Restrictive Covenants: A Means To Regulate ‘Fracking’ in New York?

December 2011Newsletters In the Zone

New York State is in the process of allowing oil and gas companies to extract natural gas through the environmentally controversial means commonly referred to as “fracking,” or high volume hydraulic fracturing. While local governments throughout New York may attempt to regulate the process through zoning or other means, such regulations may be pre-empted by state laws. The New York Supreme Court’s 2011 decision in Weiden Lake Property Owners Ass’n v. Klansky (2011 N.Y. Slip O. 51581U (Sup. Ct. Sullivan Co. Aug 18, 2011) suggests, however, another possible alternative: restrictive covenants. The Weiden Lake decision upheld the barring of a homeowner’s leasing of drilling rights to an oil company due to restrictive covenants running on the land. In Weiden Lake, the Property Owners Association (POA) of the Weiden Lake Community, of which the homeowner was a part, argued that each parcel in the community was subject to protective covenants that appeared on the subdivision plat, prohibiting, among other things, “[n]o commercial fishing enterprise or fee based boat launching or any other commercial uses…” [emphasis added].

The court found the phrase “any other commercial uses” prohibited all other commercial uses for the entirety of the community. Further, the court found that, because the homeowner’s prior deeds in the chain of title referenced the subdivision plat where such restrictive covenants were contained, the homeowner and the lessee oil company were on record notice of the restrictive covenant against commercial uses. The court found the POA had shown by clear and convincing evidence – namely the clear and unambiguous language of the covenants running with the land and prohibiting commercial use of the homeowner’s property, coupled with the record notice to the homeowner – that the POA was entitled to summary judgment declaring the covenants prohibited exploration, drilling, production and marketing of oil, natural gas and other hydrocarbons.

In conclusion, the Weiden case makes clear that privately imposed restrictive covenants are an acceptable method to prohibit drilling, including “fracking.” It remains to be seen whether a municipality can require such a restrictive covenant as a condition to land use approval due to possible pre-emption by statewide regulation.

For more information, please contact Michael I. Slapo at 212.878.7920 or [email protected].

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