TO FRACK OR NOT TO FRACK – WHEN DOES GOVERNMENT REGULATION VIOLATE THE CONSTITUTION?
by: Samuel B. Burke
Locally, there has been a lot of attention given to the proposal to ban fracking in the City of Denton. This past Tuesday, Denton’s citizens voted to enact a ban on all fracking ban. Almost immediately, lawsuits were filed challenging the ban. The fracking ban has brought significant attention to whether the ban would constitute a taking of private property that violates the United States and Texas Constitutions. Both the United States and Texas Constitutions prohibit the government from taking private property without just compensation. Most of the time, the application of this protection is straight forward. For instance, when a city physically enters a person’s property for a public purpose and does not pay for the property, the government violates both Constitutions. As the recent debate over the fracking ban suggests, in certain circumstances government regulation can result in a taking of private property without just compensation. However, determining when a regulation has gone too far is considerably more difficult than determining whether a physical taking has occurred.
Whether a regulatory taking has occurred is a legal question that usually involves a complicated and fact intensive evaluation of a particular regulation, the use being regulated, and the land being regulated. That said, there are two basic types of regulatory takings claims property owners can bring against the government when they believe regulation has gone too far. The first is generally called a Lucas or a total takings claim. The second is generally referred to as Penn-Central or partial takings claim.
Under the Lucas rule, a taking occurs when a regulation destroys all economically beneficial use of an owner’s private property. Locally, within the context of the fracking ban, the private property in question is primarily natural gas. Those who own the mineral under their land and those who have leased those mineral will argue that a ban on fracking destroys the economic value of their natural gas deposits. This is because most of these deposits are located in shale formations, and fracking is required to recover the natural gas from this type of rock formation. However, even when a regulation destroys the economic value of private property, in limited circumstances the regulation may still not be a taking. Applying the Lucas rule, the regulation will not constitute a taking if a neighboring property owner could have stopped the use being regulated under the state’s established property law. For example, if a neighboring property owner could have prevented fracking on the property because the well in the proposed location violated a subdivision’s deed restrictions, the fracking ban would likely still not be considered a taking even though the ban also prevents the minerals from being developed.
If a total taking has not occurred, a property owner may still bring a partial takings claim under the Penn Central ruling. This type of claim requires the court to consider essentially ad hoc factual inquiries, such as whether the governmental regulation has decreased the value of an owner’s land or otherwise interfered with the property owners “distinct investment-backed expectations.” In the context of the fracking ban, “distinct investment-back expectations” basically means that the gas companies will have to prove that when they entered into an oil and gas lease within Denton’s city limits they had a reasonable expectation they would be allowed to drill and frack gas wells to produce the minerals they had leased.
Now that the frack ban passes, it appears certain that the courts will be asked to decide both total takings and partial takings cases. The issues raised will ultimately require the courts to examine the claims of those on both sides the debate. Does fracking create a special threat to water quality, air quality, or public safety? If so, are those concerns raised on the specific properties where the gas wells would have been drilled? And, what are the impacts of fracking on the property values of surrounding property owners?
Regardless of whether the courts ultimately decide fracking ban is a taking, the lawsuits should clearly address (and hopefully further define) the scope of the legitimate exercise of government power and the limits of that power. I have often wished when watching a political debate that we could put the candidates under oath before starting the debate and have a Judge present who would make the candidates actually answer the questions they are asked. At least as to the fracking ban, my wish may be partially granted. No matter how the fracking ban lawsuits end, local property owners should take this opportunity to become more informed about the constitutional limits on land use regulation and when those regulations should be challenged.