Multi-Layered, and Sequential, State and Local Barriers to Extractive Resource Development
By Jan G. Laitos and Elizabeth H. Getches
INTRODUCTION
Natural resources developers throughout America, and particularly in the West, seek to extract valuable energy resources (oil, gas, coal, and coalbed methane), as well as precious minerals (gold and copper) and building materials (stone, sand, and gravel). Even though these developers may have a perfectly valid legal ownership right to remove resources, state and local regulatory barriers interfere with, and in some cases prevent, the developers' exercise of that right. These barriers arise in ways that may be characterized as both “vertical” and “horizontal.” Vertically, layer after layer of state and local regulatory uncertainty and confusion force the developer to spend time, money, and effort attempting to understand whether, and how, state and local law applies to the development project. Horizontally, over the entire life cycle of the development, from permitting to reclamation, state and local regulations and restrictions operate, sometimes with maddening predictability, to deter, retard, or stop the extraction of resources.
These governmental limits are usually imposed for environmental, land use, or jurisdictional dominance purposes. Unfortunately, no matter how worthy their motive, the sheer quantity of these multi-layered and sequential state and local barriers makes resource development very time-consuming and expensive. The relentless nature of these non-federal regulations sometimes discourages or halts otherwise useful and legally valid resource extractive operations. This consequence benefits neither the local governments imposing the regulations nor the frustrated developer. The American resource market is a victim as well because such barriers slow or even halt the movement of needed commodities to demanding consumers. Indeed, one could argue that the only parties who gain from this chaotic state of affairs are the developers' lawyers who devote endless billable hours to battling with state and local regulatory agencies.
Especially in the intermountain West, coalbed methane (CBM) development is particularly vulnerable to these state and local vertical and horizontal barriers. CBM is considered vital in meeting the nation's growing energy demand. Despite this energy need, CBM developers confront the same vertical and horizontal roadblocks as other mineral extractive industries, as well as obstacles unique to CBM development. Because CBM removal has profound impacts on water quality and quantity and the surrounding landscape, CBM development often engenders special state and local regulations, even though it is relatively cheap and easy to extract. Existing environmental rules are frequently ill-suited to address such CBM-specific consequences. Developers of CBM must litigate for clarification or face regulatory paralysis.
In this article, we will make the case that the law, especially local regulations and state rules, has become antithetical to rational resource development. First, we consider the many layers of regulatory confusion that resource developers face. We focus on the issue of whose right prevails. This question arises between (1) surface and mineral estate owners, (2) coal developers and coalbed methane gas developers, and (3) oil and gas developers and CBM developers, when the former has a dormant estate and the latter is in the process of mineral extraction. Next, we discuss the confusion developers must face when they attempt to determine whose law applies. Choice of law questions occur when developers (1) confront competing state and local regulations, or (2) encounter the two entirely different and contradictory water regulatory regimes that potentially apply to the immense quantity of water produced during CBM extraction. Then, we consider another baffling layer of legal conflict facing resource developers: the battle between private property resource rights protected by the Takings Clause of the U.S. Constitution and the police power of government that regulates this property.
After describing the layers of conflict that work to choke off even thoughtful and measured development activity, we address the discouraging and relentless pattern of regulatory obstacles that are endemic at every critical stage of a resource extractive operation. We describe the sequential state and local regulatory hurdles developers must negotiate while obtaining a permit to develop, during resource development, and after production ceases. These barriers range from changing zoning regulations to heavy-handed conditional use permits, unexpected moratoria, and even stringent post-mining reclamation requirements.
We then suggest, by way of conclusion, that it is in the interest of both developers and state and local governments to impose a more rational and unified set of regulatory rules on resource extractive operations. Increasing predictability would help to avoid the delays, confusion, and litigation that the current system encourages.
Natural resources developers throughout America, and particularly in the West, seek to extract valuable energy resources (oil, gas, coal, and coalbed methane), as well as precious minerals (gold and copper) and building materials (stone, sand, and gravel). Even though these developers may have a perfectly valid legal ownership right to remove resources, state and local regulatory barriers interfere with, and in some cases prevent, the developers' exercise of that right. These barriers arise in ways that may be characterized as both “vertical” and “horizontal.” Vertically, layer after layer of state and local regulatory uncertainty and confusion force the developer to spend time, money, and effort attempting to understand whether, and how, state and local law applies to the development project. Horizontally, over the entire life cycle of the development, from permitting to reclamation, state and local regulations and restrictions operate, sometimes with maddening predictability, to deter, retard, or stop the extraction of resources.
These governmental limits are usually imposed for environmental, land use, or jurisdictional dominance purposes. Unfortunately, no matter how worthy their motive, the sheer quantity of these multi-layered and sequential state and local barriers makes resource development very time-consuming and expensive. The relentless nature of these non-federal regulations sometimes discourages or halts otherwise useful and legally valid resource extractive operations. This consequence benefits neither the local governments imposing the regulations nor the frustrated developer. The American resource market is a victim as well because such barriers slow or even halt the movement of needed commodities to demanding consumers. Indeed, one could argue that the only parties who gain from this chaotic state of affairs are the developers' lawyers who devote endless billable hours to battling with state and local regulatory agencies.
Especially in the intermountain West, coalbed methane (CBM) development is particularly vulnerable to these state and local vertical and horizontal barriers. CBM is considered vital in meeting the nation's growing energy demand. Despite this energy need, CBM developers confront the same vertical and horizontal roadblocks as other mineral extractive industries, as well as obstacles unique to CBM development. Because CBM removal has profound impacts on water quality and quantity and the surrounding landscape, CBM development often engenders special state and local regulations, even though it is relatively cheap and easy to extract. Existing environmental rules are frequently ill-suited to address such CBM-specific consequences. Developers of CBM must litigate for clarification or face regulatory paralysis.
In this article, we will make the case that the law, especially local regulations and state rules, has become antithetical to rational resource development. First, we consider the many layers of regulatory confusion that resource developers face. We focus on the issue of whose right prevails. This question arises between (1) surface and mineral estate owners, (2) coal developers and coalbed methane gas developers, and (3) oil and gas developers and CBM developers, when the former has a dormant estate and the latter is in the process of mineral extraction. Next, we discuss the confusion developers must face when they attempt to determine whose law applies. Choice of law questions occur when developers (1) confront competing state and local regulations, or (2) encounter the two entirely different and contradictory water regulatory regimes that potentially apply to the immense quantity of water produced during CBM extraction. Then, we consider another baffling layer of legal conflict facing resource developers: the battle between private property resource rights protected by the Takings Clause of the U.S. Constitution and the police power of government that regulates this property.
After describing the layers of conflict that work to choke off even thoughtful and measured development activity, we address the discouraging and relentless pattern of regulatory obstacles that are endemic at every critical stage of a resource extractive operation. We describe the sequential state and local regulatory hurdles developers must negotiate while obtaining a permit to develop, during resource development, and after production ceases. These barriers range from changing zoning regulations to heavy-handed conditional use permits, unexpected moratoria, and even stringent post-mining reclamation requirements.
We then suggest, by way of conclusion, that it is in the interest of both developers and state and local governments to impose a more rational and unified set of regulatory rules on resource extractive operations. Increasing predictability would help to avoid the delays, confusion, and litigation that the current system encourages.
