In State ex rel. Awms Water Sols., LLC v. Mertz,[1] AWMS Water Solutions, LLC (“AWMS”) and the Ohio Department of Natural Resources, et al., (“Division”) engaged in lengthy litigation that considered whether the suspension of an injection permit amounted to an unconstitutional regulatory taking under the Fifth Amendment.
The facts are straightforward. AWMS obtained a lease and properly undertook the permitting process to construct and operate salt-water injection wells. Once permits were granted and operations commenced, seismic activity occurred. The Division then issued a Suspension Order.[2] Even though the Suspension Order was terminated for one well, it remained in effect for the second, more profitable well.
During litigation, AWMS filed for a writ of mandamus, arguing the Suspension Order’s substantial interference with AWMS’ property rights caused an economic deprivation.[3] Importantly, the federal Takings Clause goes beyond the taking of physical property and applies in cases where government regulations prove so burdensome that they result in an economic taking.[4]
So, what sort of regulation amounts to an economic taking? Long-held precedent employs a two-part test that includes determining whether a cognizable property interest was possessed, and if so, whether a taking occurred.
In this matter, the first hurdle AWMS had to overcome was the question of whether it possessed a cognizable property interest. The court noted, “[a]gain while we recognize AWMS possesses a property right in its lease, the real question is whether that right is cognizable such that it is entitled to a just compensation analysis.”[5] In answering this question, the court discussed the difference between AWMS’ right to inject brine versus its right to pursue the process of obtaining a saltwater injection well permit.[6]
The court held that although AWMS had a right to seek a permit, it did not have a right to receive a permit. Further, the permitting process was subject to the Division’s approval in the interest of public safety. Accordingly, AWMS’ argument fell flat, and the court found no reason to analyze the second part of the test.
[1] 2022-Ohio-4571, 2022 Ohio App. LEXIS 4274, 2022 WL 17752252.
[2] Id. at ¶18.
[3] Id. at ¶24.
[4] Mertz, Supra, at ¶36.
[5] Id. at ¶49.
[6] Id. at ¶53.
Andrew represents companies active in the oil and gas industry in both litigation and arbitration matters, from risk management to trial. He also advises clients on compliance and regulatory issues and handles proceedings in front of administrative agencies / governmental bodies, including the Ohio Department of Natural Resources and the Ohio Department of Commerce.
In addition to his energy practice, Andrew has broad experience in commercial and business litigation, including breach of contract / lease claims, construction disputes, non-compete / non-solicitation disputes, trade secrets, business torts, and real property-related claims. He is OSHA certified in Construction Safety and Health and has drafted and reviewed numerous construction contracts.