Clash of Convictions: HB 507 and the Battle for Oil and Gas Leasing on State-Owned Land

AUTHOR(s)

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The Franklin County Court of Common Pleas (Franklin County, Ohio) is set to determine whether Ohio lawmakers violated the Ohio Constitution through the amendments made to R.C. 155.33 via House Bill 507 (“HB 507”), which mandates, among other items, that the State of Ohio lease land owned or controlled by it for the exploration for and development and production of oil or natural gas.

On January 6, 2023, Ohio Governor, Mike DeWine, signed HB 507 into law, which was set to become effective on April 7, 2023. However, on April 6, 2023, the Ohio Environmental Council, Ohio Valley Allies, Buckeye Environmental Network, and the Sierra Club (collectively “Plaintiffs”), filed a lawsuit (“Lawsuit”) in the Franklin County Court of Common Pleas under Case No. 23CV002403 against the State of Ohio and Mary Mertz, in her capacity as Director of the Ohio Department of Natural Resources (collectively “Defendants”).

The Lawsuit, as noted above, relates to the constitutionality of the enactment of the amendments to R.C. 155.33(A)(1) via HB 507.  In particular and relevant to the Lawsuit, HB 507: (1) changed Ohio R.C. 155.33(A)(1) to require, rather than authorize, state agencies to lease state owned lands for oil and gas development; (2) directed the Oil and Gas Land Management Commission to develop a set of rules for lease applications; and (3) defined natural gas as a “green energy.”

The Plaintiffs’ Complaint seeks declaratory, preliminary, and injunctive relief relating to HB 507.   Specifically, Plaintiffs request the court to: (1) declare HB 507 unconstitutional and void under the one subject rule,[1] which says bills must only “contain one subject that is clearly expressed in the title; (2) declare HB 507 unconstitutional and void under the three-consideration rule of the Ohio Constitution;[2] (3) award preliminary and injunctive relief enjoining the State of Ohio from leasing public lands pursuant to R.C. 155.33(A) as amended by HB 507; and (34) award attorneys’ fees and costs pursuant to R.C. 2335.39, along with all other relief the court deems just and proper.

In addition to their Complaint, Plaintiffs filed a Motion for Temporary Restraining Order which argued: (1) absent a temporary restraining order (“TRO”), state agencies will be forced to lease public lands that they currently have discretion to withhold from leasing pursuant to HB 507; (2) the mandatory leasing provision in HB 507 irreparably harms Plaintiffs’ members by: (a) depriving them of their Constitutional rights to a fair legislative process that allows for education and debate on mandatory leasing of public lands; and (b) threatening oil and gas development on public lands that would injure plaintiffs recreational, cultural, and aesthetic interests in those lands, which would occur without prior notice to the Plaintiffs. On April 10, 2023, the Court rejected Plaintiffs’ Motion for TRO, finding there was no likelihood of any immediate and irreparable injury, loss, or damage to the Plaintiffs.

On April 14, 2023, the parties filed a Joint Motion to, among others, consolidate briefing on the preliminary injunction and on the merits of the case. Through this Joint Motion, the parties agreed that this case could be decided without discovery and based on the parties’ written filings (i.e. merit briefs).

Nearly one month later, on May 5, 2023, Plaintiffs filed their Merit Brief. Within their Brief, Plaintiffs argued: (1) HB 507 violates the one-subject rule by containing unrelated topics that share no rational or legitimate connection; (2) HB 507 violates the three-consideration rule of the Ohio Constitution as it did not receive three considerations in each house of the General Assembly; (3) Plaintiffs have standing to bring the lawsuit; (4) Plaintiffs’ members have been harmed, which includes property injuries, business and professional injuries, aesthetic and recreational injuries, and procedural injuries; (5) Plaintiffs’ members’ injuries were caused by the unconstitutional enactment of HB 507; and (6) declaratory and injunctive relief will redress their injuries.

About one month later, Defendants filed their Merit Brief, which argued: (1) Plaintiffs lack standing to bring the lawsuit; (2) Plaintiffs Complaint was moot and must be dismissed; (3) Plaintiffs failed to establish the necessary elements to obtain a declaratory judgment; and (4) Plaintiffs claims are without merit.  Shortly thereafter, Plaintiffs filed their Reply Brief, which essentially regurgitated their Merit Brief arguments, in an effort to rebut the arguments raised in Defendants’ Merit brief.

While it is true HB 507 will propel the production of minerals underlying state lands, antagonistic claims are being made that fracking has a direct effect on the environment and individual health, including the development of health conditions and impacts on drinking water, air pollution, and climate. Moreover, claims have been raised that no matter the amount of money derived from such leases, it will not come close to the revenue generated by state parks and public lands by preserving them. However, it’s also important that Ohioans understand the surface of these lands should see little to no impact as a result of the law and Governor DeWine’s assurances regarding surface impact on state parks. Indeed, surface permits and surface leases on state-owned lands aren’t part of the mandate, and the subsurface assets will be accessed through horizontal wells located outside or on the perimeter of the lands. Similarly, it is also important to note that nature preserves are exempted from development by the new law. Moreover, during these financially challenging times for all Ohioans, a significant amount of revenue will be generated for the state and new jobs will be created, thus providing an economic boost to the localities and the State of Ohio in general.

It has now been nearly five months since Plaintiffs filed their Reply Brief.  While a decision by the Court should be forthcoming, it is unlikely to be the end of this matter as it is anticipated that such decision will likely be appealed. Further, the Ohio Oil and Gas Land Management Commission is meeting on November 15, 2023 to decide whether to permit or deny fracking under four Ohio state parks and wildlife areas.

Stay tuned…

Authored by Andrew Good & Matthew Gibson

 

[1] See, Article II, Section 15(D)

[2] See, Article II, Section 15(D)

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.

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