Fracking Bans and Eminent Domain

As shale drilling increases across the country, fracking bans do, too.  In New York, for example, more than 50 municipalities have issued moratoriums or even outright bans on fracking.  Many Ohio municipalities have followed suit.  A lawsuit addressing this issue is currently pending before the Ohio Supreme Court: Munroe Falls vs. Beck Energy.

Are municipal fracking bans legal?

This question is still being settled by Ohio courts.  We all know that municipalities are empowered to issue and enforce zoning laws that restrict the use of one’s property.  But does the power to zone also permit them to ban an industrial process like fracking?  This exact issue is before New York’s top court.  The issue is also present in Ohio: one state law says that the Ohio Department of Natural Resources has the exclusive authority to regulate oil and gas drilling, while another Ohio law plainly grants municipalities authority to issue zoning regulations.

What effects do fracking bans have on surface owners?

Probably none, but the answer depends on the type of property interest affected by the fracking ban.  It is well settled law that zoning restrictions denying a property owner of all economically beneficial use of their land violates the takings clause of the 5th and 14th amendments.  So wouldn’t a zoning restriction that bans fracking deny mineral owners all economically beneficial use of their minerals?  Wouldn’t that be a “taking” in violation of the U.S. Constitution?  Remember that a taking will be found when the zoning restriction denies all economically beneficial use of the land.  A fracking ban would therefore not provide a surface owner a valid takings claim: the surface owner still has many options to put his land to economic use, such as building a house, or planting crops.  But what about a mineral owner?

What effects do a fracking bans have on mineral owners?

Without surface rights, it would seem that the mineral owner’s only economically viable use of his property is to extract them.  Of course, not all minerals require fracking to be economically produced.  Coal and silver, for example, are mined.  But what if a person’s only property interest was a mineral formation that required fracking to be economically produced, like the utica or marcellus shale?  Actually, the vast majority of all wells drilled in Ohio in the past 50 years have been hydraulically fracked.  Wouldn’t a zoning ordinance banning fracking deny this owner all economically viable use for his land?  What possible economic uses remain for the utica owner living in a jurisdiction where fracking has been banned?

What can a mineral owner do to protect their rights if a fracking ban seems likely or has already occurred?

If an individual already owns their mineral rights (as opposed to just the surface), they may be well served to sever only the oil and gas rights, and transfer them to a separate entity, such as an LLC or a trust.  This way, the LLC owner or Trustee could reasonably claim that they have been denied all viable economic use of their property interest: the oil and gas rights underlying the land the fracking ban affects.  The property owner could then file a lawsuit claiming that an unconstitutional taking has occurred.  The outcome of the suit would depend on the exact nature and extent of the fracking ban.  If a court were to find that the ordinance has denied the property owner of all viable economic use, that property owner would conceivably be entitled to compensation for those interests.

Where can I go for help if I want to protect my mineral interests from a fracking ban?

Contact us at our office in Canfield, Ohio.  Our firm presented a similar case to the Supreme Court of Ohio in Newbury Township Board of Trustees v. Lomak Petroleum.  In that case, Newbury Township issued an outright ban on all oil and gas drilling.  The Supreme Court found that this zoning ordinance exceeded the township’s authority to issue zoning laws, and ultimately held in favor of Lomak Petroleum.