Oil and Gas Update
Federal Court Upholds Constitutionality of Ohio's Forced Unitization Law - R.C. 1509.28
June 17, 2018
By: Andrew N. Schock
In Kerns v. Chesapeake Exploration, LLC., N.D.Ohio No. 5:18 CV 389, 2018 WL 2952662, the United States District Court for the Northern District of Ohio held that unitization pursuant to R.C. 1509.28, Ohio’s “forced unitization” statute, did not constitute a taking under the Fifth Amendment, the Fourteenth Amendment, or 42 U.S.C. § 1983. In Kerns, landowners filed suit against Chesapeake Exploration, L.L.C. and Richard J. Simmers, Chief, Ohio Department of Natural Resources, Division of Oil and Gas Resources Management, alleging that their property was unconstitutionally taken when Simmers issued an order unitizing their property pursuant to R.C. 1509.28 and Chesapeake began developing wells in said unit. Chesapeake and Simmers each filed motions to dismiss which were granted by the Northern District.
As to Chesapeake, the Court reasoned that Chesapeake’s actions to obtain the unitization order, obtain a drilling permit, and develop the property could not be attributed to the state in order to make a takings claim. The Northern District dismissed the complaint because it did not adequately allege that Chesapeake acted under the color of state law, a necessary element to Plaintiffs’ takings claims.
As to Simmers, the Court found that a per se takings claim was not stated in the complaint given the subsurface nature of the allegations and the Plaintiffs’ property rights under Ohio law. The Court explained that, in Ohio, “landowners have limited subsurface property rights and hold their private property subject to the general police power of the state.” In its holding, the Court recognized that states may enact legislation, such as R.C. 1509.28, to protect correlative rights and reduce waste pursuant to their police powers. Because R.C. 1509.28 is a valid exercise of Ohio’s police powers which protects correlative rights, its exercise does not constitute an illegal taking.