CINCINNATI (CN) – Several Ohio landowners argued before a Sixth Circuit panel Thursday that a mining company’s fracking operation under their property is unconstitutional, seeking to revive federal claims against the company and the Buckeye State.
Six people and a trust that collectively own 127 acres in Harrison County, Ohio, filed a federal lawsuit against Chesapeake Exploration LLC and the state’s Division of Oil and Gas Resources Management after Chesapeake was issued a permit to drill three wells beneath the surface of the property.
At the time the complaint was filed in February 2018, Chesapeake had drilled one of the wells and pumped “more than 8 million gallons of water, sand and chemicals” into the land as part of its hydraulic fracturing, or fracking, operation. Fracking involves the high-pressure injection of millions of gallons of chemical-laden water deep underground to crack rock and release oil and gas.
The owners claimed the operation constituted an unlawful taking under the 14th Amendment, and also argued the Ohio law allowing for subsurface mining is unconstitutional.
U.S. District Judge Patricia Gaughan disagreed, however, and granted both the mining company and the state’s motions to dismiss last June.
Gaughan found that Ohio law “does not afford subsurface property interests the same protections as surface interests,” and that the state was entitled to grant the permit through the use of its police powers.
“Plaintiffs,” she wrote, “do not allege that a well will be erected on their property or that the surface of their property will be impacted in any way by the drilling. Plaintiffs also do not allege any current surface damage.”
The judge continued, “Rather, plaintiffs allege that Chesapeake will enter beneath the land, inject water, sand and chemicals beneath the land, and remove oil, gas, and natural gas liquids from beneath the land, pursuant to the unitization procedure set forth under Ohio law.” (Emphasis in original.)
Judge Gaughan also determined that Chesapeake’s actions regarding the mining operation, including applying for the permit and drilling the first well, did not render it a state actor for the purposes of the landowners’ civil rights claim.
Attorney Phillip Campanella argued on behalf of the landowners Thursday in the Sixth Circuit, saying his clients have “a right to exclude the invasion of the subsurface” portion of their property.
Senior U.S. Circuit Judge Ralph Guy Jr. questioned the attorney about the process used to obtain the permit, and whether Chesapeake followed Ohio’s laws.
Campanella conceded the company had followed all of the state’s requirements, but that “the process that was used in this case violated the takings clause” of the 14th Amendment.
U.S. Circuit Judge Karen Nelson Moore asked about compensation – specifically, whether the landowners are paid for the oil and natural gas removed from their land.
The attorney said his clients are paid a 12.5 percent commission for the oil and gas removed from the subsurface mining operation, but that this figure is “nowhere near” the just compensation required by the takings clause.
Attorney Sam Peterson argued on behalf of the Ohio Department of Natural Resources and the chief of its Oil and Gas Resources division, Rick Simmers.
Peterson argued the subsurface rights enjoyed by landowners are not “absolute,” but are instead “correlative.”
The attorney told the panel the “unitization” process used by Ohio to allow mining companies to extract resources from land owned by multiple individuals is “a means of protecting … those correlative rights.”
“There is more protection of oil and gas rights than [there] used to be,” Peterson argued.
He told the panel that in Ohio before 1965, any resources that came out of a well belonged to the well owner, regardless of whether the minerals were actually located underneath the well owner’s property.
Peterson described the fracking operations, and pointed out that the oil and natural gas is being mined more than one and a half miles below the surface of the property.
“At no point has anything been taken,” Peterson stressed.
Attorney Tim McGranor argued on behalf of Chesapeake Exploration, and focused on the district court’s determination that his client was not an actor of the state.
He told the panel that the application process and the subsequent drilling of the land were “activities Chesapeake engaged in on its own.”
Judge Moore asked McGranor about the royalty payments made to the landowners and how the rate is determined.
The attorney answered that a state law determines the royalty percentage, and the landowners “passed on” the opportunity to appeal the calculation to Ohio’s Oil and Gas Commission.
Senior U.S. Circuit Judge Gilbert Merritt rounded out the panel.
No timetable has been set for the court’s decision.