Ohio Supreme Court Decides in Favor of Beck Energy; Local Drilling Ordinances Not a Valid Exercise of Home Rule

The Ohio Supreme Court decided a critical case in February affecting the state’s oil and gas drilling industry when it issued its decision in State ex rel. Morrison v. Beck Energy Corp (Slip Opinion No. 2015-Ohio-485) on February 17, 2015.
Beck Energy Corporation (“Beck Energy”) obtained a state permit to drill an oil and gas well on private property in the city of Munroe Falls (the “City”), located in Summit County.  The City attempted to block Beck Energy from drilling the well despite its state permit based on its own ordinances. The permit  was issued to Beck Energy by the Ohio Department of Natural Resources (“ODNR”) under O.R.C. 1509.02.  It contained 67 separate conditions, including many that addressed issues related to site preparation, pit construction and waste disposal, along with many others that govern “Urbanized Areas,” such as noise mitigation, erosion control, tree trimming and parking. Beck Energy, as an applicant for a drilling permit, was also required to provide notices to each owner within 500 feet of the well’s surface location, as well as to the municipality where the well was to be drilled.
The City issued a stop-work order and sought an injunction against Beck Energy alleging that the company was violating the City’s ordinances. The appeal to the Ohio Supreme Court involved 5 of these ordinances; including a general zoning ordinance and 4 ordinances that specifically relate to oil and gas drilling. Violations of these drilling ordinances constitute misdemeanors and could result in jail time and fines, with each day of the violation being a separate offense.
Beck Energy opposed the City’s injunction request which was granted by the trial court but overturned by the court of appeals.  The City appeals to the Ohio Supreme Court who addressed the question as to whether the City’s ordinances represented a valid exercise of its home-rule power.
The home rule amendment to Ohio’s constitution gives municipalities the “broadest possible powers of self-government in connection with all matters which are strictly local and do not impinge upon matters which are of a state-wide nature or interest.” (State ex rel. Hackley v. Edmonds, 150 Ohio St. 203, 212, 80 N.E.2d 769 (1948))  However, a municipality is not allowed to exercise its police powers in a manner that conflicts with general laws. In those instances, it must yield to the state’s law.
In reaching its decision that the City’s ordinances must yield to O.R.C. 1509.02, the Ohio Supreme Court followed a 3 step analysis: (1) is the ordinance an exercise of the police power rather than of local self-government, (2) the statute is a general law, and (3) the ordinance is in conflict with the statute.
In this case, the City did not dispute that its ordinance involved the exercise of police power rather than local self-government. The court then found that O.R.C. 1509.02 is a general law as it (1) is part of a statewide comprehensive legislative enactment, (2) applies to all parts of the state alike and operates uniformly throughout the state, (3) sets forth policy, sanitary or similar regulations, and (4) prescribes a rule of conduct upon citizens generally. The court noted that just because a state statute will have more impact in one geographic section of the state over others does not prevent it from being a ‘general law’.
Finally, the court found that the City’s ordinances conflict with the state’s statute. An ordinance conflicts with a state statute when it permits or licenses that which the statute forbids and prohibits, and vice versa. In this case, the City’s ordinances prohibited a permit that was lawfully issued by the state under O.R.C. 1509.02 and attempts to provide for double licensing which is not permitted under the state statute.
Finding a balance between home-rule authority and state regulatory authority is difficult, even without the added controversy of fracking. Under the circumstances, it comes as no surprise that the Ohio Supreme Court’s decision in favor of Beck Energy was issued by a divided (4-3) court. It will be interesting to see what transpires in the future on this subject.

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