Why ‘wrongful taking’ does not apply

One of the biggest bugbears that has haunted the efforts of local towns to craft ordinances restricting high-impact industrial uses within their borders is the threat of lawsuits. Specifically, opponents of such ordinances maintain that if a town zones some property owners’ land so that industrial operations like hydro-fracking are not permitted, it amounts to a “wrongful taking:” that is, a government action has deprived property owners of the value of their land, and they must be compensated accordingly.

The idea is based on the Fifth Amendment, which concludes with the words, “nor shall private property be taken for public use, without just compensation.” The most obvious example is eminent domain, in which the government seizes private land outright but must pay the owner the market price for it.

Would zoning that prohibited activities like hydro-fracking fall into this category? A review of court rulings on this issue suggests that the answer is “no.”

Historically, the two chief criteria that establish a case as a wrongful taking have been whether the land in question will actually be occupied by a party other than the current owner; and whether the government action so reduces the value of the land as to leave at most “but a bare residue” of its value. Also material is whether the plaintiff has been singled out to bear disproportionately the costs of a government action deemed to be for the general good.

The occupation condition is obviously not applicable to the case of restrictions on high-impact industrial activities such as gas drilling. Zoning is not actual physical occupation.

The value condition is complicated by the fact that no precise threshold defining “bare residue” has been established. However, the precedent in case law suggests that “residue” falls a lot closer to 10% than it does to 90%; the reduction must be huge—well over 50%. And while land zoned ineligible for high-impact industrial use could not house activities like gas drilling, it could still be used for other activities with economic value like farming, lumbering, residential use, quarrying, recreational, retail or commercial uses (depending on the balance of the zoning). This represents far more than a bare residue. Moreover, at least in Sullivan County, so far there does not seem to have been much, if any, premium built into the value of land that has been leased for gas drilling. Supervisor James Greier of the Town of Fremont, which is in the northwest part of Sullivan County and is therefore the most likely to lie over viable gas reserves, told us that he hadn’t noticed any upward movement in property values at all since 2007 when the first leases were signed. Accordingly, a change in zoning with regard to drilling is unlikely to produce any significant drop in value.

Ironically, to find cases related to natural gas drilling that might result in owners being left with “but a bare residue” of the value of their land, you have to look at the impact of drilling—not the impact of failing to drill. We have seen, in Pennsylvania, examples of homeowners whose water supply has been destroyed due to nearby drilling operations, and whose homes have since become unmarketable. With plots too small to be usable for operations like agriculture or lumbering, these properties can indeed be regarded as next to worthless. To this extent, landowners who suffer catastrophic environmental damage from drilling might seem to have better grounds for “wrongful takings” suits than landowners who merely have to forego the chance to have drilling on their land.

But according to Helen Slottje of the Community Environmental Defense Council, suits against a township for failure to protect such properties are not likely to succeed, given that the state oil and gas law specifically endorses drilling in general as a good idea. She said the party more likely to be vulnerable to a successful suit in such a case would be the state itself, especially in cases of mandatory integration, in which state law forces property owners’ land into gas drilling sections against their will.

Another reason landowner suits against a town for failing to protect them against drilling face an uphill battle is that towns are “given a lot of discretion” when it comes to zoning, according to Slottje. But that works both ways: it’s another reason why wrongful takings suits filed against a town for banning high-impact industrial uses are not likely to succeed either.

Under the American system of law, anybody can try to sue anybody for anything. But that doesn’t mean that the suits will get very far; and if there are clear precedents showing them to be groundless, they will be dismissed rapidly. We would expect the first challenge to an ordinance restricting high-impact industrial use to establish such a precedent. The law endows landowners with the right to make money from their property, but not to make the maximum possible amount when that conflicts with the common good as articulated in town ordinances.