Oil Company Seeks Over $1 Billion In Takings Claim Against California County For Banning Fracking

There is an interesting out of California where Citadel Exploration, an oil company, has sued the San Benito County for $1.2 billion for banning fracking and oil extraction on land within its jurisdiction. Citadel is arguing that the ban constitutes a regulatory taking and that it is entitled to the value lost, which it says amounts to 20-40 millions barrels of oil and a profit of $1.2 billion. It is a troubling case for environmentalists and land use advocates seeking to place limitations on certain industrial activities viewed as harmful.

At issue is Measure J, which bans all fracking and other high-intensity oil extraction.

For environmentalists, such cases could reignite the debate over constitutional takings: the need to compensate private owners like Seadrift of public easements.

In Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), the Court required compensation for regulatory takings. In that case. South Carolina’s Coastal Zone Management Act (1977) required owners of coast land in “critical areas” near beaches to obtain permits from South Carolina Coastal Council before committing the land to new uses. The Court found that the regulation deprives Lucas of value that had to be returned in the form of public compensation.

One exception is common law nuisance where a coastal authority can show that the regulation is designed to prevent a public nuisance such as run-off or erosion etc.

The burden — both legal and financial — in making such a claim can be high. The county would have to show that fracking causes such harms if it comes down to a Lucas fight — something companies vigorously deny. That could make this an important case and potentially damaging for environmentalists if the courts expand on the burden on states and municipalities in showing harm as an exception to takings compensation.

In the end, San Benito County Supervisor Jerry Muenzer indicated that the effort to get over a billion dollars from the county would be like . . . well … fracking water from a stone: “$1.2 billion. That’s like asking for the moon. The county will file for bankruptcy and reorganize. He’s not going to get anything.”

Source: KSBW