oil and gas activities. This remains unchanged. Second, oil and gas drilling, and fracking in particular, haven’t been linked to an increase in reported earthquake events in Oklahoma. Of recent concern is the possibility that wastewater disposal may be related to an increase in seismicity. However, the Oklahoma Geological Survey has observed that the amount of wastewater generated from hydraulic fracturing is a relatively small percentage of the total volume of wastewater injected in disposal wells in Oklahoma. The OCC is carefully monitoring injection wells and has issued “traffic light” rules governing injection wells in seismically sensitive areas. Addressing what may be an issue on a statewide basis appears to offer a better resolution than local ad-hoc measures, which might not even address the actual issue.

Q: What has happened in other jurisdictions where bans have been put in place?

A: Sometimes lost in the discussion of banning all activities in an area is the real possibility that a ban may very well constitute a “taking” and require the local government to pay money for the property right taken. Most mineral estates in Oklahoma were long ago “severed,” which basically means that the individual who owns the “right” to the mineral estate is different from the individual who owns the “right” to the surface. Both owners have rights. A ban that prohibits an owner from receiving the benefit of her property rights can be considered a “taking without compensation.” In several states, bans have resulted in lawsuits with mineral owners seeking compensation for the property. In short, although some may claim that the current statute is “taking away” the right of the local government to ban something, because the OCC already has exclusive jurisdiction and because a ban could be considered an improper taking, the legislation likely is an attempt to balance the competing rights of the various parties.