HARRISBURG, Pennsylvania — A Pennsylvania court has further limited the reach of a major 2012 law that modernized drilling regulations, ruling Thursday that state public utility regulators cannot review how local zoning restrictions affect the natural gas industry.
The Commonwealth Court decision threw out the Public Utility Commission's newly authorized power to withhold drilling fee revenue from municipalities whose zoning it deems to illegally restrict drilling activity.
The decision is another blow to an effort by Gov. Tom Corbett and the Republican-controlled Legislature to respond to the drilling industry's complaints about municipal zoning. It follows a state Supreme Court ruling in December that said the law could not strip local zoning authority over drilling activity, such as the placement of rigs, pipelines, waste pits and compressor stations.
John M. Smith, a Pittsburgh-area lawyer who helped represent the seven municipalities that sued, said they were pleased that the court "once again protected the rights of local governments and Pennsylvania citizens."
The Commonwealth Court ruling rejected three other challenges in the lawsuit to elements of the sprawling law.
Those three victories led Corbett's office to say the opinion "speaks volumes to the constitutionality of state regulation of oil and gas activities." A spokesman would only say that the office is evaluating the impact of the ruling on the intended role of the utility commission.
The court left intact limits on what doctors may reveal about the proprietary contents of hydraulic fracturing solutions.
Still, Smith said that while the court did not find the "medical gag rule" to be unconstitutional, the court interpreted the law to allow certain disclosures that alleviated much of the plaintiffs' concerns over the secrecy. Those disclosures include to patients who suffer chemical exposures from drilling operations, to other treating physicians and in medical records, Smith said.
The court also refused to require the state to notify people who rely on private water sources of the potential for drilling contamination and it rejected the argument that the law authorized illegal private eminent domain for natural gas pipelines and storage.
In addition to the seven municipalities — four in Washington County, two in Bucks County and one in Allegheny County — the plaintiffs include environmental advocacy group Delaware Riverkeeper and Dr. Mehernosh Khan, a former Pittsburgh-area physician who is now practicing in Massachusetts.
The 2012 law grew out of a desire to modernize Pennsylvania's 20-year-old drilling laws to account for a Marcellus Shale drilling boom made possible by innovations in technology, most notably horizontal drilling and hydraulic fracturing.
The law did not include a severance tax on the industry, but it did allow counties to impose an impact fee. Most of the revenue goes to local governments that host the gas wells, while state agencies and grant programs get the rest.
After the industry descended on Pennsylvania in 2008 to tap into the Marcellus Shale, companies began complaining that some municipalities were exploiting a legal gray area and using zoning rules to illegally limit drilling.
Corbett, a Republican, backed the industry, arguing that a 1984 state law had intended to outlaw municipal regulation of oil and gas operations anyway.
The law's provisions effectively told municipalities where they must allow various types of drilling activity, but they were put on hold by a lower court and were never enforced before the Supreme Court ruled 4-2 in December that the state had overstepped its bounds.