Landowners in Ohio who didn’t like being force pooled with their neighbors have, since 2015, tried to get the courts to declare that forced pooling is illegal. They’ve struck out in every court where they’ve tried that argument, including (now) the U.S. Court of Appeals for the Sixth Circuit.
In 2015, landowners in Harrison County, OH who own 127 acres (the Kerns) filed a lawsuit alleging their property rights were being violated because Chesapeake Energy had filed a pooling request with the Ohio Dept. of Natural Resources (ODNR) to pool (combine) the Kerns property with surrounding properties for shale drilling. The Kerns had not signed a lease and do not want drilling under their land. Their neighbors did sign a lease and do want drilling. Ohio has a law on the books that allows for “forced pooling” in cases where a majority of the surrounding land is leased but landowners with small positions refuse to sign.
The Kerns resisted and fought the case all the way to Ohio Supreme Court, which rejected their claims. Chesapeake drilled and fracked three wells (on a neighboring property), which included drilling under the Kerns’ property. So the Kerns filed a new lawsuit in 2016, in federal court, claiming a “taking” of their property had occurred. The federal court ruled against the Kerns in June of last year (see Federal Court Upholds Ohio Forced Pooling Law in Chesapeake Case).
Apparently the Kerns have big bucks for lawyers (or someone willing to bankroll them), because they appealed the case to the next level, the Sixth Circuit Court of Appeals. That court has now affirmed what all the previous courts said: the Kerns are out of luck.
The Sixth Circuit on Monday upheld the dismissal of a constitutional challenge to an Ohio law allowing drillers to tap properties near ones they’ve leased without getting consent from landowners, saying a permit issued by state regulators to Chesapeake Exploration LLC doesn’t constitute a “taking” under the 14th Amendment.
An appeals court panel affirmed an Ohio federal judge’s June dismissal of a suit by landowners challenging the order issued by the Ohio Division of Oil and Gas Resources Management under the state’s so-called forced pooling law allowing Chesapeake to horizontally drill below their properties.
The landowners can’t cite a single case that such pooling schemes are unconstitutional, the Sixth Circuit panel said in its opinion. Meanwhile, the Ohio Supreme Court has said the state’s forced pooling law is a legitimate use of its police power in regulating oil and gas development, and courts in other states have reached similar conclusions about their respective pooling laws, the panel said.
“That power is exercised in the service of protecting property rights by requiring a just, orderly and efficient process for neighbors to extract common resources,” the Sixth Circuit said in its opinion. “Each landowner’s property interest in the minerals remains intact; it is simply regulated. The landowners therefore have no takings claim as to the minerals below the surface of their land.”
The appeals court rejected the landowners’ argument that Chesapeake’s horizontal drilling constituted a taking because it deprives them of exclusive use of their subsurface lands. The Ohio Supreme Court has held that subsurface property rights of landowners include the right to exclude invasions “that actually interfere with [their] reasonable and foreseeable use of the subsurface,” the Sixth Circuit said.
“Ohio’s actual-interference requirement means that the landowners’ property interests in the space beneath their land springs to life only if Chesapeake’s drilling ‘actually interfere[s]’ with their ‘reasonable and foreseeable use of the subsurface,’” the panel said. “The complaint fails to adequately plead such damage and thus fails to plead the requisite property interest.”
Since there’s no property interest, the landowners’ claims that the forced pooling order issued by ODOGRM violates their due process rights can’t be sustained either, the appeals court said.
Representatives for the parties couldn’t immediately be reached for comment Tuesday.*
We see both sides of this issue. In general, we like the principle of “You can’t tell me I can’t frack, I won’t tell you that you must frack.” However, there are times when someone’s tiny slip of land sits in the middle of what would be a larger unit. Should that one holdout block his neighbors from benefiting economically? Tough call!
*Law360 (Feb 5, 2019) – 6th Circ. Backs Use Of Ohio Forced Drilling Law
Copy of the Sixth Circuit decision in Kerns v. Chesapeake:
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