In another installment of AWMS Water Sols., LLC v. Mertz, the Eleventh Appellate District issued a decision earlier this month holding that AWMS met its burden of proof and persuasion on its claim that an injection well suspension order issued by the Ohio Department of Natural Resources (“ODNR”) constituted a partial regulatory taking under the Fifth Amendment of the U.S. Constitution.[1]
When previously faced with the question, the Eleventh Appellate District granted the ODNR judgement as a matter of law, concluding that AWMS failed to establish a sufficient property interest in its injection well permit (and other property) to assert such a claim.[2] But that decision was reversed by the Supreme Court of Ohio, which held AWMS presented sufficient evidence to make judgement as a matter of law improper.[3]
Now on remand, the Eleventh Appellate District confirmed its conclusion that ODNR’s suspension order was not a categorical taking but balanced the factors from Penn Cent. Transp. Co., 438 U.S. 104, to conclude that the ODNR’s actions constituted a partial regulatory taking of AWMS’s interest. Under Penn Cent. Transp. Co., the Eleventh Appellate District was required to consider (1) the economic impact of ODNR’s regulation (i.e., the suspension order); (2) the extent to which ODNR’s regulation interfered with AWMS’s distinct investment-backed interests; and (3) the character of ODNR’s action.
With respect to the economic impact factor, the Eleventh Appellate District concluded AWMS was economically harmed by ODNR’s suspension order.[4] The Eleventh Appellate District also concluded that the suspension order interfered with AWMS’s reasonable investment-backed expectations. On this point, the Eleventh Appellate District emphasized that AWMS could not have reasonably anticipated the ODNR’s failure to adequately respond (or respond at all) to AWMS’s proposals for having the suspension order lifted.[5] It agreed with the Supreme Court of Ohio’s analysis, however, that the suspension order was reasonable as a matter of law.
Ultimately, weighing the factors from Penn Cent. Transp. Co., the Eleventh Appellate District concluded AWMS had established a compensable partial, regulatory taking claim. While the majority opinion conceded that the suspension order was reasonable in light of the seismic activity caused by AWMS’s injections, it emphasized that it was improper for ODNR to “drag[] its heels even after AWMS attempted to ameliorate the issues identified by [ODNR].” As the opinion succinctly summarized:
“To be sure, public safety is a preeminent concern of any regulatory body. These bodies, however, cannot leave a party in regulatory purgatory when that party seeks to cooperate in good faith with state decisionmakers.”
[1] 2024-Ohio-4451 (Sept. 9, 2024).
[2] Eleventh Appellate District Rejects Takings Claim Based on Injection Well Permit Suspension Order (vorys.com)
[3] Supreme Court of Ohio Sides with Injection-Well Operator in Takings Case (vorys.com)
[4] It’s worth noting that the Court sided with ODNR’s experts when it came to determining the amount of economic harm that AWMS suffered from the suspension order.
[5] The dissent disagrees with the majority’s analysis of this factor and would have held that the suspension order did not interfere with AWMS’s reasonable investor-backed expectations because the ODNR’s regulations did not change.