In the Supreme Court of Ohio KEITH J. KERNS, et al., Relators, v. RICHARD J. SIMMERS, et al., Respondents. : : : : : : : : : : Case No. 2016-1011 Original Action in Mandamus ______________________________________________________________________________ RESPONDENTS’ SUPPLEMENTAL BRIEF ______________________________________________________________________________ PHILLIP J. CAMPANELLA (0010875) 7059 Gates Road Gates Mills, Ohio 44040 440-655-1553 [email protected]Counsel for Relators MICHAEL DEWINE (0009181) Attorney General of Ohio ERIC E. MURPHY* (0083284) State Solicitor *Counsel of Record SAMUEL C. PETERSON (0081432) Deputy Solicitor BRIAN J. BECKER (0089738) Assistant Attorney General 30 East Broad Street, 17th Floor Columbus, Ohio 43215 614-466-8980 614-466-5087 fax [email protected]Counsel for Respondents Supreme Court of Ohio Clerk of Court - Filed July 20, 2017 - Case No. 2016-1011
PHILLIP J. CAMPANELLA (0010875) 7059 Gates Road Gates Mills, Ohio 44040 440-655-1553 [email protected] Counsel for Relators
MICHAEL DEWINE (0009181) Attorney General of Ohio
ERIC E. MURPHY* (0083284) State Solicitor *Counsel of Record SAMUEL C. PETERSON (0081432) Deputy Solicitor BRIAN J. BECKER (0089738) Assistant Attorney General 30 East Broad Street, 17th Floor Columbus, Ohio 43215 614-466-8980 614-466-5087 fax [email protected]
Counsel for Respondents
Supreme Court of Ohio Clerk of Court - Filed July 20, 2017 - Case No. 2016-1011
TABLE OF CONTENTS
Page
TABLE OF CONTENTS ................................................................................................................. i
TABLE OF AUTHORITIES .......................................................................................................... ii
I. Ohio’s statutory unitization procedure does not violate the takings provisions of the Fifth and Fourteenth Amendments to the United States Constitution or Article I, Section 19 of the Ohio Constitution.....................................................................................1
A. Ohio’s statutory unitization statutes do not violate the takings provisions of the Fifth and Fourteenth Amendments to the United States Constitution. ..............4
B. Ohio’s statutory unitization statutes are a valid exercise of the State’s police power and do not violate Article I, Section 19 of the Ohio Constitution. ...............7
C. Unitization under R.C. 1509.28 does not constitute a physical invasion and is not a per se taking. .................................................................................................11
II. Relators had adequate remedies at law to dispute or otherwise challenge the unitization order at issue in this case. ................................................................................15
A. The review procedures found in R.C. Chapter 1509 provide adequate remedies at law for those who wish to challenge a unitization order. ...................16
B. Realtors’ assertions that the available remedies at law were inadequate are unpersuasive and incorrect. ....................................................................................18
Benjamin v. Columbus, 167 Ohio St. 103 (1957).............................................................................................................9
Brown v. Legal Found., 538 U.S. 216 (2003) .................................................................................................................11
Burtner-Morgan-Stephens Co. v. Wilson, 63 Ohio St. 3d 257 (1992) .........................................................................................................8
Chance v. BP Chemicals, Inc., 77 Ohio St. 3d 17 (1996) ...................................................................................................13, 14
Chesapeake Exploration, L.L.C. v. Buell, 144 Ohio St. 3d 490, 2015-Ohio-4551.......................................................................................7
Cities Serv. Gas Co. v. Peerless Oil & Gas Co., 340 U.S. 179 (1950) ...................................................................................................................4
City of Norwood v. Horney, 110 Ohio St. 3d 353, 2006-Ohio-3799.......................................................................................7
Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1 (Tex. 2008) ........................................................................................................13
Columbus v. Teater, 53 Ohio St. 2d 253 (1978) .........................................................................................................8
Crosby v. Pickaway Cnty. Gen. Health Dist., 2007-Ohio-6769 (4th Dist.) .....................................................................................................18
Gawenis v. Ark. Oil & Gas Comm’n, 464 S.W.3d 453 (Ark. 2015) ..................................................................................................5, 6
Hale v. CNX Gas Co., No. 1:10cv00059, 2011 U.S. Dist. LEXIS 52935 (W.D. Va. Jan. 21, 2011) ............................5
Head v. Amoskeag Mfg., 113 U.S. 9 (1885) .......................................................................................................................4
iii
Hinman v. Pac. Air Transp., 84 F.2d 755 (9th Cir. 1936) ...............................................................................................12, 13
Horne v. Dept. of Agric., 135 S. Ct. 2419 (2015) .............................................................................................................11
Hunter Co. v. McHugh, 11 So.2d 495 (La. 1942) ............................................................................................................5
Hunter Co. v. McHugh, 320 U.S. 222 (1943) ...................................................................................................................4
Hunter v. Justice’s Court of Centinela Township, 223 P.2d 465 (Cal. 1950) ...........................................................................................................5
Kelley v. Ohio Oil Co., 57 Ohio St. 317 (1897)...............................................................................................................1
Kerns v. Simmers, 2017-Ohio-4396 .........................................................................................................................1
Koziara v. Commissioner, 86 T.C. 999 (1986) .....................................................................................................................5
Lake Erie & W. Rd. Co. v. Hancock Cnty., 63 Ohio St. 23 (1900)...............................................................................................................14
Levin v. City of Sheffield Lake, 70 Ohio St. 3d 104 (1994) .......................................................................................................20
Lightning Oil v. Anadarko E&P Onshore, LLC, 60 Tex. Sup. J. 997, 2017 Tex, LEXIS 463 (Tex. 2017) .........................................................13
Loretto v. Teleprompter Manhattan Catv Corp., 458 U.S. 419 (1982) .....................................................................................................11, 12, 13
Lucas v. S.C. Costal Council, 505 U.S. 1003 (1992) .................................................................................................................7
Miami Cnty. v. Dayton, 92 Ohio St. 215 (1915)...............................................................................................................8
Northwest Cent. Pipeline Corp. v. State Corp. Comm’n, 489 U.S. 493 (1989) ...................................................................................................................2
Nunez v. Wainoco Oil & Gas Co., 488 So. 2d 955 (La. 1986) .......................................................................................................14
iv
Ohio Oil Co. v. Indiana, 177 U.S. 190 (1900) ...............................................................................................................4, 6
Patterson v. Sanolind Oil & Gas Co., 77 P.2d 83 (Okla. 1938) .............................................................................................................5
Redman v. Ohio Dep’t of Indus. Relations, 75 Ohio St. 3d 399 (1996) .....................................................................................................3, 9
State ex rel. Berger v. McMonagle, 6 Ohio St. 3d 28 (1983)............................................................................................................18
State ex rel. Boardwalk Shopping Ctr., Inc. v. Court of Appeals for Cuyahoga Cnty., 56 Ohio St.3d 33 (1990)...........................................................................................................16
State ex rel. Daggett v. Gessaman, 34 Ohio St. 2d 55 (1973) .........................................................................................................18
State ex rel. Fisher v. Nacelle Land & Mgmt. Corp., 90 Ohio App. 3d 93 (11th Dist. 1992) .....................................................................................17
State ex rel. Kingsley v. State Emp. Relations Bd, 130 Ohio St. 3d 333, 2011-Ohio-5519...............................................................................18, 19
State ex rel. Manley v. Walsh, 142 Ohio St. 3d 384, 2014-Ohio-4563.....................................................................................19
State ex rel. Morrison v. Beck Energy Corp., 143 Ohio St. 3d 271, 2015-Ohio-485.........................................................................................3
State ex rel. Nicholson v. City of Toledo, 2012-Ohio-4325 (6th Dist.) .....................................................................................................18
State ex rel. Sibarco Corp. v. Berea, 7 Ohio St. 2d 85 (1966)............................................................................................................18
State ex rel. TravelCenters of Am., Inc. v. Westfield Twp. Zoning Comm., 87 Ohio St. 3d 161 (1999) .......................................................................................................16
State ex rel. Ullmann v. Hayes, 103 Ohio St. 3d 405, 2004-Ohio-5469...............................................................................16, 18
State ex rel. Willis v. Sheboy, 6 Ohio St.3d 167 (1983)...........................................................................................................19
v
State v. Martin, 168 Ohio St. 37 (1958)...........................................................................................................8, 9
State v. Port Clinton Fisheries, 12 Ohio St. 3d 114 (1984) .........................................................................................................8
Stop the Beach Renourishment, Inc. v. Fla. Dep’t of Envtl. Prot., 560 U.S. 702 (2010) ...................................................................................................................7
Superior Oil Co. v. Foote, 59 So.2d 85 (Miss. 1948) ...........................................................................................................5
Sylvania Corp. v. Kilborne, 271 N.E.2d 524 (N.Y. 1971) ......................................................................................................5
Texaco, Inc. v. Indus. Comm’n, 448 N.W.2d 621 (N.D. 1989) ....................................................................................................5
Thrasher v. Atlanta, 173 S.E. 817 (Ga. 1934) ...........................................................................................................12
United States v. Causby, 328 U.S. 256 (1946) ...........................................................................................................13, 14
Waller Brothers v. Exon Corp., 836 F. Supp. 363 (S.D. Miss. 1993)...........................................................................................5
Willoughby Hills v. Corrigan, 29 Ohio St. 2d 39 (1972) .............................................................................................12, 13, 14
Wymslo v. Bartec, Inc., 132 Ohio St. 3d 167, 2012-Ohio-2187.......................................................................................9
2 Proceedings and Debates of the Constitutional Convention of the State of Ohio (1912) .........................................................................................................................................8
Ohio Legislative Service Commission, Oil and Gas Law in Ohio, Staff Research Report No. 63 (1965) .................................................................................................................3
1
Relators Keith Kerns, Corey Kerns, Mark Zantene, Linda Zantene, Robert Zantene Trust,
Helen Zantene, and Connie Huhn seek an order from this Court compelling Respondents to
initiate appropriation proceedings. As discussed more fully in Respondents’ brief on the merits,
the Relators are not entitled to the relief they seek. Among other things, the property at issue in
this case is governed by a lease, the validity of which remains in dispute. See Respondents’ Br. at
23-25. Until those questions are resolved, the Relators cannot establish that they have a clear
legal right to mandamus.
After briefing was submitted in this case, the Court ordered supplemental briefing on two
questions. First, it asked the parties to address “[t]he applicability to this action of the ‘takings’
provisions of Article I, Section 19 of the Ohio Constitution and the 5th and 14th Amendments to
the United States Constitution.” Second, it asked “[w]hether there is an adequate remedy at law
available to relators in lieu of this mandamus action.” See Order, Kerns v. Simmers, 2017-Ohio-
4396. For the reasons stated in the Respondents’ merits brief (the entirety of which is
incorporated here in full) and the briefs of amici, and for the reasons that follow, the unitization
order at issue in this case is not a taking and to the extent that they seek to challenge that order,
the Relators have an adequate remedy at law. See Respondents’ Br. at 15-21 and 26-30.
I. Ohio’s statutory unitization procedure does not violate the takings provisions of the Fifth and Fourteenth Amendments to the United States Constitution or Article I, Section 19 of the Ohio Constitution.
In the early days of oil and gas development, landowners who drilled wells on their land
were entitled to everything that those wells produced, regardless of the source. This approach
reflected the common law “rule of capture,” which this Court summarized as “[w]hatever gets
into the well, belongs to the owner of the well, no matter where it came from.” Kelley v. Ohio
Oil Co., 57 Ohio St. 317, 327-28 (1897). The rule of capture eventually led to inefficiency and
2
waste, however, as landowners rushed to drill wells to ensure that they, and not their neighbors,
benefited the most from the oil and gas underlying the land.
Because the proliferation of wells often left valuable resources stranded in the ground,
States began to restrict where and how wells could be drilled. Among other things, these
restrictions included well-spacing requirements and acreage restrictions. All property owners
possess an equal right to develop the oil and gas under their land (commonly referred to as
“correlative rights”), and the imposition of these restrictions meant that states also needed to take
steps to ensure that a small minority could not prevent the majority of landowners from
exercising that right. States therefore adopted procedures to allow the mineral interests of
multiple landowners to be combined to satisfy drilling unit size requirements (commonly
referred to as “pooling”) and to ensure that the source of oil or gas was being recovered in the
most efficient way (commonly referred to as “unitization”). The procedures guaranteed both that
oil and gas would be produced efficiently and that objecting landowners would be fully
compensated for the portion of the oil and gas attributable to their land. As more and more
States adopted such statutes, the doctrine of correlative rights began to supplant the rule of
capture. Cf. Northwest Cent. Pipeline Corp. v. State Corp. Comm’n, 489 U.S. 493, 497-99
(1989) (discussing history of the doctrine of correlative rights).
Ohio joined the ranks of correlative rights States in 1965 when it adopted the
comprehensive regulatory scheme found in R.C. Chapter 1509. Correlative rights are defined in
Ohio as “the reasonable opportunity to every person entitled thereto to recover and receive the
oil and gas in and under the person’s tract or tracts . . . without having to drill unnecessary wells
or incur other unnecessary expense.” R.C. 1509.01(I). Proponents of the law advocated for it
because of a need to eliminate the frenzied drilling of unnecessary wells and to ensure that all
3
landowners had an equal right to access the oil and gas underneath their land. See Ohio
Legislative Service Commission, Oil and Gas Law in Ohio, Staff Research Report No. 63 at 40
(1965). This Court has since agreed, noting that “the principles underlying R.C. Chapter 1509
are safety, . . . protection of correlative rights, . . . and the prevention of physical and economic
waste.” Redman v. Ohio Dep’t of Indus. Relations, 75 Ohio St. 3d 399, 409 (1996) (citing in part
R.C. 1509.27 and 28); see also State ex rel. Morrison v. Beck Energy Corp., 143 Ohio St. 3d
271, 2015-Ohio-485, ¶ 44 (O’Donnell, J. concurring in part, dissenting in part). (The purpose of
“regulating the location and spacing of wells in the first place” is to ensure the efficient
production of oil and gas, the prevention of waste, and the protection of the “correlative rights of
neighbors.”). As in other correlative rights States, R.C. Chapter 1509 provides both a procedure
for combining separate property interests into a common whole and a procedure to ensure that all
parties receive just compensation if their oil and gas interests are combined. See R.C. 1509.27
(pooling); R.C. 1509.28 (unitization); and R.C. 1509.27(F) and 1509.28(A)(3) (compensation).
As far as can be determined, every court to have considered the issue has held that States
may constitutionally establish procedures governing the pooling and unitization of oil and gas
resources. The U.S. Supreme Court has repeatedly upheld the power of States to regulate the
production of oil and gas generally. And state supreme courts have rejected constitutional
challenges to statutory unitization and pooling procedures specifically. Relators have not
pointed to a single court anywhere that has held otherwise, and this Court should not be the first.
It should instead hold that Ohio’s statutory unitization procedures do not violate the takings
provisions of the Fifth and Fourteenth Amendments to the U.S. Constitution or Article I, Section
19 of the Ohio Constitution.
4
A. Ohio’s statutory unitization statutes do not violate the takings provisions of the Fifth and Fourteenth Amendments to the United States Constitution.
The U.S. Supreme Court has consistently held that “a state may adopt reasonable
regulations to prevent economic and physical waste of natural gas.” Cities Serv. Gas Co. v.
Peerless Oil & Gas Co., 340 U.S. 179, 185-86 (1950). It has “upheld numerous kinds of state
legislation designed to curb waste of natural resources and to protect the correlative rights of
owners through ratable taking.” Id. And it has recognized that “the legislative power . . . can be
manifested for the purpose of protecting all the collective owners, by securing a just distribution,
to arise from the enjoyment by them, of their privilege to reduce to possession, and to reach the
like end by preventing waste.” Ohio Oil Co. v. Indiana, 177 U.S. 190, 210 (1900); see also
Hunter Co. v. McHugh, 320 U.S. 222, 227-28 (1943) (dismissed on other grounds). These
decisions reflect a longstanding principle of property law that holds that “[w]hen property, in
which several persons have a common interest, cannot be fully and beneficially enjoyed in its
existing condition, the law often provides a way in which they may compel one another to
submit to measures necessary to secure its beneficial enjoyment, making equitable compensation
to any whose control of or interest in the property is thereby modified.” Head v. Amoskeag Mfg.,
113 U.S. 9, 21 (1885).
Consistent with these principles, courts have uniformly held that statutory unitization or
pooling procedures do not constitute an impermissible taking. Oklahoma was one of the first
States to address the constitutionality of spacing requirements and unitization or pooling
procedures. It first rejected a challenge to well-spacing requirements, holding that “the lawful
exercise of the state’s power to protect the correlative rights of owners in a common source of
supply of oil and gas is not a proper subject for the invocation of the provisions of either the state
or federal Constitution which prohibit the taking of property without just compensation or
5
without due process of law.” Patterson v. Sanolind Oil & Gas Co., 77 P.2d 83, 89 (Okla. 1938).
It later upheld the State’s unitization procedures in the face of a similar constitutional challenge.
Palmer Oil Corp. v. Phillips Petro. Co., 231 P.2d. 997 (Okla. 1951). It concluded in Palmer Oil
that “[t]he police power of the State extends to defining the correlative rights of owners in a
common source of oil and gas supply, providing for the management, operation and further
development of such common source of supply and distributing the proceeds thereof among
those entitled thereto.” Id. at syl. ¶ 2.
Courts in other States have followed suit. Like Oklahoma, they have concluded that a
State may constitutionally compel the collective development of a source of oil and gas. See
Gawenis v. Ark. Oil & Gas Comm’n, 464 S.W.3d 453, 457 (Ark. 2015) (Arkansas’s forced-
integration provisions “do not ‘take’ anything.”); Bennion v. ANR Prod. Co., 819 P.2d 343, 348-
49 (Utah 1991); Texaco, Inc. v. Indus. Comm’n, 448 N.W.2d 621, 622 n.1 (N.D. 1989) (“[T]he
constitutionality of oil and gas conservation legislation, including compulsory pooling, is well
established”); Sylvania Corp. v. Kilborne, 271 N.E.2d 524, 526-27 (N.Y. 1971); Hunter v.
Justice’s Court of Centinela Township, 223 P.2d 465, 467-69 (Cal. 1950); Superior Oil Co. v.
Federal courts have done the same; they too have found that statutory unitization and
pooling statutes pass constitutional muster. Hale v. CNX Gas Co., No. 1:10cv00059, 2011 U.S.
Dist. LEXIS 52935, *60-61 (W.D. Va. Jan. 21, 2011); Waller Brothers v. Exon Corp., 836 F.
Supp. 363, 371 (S.D. Miss. 1993); see also Koziara v. Commissioner, 86 T.C. 999, 1007 (1986)
(Michigan unitization procedure did not “constitute an involuntary conversion of property
interests of the affected parties”).
6
Although many of these decisions pre-date the development of more advanced extraction
techniques such as horizontal drilling and hydraulic fracturing, recent decisions confirm that the
same standards apply regardless of the type of well or the method of extraction. See Continental
Resources v. Farrar Oil Co., 559 N.W.2d 841, 842 and 846 (N.D. 1997) (holding, in the context
of a horizontal well, that “[t]he police powers of the state are properly exercised when the
Industrial Commission orders spacing or compels pooling”); see also Gawenis, 464 S.W.3d 453
(upholding unitization as applied to shale gas development).
The uniform weight of authority therefore demonstrates that statutory unitization
procedures like those at issue here do not violate the Fifth and Fourteenth Amendments to the
U.S. Constitution. Should this Court hold otherwise, it would stand alone in reaching that
conclusion. Its decision would not just create a conflict with other courts, however, it would also
lead to an absurd result. Such a conclusion would permit a single landowner to block all other
property owners from exercising their rights on one hand but, on the other hand, would prevent
the legislature from acting to protect the rights of all affected property owners. The U.S.
Supreme Court has already rejected an interpretation of the Fifth and Fourteenth Amendments
that would lead to such a result, see Ohio Oil Co., 177 U.S. at 210-11, and Relators offer no
reason why this Court should adopt one now. (Although Relators also cite Ohio Oil Co. to
support their arguments, see Relators’ Sup. Br. at 9, the passage they quote, when placed context,
undermines those arguments. The language Relators quote summarizes the argument that the
U.S. Supreme Court rejected when it held that a challenged state law had not taken private
property, but instead “protect[ed] private property and prevent[ed] it from being taken by one of
the common owners without regard to the enjoyment of the others.” Ohio Oil Co., 177 U.S. at
210.)
7
B. Ohio’s statutory unitization statutes are a valid exercise of the State’s police power and do not violate Article I, Section 19 of the Ohio Constitution.
Neither the text of the Ohio Constitution nor its history compel this Court to reach a
different conclusion about the constitutionality of Ohio’s statutory unitization procedures as a
matter of state law. Article I, Section 19 of the Ohio Constitution provides greater protection to
private property rights than does the U.S. Constitution. City of Norwood v. Horney, 110 Ohio St.
3d 353, 2006-Ohio-3799, ¶¶ 75-80. Unitization orders, like the one at issue here, do not violate
that constitutional provision, but instead benefit all property owners who possess an interest in a
common supply of oil and gas. Such orders are a valid exercise of the State’s police power and
are independently authorized by a separate provision of the Ohio Constitution.
The rights to acquire, use, enjoy, and dispose of property are fundamental, see id. at ¶ 34,
and the Ohio Constitution states that property rights “shall ever be held inviolate,” see Ohio
Const. Art. I, Section 19. Before a court can protect a property right, however, the right must be
defined. Property rights are those that have their roots “in the title itself,” and courts that seek to
define an individual’s rights must look to “background principles of the State’s law of property.”
See Lucas v. S.C. Costal Council, 505 U.S. 1003, 1029 (1992); see also Stop the Beach
Renourishment, Inc. v. Fla. Dep’t of Envtl. Prot., 560 U.S. 702, 732 (2010). There is no question
that, in Ohio, the right to extract oil and gas is a property right. See Chesapeake Exploration,
L.L.C. v. Buell, 144 Ohio St. 3d 490, 2015-Ohio-4551, ¶¶ 20-24. But background principles of
Ohio property law—and this Court’s decisions interpreting and applying those principles—show
that the right to recover oil and gas is a correlative right, not an absolute one. It is held
collectively with neighboring landowners who have an equal interest in the common source of
supply. And it is a right that is subject to the reasonable exercise of the State’s police power.
8
Article II, Section 36 of the Ohio Constitution grants the General Assembly the authority
to pass laws to “provide for the regulation of methods of mining, weighing, measuring and
marketing coal, oil, gas and all other minerals.” The creation of this authority was prompted by a
desire to ensure that all Ohioans are able to benefit from the natural resources found in the State.
The supporters of the amendment emphasized that “‘[w]e have no right to waste our natural
resources and thereby deprive the people of the future of that which belongs to them.’” See
Columbus v. Teater, 53 Ohio St. 2d 253, 259-60 (1978) (quoting 2 Proceedings and Debates of
the Constitutional Convention of the State of Ohio (1912), at page 1837).
The Court has recognized that the legislature’s exercise of the authority granted to it by
Article II, Section 36 of the Ohio Constitution is an exercise of the police power. See State v.
Martin, 168 Ohio St. 37, 40-42 (1958); see also State v. Port Clinton Fisheries, 12 Ohio St. 3d
114, 117 (1984) (Holmes, J., concurring) (“The Constitution, statutes, and common law of this
state make it quite clear that the control and conservation . . . of natural resources generally[] [is]
within the police power of the state.”). And it has rejected claims that the exercise of that power
amounts to a taking of private property without due process of law. Miami Cnty. v. Dayton, 92
Ohio St. 215, 222-25 (1915) (rejecting a challenge to the establishment of a conservation district
under Article II, Section 36).
With respect to oil and gas development specifically, the Court has long recognized that
the “state’s police powers permit the General Assembly to enact legislation governing pooling
arrangements, spacing, unitization and other oil and gas drilling regulations.” Burtner-Morgan-
Stephens Co. v. Wilson, 63 Ohio St. 3d 257, 260 (1992) (but finding application of new laws to
preexisting contract improper). It has held that the adoption of R.C. Chapter 1509 was a proper
exercise of those police powers because the principles underlying the statutes contained in that
9
chapter are “safety, . . . protection of correlative rights, . . . and the prevention of physical and
economic waste.” Redman, 75 Ohio St. 3d at 409. These decisions show that the State has
always defined the right to recover oil and gas not as an absolute and individual right, but as a
collective right that is subject to reasonable regulation to protect the rights of others who have an
equal and equivalent right to do the same.
Relators do not appear to challenge Ohio’s unitization process as an invalid exercise of
the State’s police power, but even if their argument can be so construed, that challenge would
fail. “The police power is inherent in sovereignty; and its exercise is justified by the necessity of
the occasion. Its foundation is the right and duty of the government to provide for the common
welfare of the governed.” Martin, 168 Ohio St. at 40 (citation omitted). The legislature’s
exercise of its police power will be upheld “if it bears a real and substantial relation to the public
health, safety, morals or general welfare of the public and if it is not unreasonable or arbitrary.”
Benjamin v. Columbus, 167 Ohio St. 103, syl ¶ 5 (1957). A court “will not invalidate the
judgment of the General Assembly as to whether an exercise of the police power bears a real and
substantial relation to the public health, safety, morals, or general welfare of the public unless
that judgment appears to be clearly erroneous.” Wymslo v. Bartec, Inc., 132 Ohio St. 3d 167,
2012-Ohio-2187, ¶ 50.
The statutory unitization procedure found in R.C. 1509.28 easily passes that test. As
discussed above, the Court has recognized that the provisions of R.C. Chapter 1509 relate to
public safety and, by protecting the correlative rights of affected landowners, advance the
general welfare of the public. See Redman, 75 Ohio St. 3d at 409. There is no reason for the
Court to now question its earlier conclusion; statutory unitization benefits, rather than burdens,
all affected landowners. It does so in at least three ways. First, unitization enables landowners
10
to access oil and gas reserves underlying their property that they never would have been able to
access on their own. Well-spacing and acreage requirements limit where and how a well may be
drilled. See R.C. 1509.24 and Ohio Adm. Code § 1501:9-1-04. And while property owners like
Relators might not be able to meet these requirements individually, unitization and pooling
provide a tool by which they can be satisfied. Second, unitization makes the development of
otherwise uneconomical reserves possible. Oil and gas wells, like the ones at issue in this case,
are extremely expensive to drill and construct, costing millions of dollars apiece. Generally,
without unitization or pooling, it would not be economical for a single landowner, or even a
small group of landowners like Relators, to access the oil and gas underlying their land. See
Transcript, Respondents’ Ex. G; Evid. at 223-24. Third, through collective operation, unitization
makes possible the use of advanced recovery techniques that extract oil and gas more efficiently
and therefore leads to a greater recovery for all landowners. (In this case, testimony established
that unit operation and advanced recovery techniques will lead to the production of additional oil
and gas worth approximately $36 million dollars, whereas without it, over 40% of the otherwise-
recoverable gas would be left stranded in the ground. See Transcript, Respondents’ Ex. G; Evid.
at 220-21 and Application, Respondents Ex D; Evid. at 111.) Finally, unitization accomplishes
all of this without transferring a landowner’s title to his or her land. See R.C. 1509.28(B)(2). In
this case the order at issue specifically states that no activity may occur on the surface of
Relators’ property. See Order, Respondents’ Ex. B; Evid. at 4-5.
Under the circumstances, the provisions of R.C. Chapter 1509 can hardly be described as
unreasonable or arbitrary exercises of the State’s police power. Affected landowners are in fact
left in a better position than they would have been absent a unitization order; they retain title to
their property while also receiving greater compensation for the oil and gas underlying that
11
property than they would have received had they attempted to access those resources
independently. This type of mutual benefit and enhanced recovery is precisely the type of
efficient use of public resources envisioned by Article II, Section 36 of the Ohio Constitution.
C. Unitization under R.C. 1509.28 does not constitute a physical invasion and is not a per se taking.
Relators’ claim that unitization constitutes a physical invasion of their property, and
therefore a per se taking, is unpersuasive. It is true that a physical invasion of property, even if
small, can constitute a per se taking. See Loretto v. Teleprompter Manhattan Catv Corp., 458
U.S. 419, 434-35 (1982). But that rule does not apply in this instance. The oil and gas rights at
issue here are not absolute, but are correlative—that is, they are held together with all other
affected landowners. Additionally, no physical invasion of property takes place when activities
occur miles beneath the surface.
A single property owner cannot independently assert a physical invasion of property that
is owned collectively or that is otherwise subject to the correlative rights of others. In every case
in which the U.S. Supreme Court has recognized a per se taking, the ownership of real or
personal property has been absolute and undisputed. See Loretto, 458 U.S. at 421 (apartment
buildings); Horne v. Dept. of Agric., 135 S. Ct. 2419, 2431 (2015) (raisins); Brown v. Legal
Found., 538 U.S. 216, 235 (2003) (trust account interest). In none of those cases was the
property only a fractional interest in a collective whole or otherwise limited by the equal and
countervailing interests of others. The U.S. Supreme Court recognized that the nature of the
property interest is significant; it distinguished raisins (in which a farmer has an absolute
ownership interest) from oysters (which are a publicly-owned natural resource). See Horne, 135
S.Ct. at 2431 (Oyster packers “did not simply seek to sell their property; they sought to
12
appropriate the State’s.”). In this case, although not completely analogous, the correlative rights
doctrine means that the oil and gas at issue is more like oysters than raisins.
Additionally, Relators do not claim that any invasion of their surface property will occur
because of the unitization order at issue here. Nor could they. The order in question specifically
prohibits activity on the surface of Relators’ property. See Order, Respondents’ Ex. B; Evid. at
4-5. All surface activity will instead occur on land that has been leased for that purpose and that
is governed by a surface-use agreement. See Testimony, Respondents’ Ex. D; Evid. at 118-19.
Even then, that activity will take place over half a mile away—if not more. See id.; see also
Exhibit LE-2 and LE-4, Respondents’ Ex. D; Evid. at 138 and 140.
Therefore, to the extent that the per se taking doctrine reflects common law principles of
trespass, see Loretto, 458 U.S. at 427 n.5, the common law has little to say here. The common
law never contemplated oil wells drilled miles beneath the surface. And while it had often been
said “that the ownership of land extends to the periphery of the universe,” this Court has
recognized that that expression “has no place in the modern world.” Willoughby Hills v.
Corrigan, 29 Ohio St. 2d 39, 49 (1972). It reached that conclusion not because the law has
changed over time, but because the expression was never a technical statement of the common
law governing property ownership. However poetic it might have been, the saying was never
intended to be a literal expression of the scope of property rights. It is “a generalization from old
cases involving the title to space within the range of actual occupation, and any statement as to
title beyond was manifestly a mere dictum.” Thrasher v. Atlanta, 173 S.E. 817, 825 (Ga. 1934)
(emphasis added). That is why courts have rejected its application to activities—like an airplane
flying well overhead—that have no impact on surface property. See, e.g., Hinman v. Pac. Air
Transp., 84 F.2d 755, 757 (9th Cir. 1936) (cited by Willoughby Hills and observing that the
13
expression was meant simply to convey that a landowner is protected in using space above his
property to the extent that he is able).
This Court has already considered the scope of subsurface property ownership and held
that traditional notions of trespass do not apply to activities that occur miles below. See Chance
v. BP Chemicals, Inc., 77 Ohio St. 3d 17, 25 (1996) (citing Willoughby Hills, Hinman, and
United States v. Causby, 328 U.S. 256, 265 (1946)). In Chance, neighboring landowners
brought a trespass claim against the operator of a deep injection well, alleging that the injection
of hazardous waste deep underground forced it to migrate beneath their properties and therefore
constituted a physical invasion of that property. The Court rejected their claim. It reasoned that
there are “limitations on property owners’ subsurface rights” that make those rights different
than the traditional surface rights involved in other cases. Chance, 77 Ohio St. 3d at 26. And it
concluded that because landowners do not have “absolute ownership of everything below the
surface of their properties,” subsurface activities will give rise to a trespass claim only when
those activities interfere with a reasonable and foreseeable use of the surface properties. See id.
at 26-28. Assuming for the sake of argument that waste had migrated underneath the plaintiffs’
property, the Court held in Chance that injection of that waste did not constitute a trespass
because the landowners were unable to show physical damages or interference with their use of
their property. Id. at 27.
Other courts have likewise concluded that trespass principles apply differently when the
property in question is not a surface estate. On at least two occasions the Texas Supreme Court
has found that traditional notions of trespass do not apply to subsurface activity. See Coastal Oil
& Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1, 12 (Tex. 2008) (“The law of trespass need
no more be the same two miles below the surface than two miles above.”) and Lightning Oil v.
(drilling through a mineral estate was insufficient to support a claim for trespass). The Louisiana
Supreme Court has done the same. Nunez v. Wainoco Oil & Gas Co., 488 So. 2d 955, 964 (La.
1986). And, as this Court did in Willoughby Hills and Chance, the U.S. Supreme Court has tied
a per se taking claim to interference with the surface estate. United States v. Causby, 328 U.S.
256, 265 (1946). It held that activities that occur far from the surface (specifically
transcontinental flights miles in the air) do not invade a recognized property interest. Id. at 260-
61. Although it ultimately found that a taking occurred in Causby, the U.S. Supreme Court did
so only because in that specific case the planes were not miles above, but were instead so close to
the ground that they interfered with the surface property. Id. at 265 (a taking occurred because
flights were so “close to the land that continuous invasions of it affect the use of the surface of
the land itself” (emphasis added)).
The important distinction between activities that affect the surface and those that do not
shows why Relators’ reliance on Lake Erie & W. Rd. Co. v. Hancock Cnty., 63 Ohio St. 23
(1900) is misplaced. In that case, as with the flights in Causby, the excavation of a ditch took
place close to the surface and would require digging under a railroad line and the construction of
supports to ensure that the ditch did not interfere with the railroad. See id. at 31-32. It does not
stand, as Relators seem to suggest, see Relators’ Sup. Br. at 6, for the principle that any and all
subsurface activity will qualify as a physical invasion of property.
Finally, as a practical matter, the rule that Relators propose is unworkable and would lead
to absurd results. Although drilling units may cover hundreds, if not thousands, of acres, the
horizontal portions of a well can be found underneath only a small fraction of that land. The
total area of recovery extends far beyond the actual wellbore itself, however. But if the Court
15
were to accept Relator’s physical invasion argument, the availability of relief would turn on
where the wellbore is actually drilled. Landowners whose property happened to overlie the
horizontal portion of the well would be able to assert a takings claim, while all other landowners
(likely the majority of landowners in a unit) would not. Relators’ rule would also be
counterproductive and could lead to less efficient production and use of the State’s natural
resources. Drillers would place their wells not where it was the most efficient or made the most
geological sense, but where they could be sure to avoid legal challenges. That is hardly the type
of efficient use of the State’s resources envisioned by the framers of Article II, Section 36 or the
General Assembly when it adopted R.C. Chapter 1509.
II. Relators had adequate remedies at law to dispute or otherwise challenge the unitization order at issue in this case.
The fact that a unitization order does not constitute a taking under the Fifth and
Fourteenth Amendments to the U.S. Constitution or Article I, Section 19 of the Ohio
Constitution does not mean that the affected property owners have no legal interest to protect.
All property owners with correlative rights in a geological formation have a fractional interest in
the oil and gas beneath their property and possess a “reasonable opportunity” to recover it. See
R.C. 1509.01(I) (defining correlative rights). To the extent that a unitization order affects those
rights, the affected parties—like Relators here—have an acknowledged interest in obtaining
review of the order. R.C. Chapter 1509 provides processes for doing just that. Because the
established processes constitute an adequate remedy at law by which Relators could have
obtained review of the order at issue in this case, they are not entitled to the mandamus relief that
they now seek.
16
A. The review procedures found in R.C. Chapter 1509 provide adequate remedies at law for those who wish to challenge a unitization order.
A writ of mandamus will not be granted when a relator has a plain and adequate remedy
in the ordinary course of law. State ex rel. TravelCenters of Am., Inc. v. Westfield Twp. Zoning
Comm., 87 Ohio St. 3d 161, 163 (1999). The remedy must be “complete, beneficial, and
speedy” to qualify as an adequate remedy. See State ex rel. Ullmann v. Hayes, 103 Ohio St. 3d
405, 2004-Ohio-5469, ¶ 8-9. It is the existence of the remedy—not whether a relator availed
himself of it—that precludes relief in mandamus. See State ex rel. Boardwalk Shopping Ctr.,
Inc. v. Court of Appeals for Cuyahoga Cnty., 56 Ohio St.3d 33, 35 (1990).
Parties who wish to challenge a unitization order have not one, but two, opportunities to
do so. First, they may appeal the unitization order to the Oil and Gas Commission, see R.C.
1509.36, followed by a further appeal to the Franklin County Court of Common Pleas, see R.C.
1509.37. Second, in the alternative, they may bypass the Commission and appeal directly to a
court of common pleas. See R.C. 1509.36. Either avenue provides an adequate remedy at law to
challenge a unitization order and to present the claims that Relators now seek to raise.
Appeal to the Oil and Gas Commission. Parties may first appeal to the Oil and Gas
Commission and seek an order vacating or modifying the unitization order. R.C. 1509.36.
(“Any person adversely affected by an order by the chief of the division of oil and gas resources
management may appeal to the oil and gas commission.”). The challengers to an order may
submit evidence and seek subpoenas to compel the attendance of witnesses or production of
documents at the hearing. Id. Should they prevail, the Commission is not limited to simply
invalidating the challenged order but may make “the order that it finds the chief should have
made.” Id. Regardless of the outcome of the proceedings, the final order “shall contain a written
finding by the commission of the facts upon which the order is based.” Id.
17
If dissatisfied with the Commission’s decision, challengers may take a further appeal to
the Franklin County Court of Common Pleas. R.C. 1509.37. Although in most cases limited to
the record, the common pleas court may “grant a request for the admission of additional evidence
when satisfied that the additional evidence is newly discovered and could not with reasonable
diligence have been ascertained prior to the hearing before the commission.” Id. On appeal, the
parties “may be heard on oral argument, briefs may be submitted, and evidence introduced if the
court has granted a request for the presentation of additional evidence.” Id. As with an appeal to
the Commission, the court may both vacate the challenged order and may “make the order that it
finds the commission should have made.” R.C. 1509.37.
Appeal to a court of common pleas. Appeals to the Commission are not the “exclusive
procedure that any person who believes the person’s rights to be unlawfully affected by those
sections or any official action taken thereunder must pursue in order to protect and preserve
those rights.” R.C. 1509.36. Nor do they “constitute a procedure that that person must pursue
before that person may lawfully appeal to the courts.” Id. A party who wishes to challenge a
unitization order may therefore bypass the Commission and may file their challenge directly with
a common pleas court. See id.; see also State ex rel. Fisher v. Nacelle Land & Mgmt. Corp., 90
Ohio App. 3d 93, 96-97 (11th Dist. 1992) (parties need not seek review with the Oil and Gas
Commission before appealing to the courts).
Relators took advantage of neither of the available opportunities to challenge the
unitization order at issue here. Although they initially appealed the unitization order to the
Commission, see Order, Respondents’ Ex. C; Evid. at 13-22, Relators declined to appeal the
Commission’s decision to the Franklin County Court of Common Pleas. Instead, they filed a
mandamus complaint in this Court. The Court has stressed, however, that mandamus is not a
18
substitute for appeal. State ex rel. Daggett v. Gessaman, 34 Ohio St. 2d 55, syl. ¶ 3 (1973). The
availability of an appeal, like the one that Relators chose not to take here, constitutes an adequate
remedy at law that precludes mandamus relief. See State ex rel. Berger v. McMonagle, 6 Ohio
St. 3d 28, 30 (1983) (“[M]andamus will not issue where the relator has or had available a clear,
plain and adequate remedy in the ordinary course of the law.” (citation omitted)).
B. Realtors’ assertions that the available remedies at law were inadequate are unpersuasive and incorrect.
Relators justify their failure to pursue either of the statutory avenues for challenging the
unitization order by claiming that neither provided them with an adequate remedy. See Relators’
Sup. Br. at 11. They are wrong. None of their arguments provide the Court with any reason to
conclude that the available legal remedies were anything less than “complete, beneficial, and
speedy.” Cf. State ex rel. Ullmann, 103 Ohio St. 3d 405 at ¶ 8-9.
Relators are incorrect, for example, when they claim that the administrative appeal
process provided them with no opportunity to raise their constitutional claims. The Court has
held just the opposite, concluding that “facial and as-applied constitutional challenges can be
raised on further appeal from an administrative agency to a court.” State ex rel. Kingsley v. State
Emp. Relations Bd, 130 Ohio St. 3d 333, 2011-Ohio-5519, ¶ 18. Had Relators prevailed on their
claim, the common pleas court could have provided them with all of the relief that they seek in
this mandamus action. See State ex rel. Sibarco Corp. v. Berea, 7 Ohio St. 2d 85, 90-91 (1966).
It could have determined whether the unitization order constituted a taking and, if warranted,
could have ordered Respondents to commence appropriation proceedings—precisely the relief
that Relators now request. See Crosby v. Pickaway Cnty. Gen. Health Dist., 2007-Ohio-6769,
¶ 24 (4th Dist.); see also State ex rel. Nicholson v. City of Toledo, 2012-Ohio-4325 (6th Dist.).
19
If anything, an appeal would have provided Relators with more complete relief than is
available now in this mandamus action. As discussed in Respondents’ merits brief, there are
significant questions about who owns the mineral rights that are at issue here. See Respondents
Br. at 23-25. The Commission’s decision noted that the property in question is subject to
existing leases of the oil and gas and concluded that “only a court of competent jurisdiction can
adjudicate property rights, can evaluate the validity of leases, or can determine the subsurface
legal relationship between the parties.” Order, Respondents’ Ex. C; Evid. at 18-19. These types
of legal questions are no more appropriately raised in mandamus than they were before the
Commission; mandamus is warranted only “where the right is clear, and does not depend upon
complication of disputed facts which must be settled from the conflicting testimony of
witnesses.” State ex rel. Manley v. Walsh, 142 Ohio St. 3d 384, 2014-Ohio-4563, ¶ 27. Had
Relators availed themselves of the opportunity to appeal the Commission’s decision, however,
the common pleas court may have been able to resolve Realtors’ constitutional claims and any
property disputes at the same time. Far from being an incomplete remedy, an appeal would have
provided Relators with more complete relief than is available now.
The possibility that the appeal process might take longer than mandamus also does not
mean that Relators available remedies were inadequate. “Where a constitutional process of
appeal has been legislatively provided, the sole fact that pursuing such process would encompass
more delay and inconvenience than seeking a writ of mandamus is insufficient to prevent the
process from constituting a plain and adequate remedy in the ordinary course of the law.” State
ex rel. Willis v. Sheboy, 6 Ohio St.3d 167, syl. ¶ 1 (1983); see also Kingsley, 130 Ohio St. 3d 333
at ¶ 20. And even then, it is not clear that an appeal would have resulted in delay. The common
pleas court must consider appeals from the Commission on an expedited basis and “shall give
20
preference to the hearing over all other civil cases irrespective of the position of the proceeding
on the calendar of the court.” R.C. 1509.37.
Finally, to the extent that Relators suggest that Respondents previously argued that
mandamus is appropriate and have now changed positions, they are again incorrect. See Relators
Sup. Br. at 11-13. It is true that Respondents’ brief in federal court cited Levin v. City of
Sheffield Lake, 70 Ohio St. 3d 104 (1994) for the general principle that mandamus is the
appropriate vehicle for compelling appropriation proceedings See Respondents’ Federal Br. at
10-11. The passage that Relators quote, however, is taken out of context. It ignores
Respondents’ further argument that the general rule was not applicable because Ohio’s “oil &
gas conservation statutes do not work a ‘taking.’” See id. at 11. Thus, far from suggesting that
mandamus is appropriate in this specific case, Respondents’ brief in federal court simply restated
the undisputed legal principle that, as a general matter, the proper vehicle to compel the
commencement of appropriation proceedings is through mandamus. For the above reasons,
however, and for the reasons stated in Respondents’ merits brief (incorporated here in full), that
general rule does not apply here. Relators have no clear legal right to the relief they seek, the
Respondents have no clear legal duty to commence appropriation proceedings, and Relators had
an adequate remedy at law to raise all of the claims contained in their petition for a writ of
mandamus.
21
CONCLUSION
The Court should deny the Relators’ petition for a writ of mandamus.
Respectfully submitted, MICHAEL DEWINE (0009181) Attorney General of Ohio
/s Eric E. Murphy ERIC E. MURPHY* (0083284) State Solicitor *Counsel of Record SAMUEL C. PETERSON (0081432) Deputy Solicitor BRIAN J. BECKER (0089738) Assistant Attorney General 30 East Broad Street, 17th Floor Columbus, Ohio 43215 614-466-8980 614-466-5087 fax [email protected]
Counsel for Respondents
CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing Respondents’ Supplemental Brief was served
on July 20, 2017, by U.S. mail on the following:
Phillip J. Campanella 7059 Gates Road Gates Mills, Ohio 44040 Counsel for Relators
