Questions regarding zoning for oil and gas development projects have persisted in Pennsylvania for years. Now, cryptocurrencies and data mining operations could create a new wrinkle in the long-running dispute over oil and gas zoning.
Municipal “police powers” allow municipalities to “manage community growth by locating private development in use zones within the community.” About Charleston Outdoor LLC, 280 A.3d 948, 957 (Pa. 2022). “The fundamental purpose of zoning is to ensure the orderly physical development of a city, ward, township, or other community by confining specific uses of real property to certain defined areas. ” Omatic v. Cecil Township Zoning Hearing, 286 A.2d 413, 421 (Pa. Commw. Ct. 2022). By their nature, zoning ordinances restrict an individual’s right to use real property as they wish by restricting the use of a particular property to a specific geographic area. However, zoning has long been found to be an appropriate use of government’s “police powers.” This is because, under a proper zoning plan, “all property owners in a designated area are subject to the same restrictions, and are not only for the benefit of the municipality as a whole, but also for the common benefit of each other.” .” About Realen Valley Forge Greenes Associates838 A.2d 718, 729 (Pa. 2003) (cited) Pennsylvania Coal Company v. Mahon, 260 US 393 (1922)); United Artists Theater Circuit, Inc. v. City of Philadelphia, Philadelphia Historical Commission., 595 A.2d 6, 13 (Pa. 1991).
In Pennsylvania, the technical details of how oil and gas development occurs are controlled by the state, but where that development occurs is within municipal zoning. It is located in look, Huntley & Huntley, Inc. v. Oakmont Borough Council, 964 A.2d 855, 866 (Pa. 2009). The Pennsylvania Legislature passed Act 13 of 2012, which was designed to require all local zoning ordinances to allow for the “reasonable development of oil and gas resources,” including specific requirements that apply throughout the state. was approved. look, 58 Pa.CS § 3304. Robinson Township, Washington County vs. Commonwealth, 83 A.3d 901, 1000 (Pa. 2013), the Pennsylvania Supreme Court blocked this, concluding that it violated the Environmental Rights Amendment of the Pennsylvania Constitution. look, Paconst. art. 1 second. 27.
Against this backdrop, zoning disputes for oil and gas operations in Pennsylvania often involve whether oil and gas zoning restrictions maintain a “mutuality of interests” between authorized land uses within the zoning district. It is frequently a point of contention. A common issue is the nature of oil and gas development and its compatibility with other uses within the zone of use for which it is authorized, and courts have determined that the nature of oil and gas development is In most cases, it is left up to local governments to decide on land use zones. for example, Frederick v. Allegheny Township Zoning Hearing.board, 196 A.3d 677, 690–91 (Pa. Cmmw. 2018), a Pennsylvania federal court held that “municipalities must assess their landscape and ensure that all oil and gas operations are A common issue is whether the intensive process of constructing well pads and drilling wells is representative of the land use as a whole, or whether it actually is the typical land use for passive production of oil and gas from wells located on well pads. .
Developments in cryptocurrency mining and data mining could insert a new layer into the existing debate about where oil and gas development should occur under zoning ordinances. Cryptocurrency and data mining activities use vast amounts of computing power, which requires large amounts of electricity. The electricity is provided by a generator powered by a natural gas well. And it doesn’t just concern electricity produced by natural gas power plants. Applications that require large-scale computing power can be located on the natural gas well sites themselves and use the gas produced by those wells to generate electricity.
Although not in the realm of zoning, these days Big Dog Energy, LLC v. EZ Blockchain, LLC, No. CV 3:23-11 (WD Pa. June 15, 2023), illustrates new potential zoning issues involving oil and gas development. Big Dog Energy operates oil and gas wells in Clearfield County, Pennsylvania, and he contracted with EZ Blockchain to establish a mobile data mining operation at the well site. Under the agreement, Big Dog Energy “makes available for sale; [EZ Blockchain] Purchase a certain amount of natural gas to power mobile data mining operations.big dog [Energy] provide space for the well [EZ Blockchain] Operates a mobile data center, [EZ Blockchain] I was responsible for the construction, maintenance, and operation of the center. ” Same as above. At *1. A dispute arose between Big Dog Energy and EZ Blockchain regarding performance under the contract, leading to litigation.
The specificities of the dispute between Big Dog Energy and EZ Blockchain are not material to this discussion. However, the existence of an agreement between the gas well operator and the data mining entity to identify the location of data mining operations at oil and gas well sites is important. The presence of cryptocurrencies and data mining operations at well sites not only raises interesting questions about oil and gas lease terms, but also because oil and gas drilling sites are not necessarily used for the single purpose of extracting oil and gas. This means that it will not be done. Instead, oil and gas drilling sites can become home to other types of land uses that depend on the gas produced from wells but are quite distinct from the extractive industry itself.
This raises fundamental questions about the treatment of oil and gas drilling sites by municipal planning ordinances and the courts’ potential evaluation of disputes regarding these activities. While courts defer to local governments’ decisions about where certain land uses are located, courts have held that local governments’ zoning of oil and gas drilling sites excludes the presence of other land uses, such as virtual currency or data mining operations, at those sites. There are questions as to whether this was taken into account. Although these studies are inherently specific to individual municipalities, there are questions and disputes about whether other land uses, such as virtual currency or data mining, are primary land uses or just land uses. It is natural that this is expected to occur. accessories Used in oil and gas wells.
At this time, conducting cryptocurrency and data mining operations at gas well sites does not appear to be widespread in Pennsylvania or the nation. However, cryptocurrencies and data mining at and around gas well sites, as pipeline permitting issues continue and economic factors may encourage the location of these power-intensive activities closer to power generation sources. It is reasonable to expect that work placements will expand. Local governments and their residents should consider the possibility that oil and gas well sites will host more than just extraction equipment to extract hydrocarbons from the ground, and adjust zoning ordinances accordingly.
