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May 19, 2014 Articles

Is New York's Fracking Review Subject to Judicial Oversight?

This case could decide whether New York's environmental review of fracking can be accelerated by judicial order.

By Matthew D. Wagoner and Cindy Monaco

High-volume hydraulic fracturing (fracking) in the state of New York has been on hold as the state reviews the use of fracking under the New York State Environmental Quality Review Act. The review has lasted almost six years, causing plaintiffs in two cases to seek a judicial order requiring the state to complete its review. These cases have the potential for ushering in a new era of shale development in New York. But the state has moved to dismiss the cases, raising a variety of challenges, challenging everything from the plaintiffs’ standing to the court’s ability to issue a mandamus order. If the court grants the state’s motions to dismiss, the state’s review of fracking would be insulated from judicial review, allowing New York to indefinitely delay the use of fracking within its borders.

The Marcellus Shale formation covers approximately 54,000 square miles primarily underlying New York, Pennsylvania, Ohio, and West Virginia. By 2008, oil and gas operators were pursuing leases in the Southern Tier of New York to explore the Marcellus Shale formation using fracking. As a result, in July 2008, then-Governor David Paterson directed the New York State Department of Environmental Conservation to update the generic environmental-impact statement that the department had prepared in 1992 regarding oil and gas drilling. The governor’s directive required the department to complete a supplemental impact statement and issue a statement of its findings.

The process of producing a supplemental impact statement has continued for almost six years, and based on recent testimony by both the Department of Environmental Conservation Commissioner Joseph J. Martens and the New York State Department of Health Commissioner Nirav R. Shah, there is no end in sight.

To bring this process to a conclusion, some New Yorkers have turned to litigation. On December 17, 2013, Mark S. Wallach—as the bankruptcy trustee of Norse Energy Corp. USA—and James Lobdell commenced a hybrid proceeding against the Department of Environmental Conservation, the Department of Health, Commissioner Martens, Commissioner Shah, and Governor Andrew M. Cuomo. The petitioners claim that the respondents have illegitimately obstructed and delayed the supplemental-impact-statement process for political reasons and that the resultant delay has harmed the petitioners. In February 2014, the Joint Landowners Coalition of New York, on behalf of its approximately 70,000 members and several business landowners, filed a nearly identical lawsuit against the same respondents.

Factual Allegations: Evolution of the Process and About-Face by Respondents 
The Department of Environmental Conservation released its draft scope for the supplemental impact statement in October 2008 and published the final scope, after public review, in February 2009. The first draft impact statement was published in September 2009, and it received thousands of public comments. More than a year into the department’s efforts to address the public comments, in December 2010, then-Governor Paterson issued Executive Order No. 41 directing the department to conduct a further environmental review and to publish a revised draft impact statement by June 1, 2011. After taking office in January 2011, Governor Cuomo issued Executive Order No. 2, continuing Executive Order No. 41.

The department did not comply with the June 1, 2011, deadline, instead releasing the revised draft impact statement in July 2011. At that time, Commissioner Martens stated, “[w]ith all of the precautions that we have built into the process, [fracking] can be done safely.” Notably, the revised draft impact statement memorializes the department’s extensive consultations and deliberations with the Department of Health in reaching the conclusion that fracking “can be undertaken safely . . . with strong and aggressive regulations.” Jon Campbell, “DEC: Local hydrofracking bans could end up in court,” Elmira Star-Gazette, July 7, 2011, at A1.

In September 2011, the Department of Environmental Conservation issued the second revised draft impact statement, which included new proposed mitigation measures, and it also published the proposed regulations for fracking. The public-comment period for the second revised draft impact statements and regulations resulted in the submission of more than 80,000 public comments.

During this period, Commissioner Martens answered questions pertaining to the health impacts associated with fracking, stating:

[The Department] has fully considered the impact fracking could potentially have on public health and our communities. . . . We examined the history of spills and other problems in other states where the process was used. Most importantly, [the Department] carefully considered every possible way that people could be exposed to those chemicals and consulted with the State Dept. of Health about how to prevent that exposure. . . . That is why [the Department] has designed the most stringent set of requirements in the nation—to prevent contamination of our natural resources and thus eliminate human exposure pathways.

In December 2011, Commissioner Martens stated that the supplemental-impact-statement process would be completed by that spring. In January 2012, the department published a fact sheet indicating that the supplemental-impact-statement process would conclude in that year. In February 2012, Commissioner Martens stated that “there are months, not years, worth of more work to do” and “[w]ith the proper oversight and state-of-the-art regulations, . . . [fracking] can be done safely.”

Although the Department of Health had been extensively involved in the supplemental-impact-statement process from the outset, on September 20, 2012, Commissioner Martens requested that Commissioner Shah assess the impact of fracking on public health. In January 2013, Commissioner Shah testified that the health review would be done in “the next few weeks.” A week later, Commissioner Shah requested more time for his health review but confirmed that it would be completed “within a few weeks, along with [his] recommendations.” Letter from Nirav Shah, Comm’r of N.Y. State Dep’t of Health, to Joe Martens, Comm’r of N.Y. State Dep’t of Envtl. Conservation (Feb. 12, 2013). In March 2013, Commissioner Shah again indicated that the health review would be finished in a few weeks. And, in May 2013, Governor Cuomo stated that he expected the health review to be completed already and that he now expected it within weeks.

In October 2013, however, Commissioner Martens did an about-face, stating that the health review should not be expected anytime soon and that there was no “urgency” for completing the process of preparing a supplemental impact statement. Then, on December 16, 2013, Governor Cuomo held a press conference with his cabinet where Commissioner Shah answered questions about the status of the health review. Commissioner Shah refused to give any estimated timeline for completion of the health review, stating only that it will be completed “[w]hen I’m done.”

Commencement and Legal Allegations 
The next day, the petitioners commenced the Norse action seeking an order (1) compelling the Department of Environmental Conservation and Commissioner Martens to complete the supplemental-impact-statement process, (2) determining that the continued failure of the Department and Commissioner Martens to complete the process based on the still-pending health review is arbitrary and capricious and an abuse of discretion and that the Department of Health and Commissioner Shah are proceeding without or in excess of their jurisdiction, (3) determining that Governor Cuomo’s direct intervention in the process renders his records open to public scrutiny, and (4) determining that Governor Cuomo is acting without or in excess of his jurisdiction by orchestrating the delay of the process of preparing a supplemental impact statement.

The petitioners argue that the respondents’ failure to complete the process for more than five and one-half years merits mandamus to compel completion of the process. They assert that the delay violates (1) New York State Environmental Quality Review Act’s express timing requirements and overarching mandate for prompt review; (2) the directive in New York Environmental Conservation Law section 23-0501(3) that well permits be processed expeditiously; (3) the New York Energy Law’s public policy to promote the prudent development of indigenous resources, including Devonian shales (N.Y. Energy Law § 3-101(5) (McKinney 2014)); and (4) the common-law precept that agencies must process permit applications in a reasonable period of time. See, e.g.Utica Cheese, Inc. v. Barber, 49 N.Y.2d 1028, 1030 (1980).

The petitioners further allege that the health-review referral was a political sham orchestrated by Governor Cuomo to delay the supplemental-impact-statement process, rendering it an abuse of discretion and an improper delegation of the Department of Environmental Conservation’s obligations under the Environmental Quality Review Act. Furthermore, the petition alleges that, by precluding the department from carrying out its obligations under the act, Governor Cuomo acted as an interested agency under the act, subjecting his records to public scrutiny. The petitioners also maintain that Governor Cuomo acted illegally and in excess of his jurisdiction.

The Joint Landowners Coalition of New York brought an action asserting essentially the same claims.

Respondents’ Motions to Dismiss
The respondents moved to dismiss the claims in both actions based on a variety of arguments.

Regarding the Norse action, initially, the respondents attack the petitioners’ standing. Among other arguments, they contend that the petitioners lack standing because they fail to allege any concrete injury-in-fact different from that experienced by the general public, namely, that everyone in New York is similarly affected because no one can use fracking. The respondents also assert that Norse’s claims of economic injury are speculative, and, in any event, economic interests are not within the zone of interest protected by the Environmental Quality Review Act. The respondents also contend that petitioner Lobdell lacks standing to sue as a shareholder of Norse’s parent company, as he lacks authority to represent Norse’s interests.

The respondents then attack the petitioners’ request for mandamus. They assert that the petitioners are not entitled to mandamus to compel because the petitioners are seeking to compel an act that is discretionary. See N.Y. Comp. Codes R. & Regs. tit. 6, §§ 617.2(ad), 617.3(i), 617.9(a)(5)(ii)(a) (2014). Furthermore, the respondents maintain that the underlying issue is nonjusticiable because it involves “complex societal and governmental issues . . . [that should be] left to the discretion of the political branches of government.” N.Y. State Inspection, Sec. & Law Enforcement Emps., Dist. Council 82, AFSCMS, AFL-CIO v. Cuomo, 64 N.Y.2d 233, 240 (1984) (citation omitted).

The respondents also advance a number of procedural bars. They argue that the petitioners’ claims related to the health review are time-barred pursuant to the four-month statute of limitations, which they contend began running upon the health-review referral in September 2012. N.Y. C.P.L.R. § 217(1) (McKinney 2014). They further assert that these claims fail to state a cause of action because it is lawful for the Department of Environmental Conservation to await input from the Department of Health before rendering findings. N.Y. Comp. Codes R. & Regs. tit. 6, § 617.14(c)(3) (2014). Moreover, they argue that the improper-delegation claim is premature and will not be ripe for review until the Department of Environmental Conservation reaches a final determination on the supplemental impact statement. Finally, they argue that the petitioners’ request for prohibition against the Department of Health and Commissioner Shah is not available as a matter of law because the agency conduct at issue is not judicial or quasi-judicial in nature. Morganthau v. Erlbaum, 59 N.Y.2d 143, 147 (1983).

The respondents further assert that the petitioners’ claims against Governor Cuomo fail to state a cause of action because, as a matter of law, the governor is not an “agency” under the Environmental Quality Review Act. Thus, they maintain that the governor’s records are not subject to public scrutiny. Furthermore, they argue that the petitioners’ request for prohibition is improper because the conduct at issue is not judicial or quasi-judicial. Finally, the respondents contend that the petitioners have not alleged that Governor Cuomo has overstepped his executive role in seeing the laws of the state faithfully executed. For these reasons, the respondents seek to dismiss the petition in the Norse action in its entirety. And, in March 2014, the respondents filed a nearly identical motion to dismiss the Joint Landowners Coalition’s action.

Norse’s Opposition to the Motion 
As to standing, the petitioners argue that they have standing because of the direct negative impact that the respondents’ inaction has had on the petitioners’ legally protected property interests. Specifically, petitioner Wallach alleges that Norse’s assets, which include its leasehold interest of 130,000 mineral acres, 27 pending permit applications, sophisticated seismic-testing studies, and business strategy for developing its acreage, once valued at more than $100,000,000, have been rendered valueless by the respondents’ conduct. Petitioner Lobdell, a shareholder in Norse’s parent company, alleges that his investment has been rendered valueless and that the general public interest of New York has been harmed by the respondents’ conduct. Thus, Norse is directly and presumptively aggrieved by the respondents’ inaction, meaning that Norse need not show a special environmental injury to have standing. Further, petitioner Lobdell contends that he has standing based on the doctrine of public-interest standing: That is, in matters of great public interest, such as the future of New York’s oil and gas development, citizens may maintain a mandamus proceeding to compel a public officer or body to perform a duty. Hebel v. West, 25 A.D.3d 172, 175–76 (N.Y. App. Div. 3d Dep’t 2005).

As to mandamus, the petitioners argue that their claim states a cause of action because the department’s review process is not discretionary. The petitioners cite several cases where courts granted mandamus to compel the completion of an obligation under the Environmental Quality Review Act, including issuance of the final impact statement and a statement of findings. E.g., Costco Wholesale Corp. v. Town Bd. of Town of Oyster Bay, 90 A.D.3d 657, 657–59 (N.Y. App. Div. 2d Dep’t 2011). The petitioners point out that if the court accepted the respondents’ arguments, the respondents’ conduct would be insulated from judicial review even if the process went on indefinitely. The petitioners note that the respondents’ refusal to provide a timeline for completing the process highlights the need for mandamus relief. Utica Cheese, 49 N.Y.2d at 1030.

The petitioners also argue that their mandamus action is justiciable because it presents a purely legal question that falls squarely within the judicial province, as demonstrated by the numerous decisions granting mandamus to compel completion of reviews under the Environmental Quality Review Act.

As for the respondents’ procedural challenges, the petitioners maintain that their claims related to the health review are not time-barred, as they are based on the respondents’ continuing unlawful acts (i.e., their failure to carry out a statutory obligation), which tolls the statute of limitations. They also assert that, under these unique facts, where the lead agency has turned total control of the timing and outcome of the process to another entity, the improper delegation claim is ripe.

As for the causes of action asserted against the Department of Health and Commissioner Shah, the petitioners maintain that there is no basis to dismiss these claims. The petitioners argue that even if the relief requested—i.e., prohibition—is technically incorrect, that is of no import. The court may convert from one form of proceeding to another and may grant any relief warranted by the pleaded facts. N.Y. C.P.L.R. §§ 103(c), 3017(a) (2014). Thus, the causes of action asserting that the Department of Health and Commissioner Shah are acting without or in excess of their jurisdiction remain viable.

As to Governor Cuomo, the petitioners contend that courts have found the executive to be an “agency” for purposes of the Environmental Quality Review Act. Further, the petitioners maintain that, contrary to the respondents’ contentions, the petition repeatedly and unequivocally alleges that the governor has acted and continues to act illegally, for his own political gain, and in excess of his jurisdiction.

The Joint Landowners Coalition advanced nearly identical arguments in opposing the respondents’ motion to dismiss.

This case could decide whether New York’s environmental review of fracking can be accelerated by judicial order. First, however, the court has to resolve key questions about the petitioners’ standing and the court’s power to order the state agencies to complete their reviews. The motions to dismiss have been scheduled for oral argument on April 25, 2014. All stakeholders await the ultimate decision of the court.

Keywords: energy litigation, oil, gas, mandamus, fracking, fracturing, SGEIS, SEQRA, impact statement, Environmental Quality Review Act, New York

Matthew D. Wagoner and Cindy Monaco are of counsel at The West Firm, PLLC, in Albany, New York.

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