On February 21, 2020, the Pennsylvania Commonwealth Court dismissed a claim brought by a group of municipalities alleging that a Pennsylvania Public Utility Commission (PUC) regulation governing the siting of gas meters failed to sufficiently protect historic resources under Article I, Section 27 of the Pennsylvania Constitution, also known as the Environmental Rights Amendment (ERA). See City of Lancaster, et al. v. Pa. Pub. Util. Comm’n, No. 251 MD 2019 (Pa. Cmwlth. Feb. 21, 2020).

The PUC regulation at issue, 52 Pa. Code § 59.18, was amended in 2014 to encourage natural gas distribution companies (NGDCs) to site gas meters outside, rather than inside, of buildings. Subsection 59.18(d), nevertheless, allows an NGDC to consider locating a gas meter inside of a historic building, such as one designated as historic under the Pennsylvania Historic District Act, but only if certain safety conditions are met, including that the meter is adequately protected from ambient temperatures to avoid meter freeze-ups and that the meter is not at a high risk of vandalism. Ultimately, the regulation leaves this decision to the sole discretion of the NGDC.

In City of Lancaster, an NGDC serving three municipalities – the City of Lancaster, Borough of Carlisle, and Borough of Columbia – had decided to relocate meters from the interior of buildings to the exterior of buildings in the municipalities’ historic districts. The municipalities filed a Petition for Review before the Commonwealth Court in its original jurisdiction, alleging that Section 59.18 violates the ERA by making the interior locations of meters in historic districts the exception rather than the rule, by failing to set standards that a utility must follow when installing a meter in a historic district to protect historic resources, by leaving this decision to the ultimate discretion of the utility, and by exempting utilities from local historic district requirements.

The Court began its analysis by noting that, last year, the Pennsylvania Supreme Court, in PPL Electric Utilities Corp. v. City of Lancaster, 214 A.3d 639 (Pa. 2019), held that the Pennsylvania Public Utility Code occupies the entire area of utility regulation in the Commonwealth, known as “field preemption.” The Court stated that, as a general matter, Section 59.18 therefore supersedes any local regulation or ordinance that falls within the ambit of that field. At the same time, as the Commonwealth Court previously held in UGI Utilities, Inc. v. City of Reading, 179 A.3d 624 (Pa. Cmwlth, 2017), preemption is barred where the regulation at issue completely removes protections to the public natural resources protected by the ERA. For example, the Pennsylvania Supreme Court, in Robinson Twp. v. Commonwealth, 83 A.3d 901 (Pa. 2013) (plurality), struck down Sections 3303 and 3304 of Act 13 of 2012 which superseded local regulation of oil and gas operations and imposed an affirmative obligation on municipalities to adopt zoning ordinance amendments permitting oil and gas operations in all zoning districts. In other words, the PUC and its regulations must still comply with the ERA.

Here, the Court found that the municipalities failed to establish that 52 Pa. Code § 59.18, on its face, caused an “unreasonable degradation” of historic values protected under the ERA. The Court explained that the intent of Section 59.18 is actually to protect historic buildings by providing a specific exception for considering the placement of meters indoors in historic districts as long as certain safety requirements are met. The Court, citing Robinson Twp., emphasized that “the duties to conserve and maintain natural resources under the ERA ‘do not require a freeze of the existing public natural resource stock” and “are tempered by legitimate state interests.’” The Court ultimately dismissed the municipalities’ facial challenge to Section 59.18, finding that there may be circumstances in which no harm to historic resources will result from the placement of meters outside of historic buildings, but allowed the municipalities to seek to amend their Petition for Review to assert an as-applied challenge.

Additionally, the Court rejected the PUC’s argument that the municipalities failed to exhaust administrative remedies, finding that the PUC’s internal review procedures under 52 Pa. Code § 5.44 are not applicable to an NGDC’s decision not to site a meter inside a historic building under 52 Pa. Code § 59.18(d), and that the municipalities brought a facial challenge to the constitutionality of a regulation, which is an exception to the doctrine of exhaustion of administrative remedies. The Court also rejected the PUC’s argument that the municipalities failed to join a necessary or indispensable party, i.e., the NGDC, holding that the NGDC has an interest in applying the regulations that exist, but not in the validity of the regulations generally. Finally, the Court rejected the PUC’s argument that the municipalities failed to demonstrate direct and immediate harm and the existence of an actual controversy, and the Court rejected the PUC’s argument that the municipalities failed to demonstrate the need for pre-enforcement review, noting that the review at issue was actually post-enforcement.

The Commonwealth Court’s holding in City of Lancaster is a reminder that the Court will require parties to allege specific facts to support their ERA claims and that the Court will tend to defer to the Commonwealth in the face of an ERA challenge when there is a sufficient state interest in the regulation at issue.

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