State v. Beck Energy Corp.

• Decision Date: 06 February 2013
• Docket Number: No. 25953.,25953.
• Parties: STATE of Ohio ex rel. Jack MORRISON, Jr., Law Director City of Munroe Falls, Ohio, et al., Plaintiffs–Appellees, v. BECK ENERGY CORPORATION, et al., Defendants–Appellants.
• Court: Ohio Court of Appeals

989 N.E.2d 85

STATE of Ohio ex rel. Jack MORRISON, Jr., Law Director City of Munroe Falls, Ohio, et al., Plaintiffs–Appellees,

v.BECK ENERGY CORPORATION, et al., Defendants–Appellants.

No. 25953.

Court of Appeals of Ohio, Ninth District, Summit County.

Feb. 6, 2013.

Thomas Saxer and Scott E. Mullaney, Amer Cunningham Co., LPA, Akron, OH, for plaintiffs-appellees.

John W. Solomon, Vorys, Sater, Seymour and Pease LLP, Akron, OH, and John K. Keller and Robert J. Krummer, Vorys, Sater, Seymour and Pease LLP, Columbus, OH, for defendants-appellants.

MARY JANE TRAPP, J., Eleventh Appellate District, sitting by assignment.

{¶ 1} Beck Energy Corporation secured a permit from Ohio's Department of Natural Resources to drill on Joseph Willingham's property located in the City of Munroe Falls, Ohio. When Beck Energy began drilling on the property, the city issued a Stop Work Order and filed a complaint in the Summit County Court of Common Pleas for an injunction to stop Beck Energy from drilling. The city claimed Beck Energy did not comply with its ordinances requiring permits for drilling, zoning, and rights-of-way construction. The trial court granted the injunctive relief sought by the city and Beck Energy and Mr. Willingham brought this appeal.

{¶ 2} On appeal, the question to be answered is whether the City of Munroe Falls can enforce its ordinances governing oil and gas drilling and related zoning and rights-of-way issues despite the state's comprehensive statutory scheme for drilling set forth in R.C. Chapter 1509. This appears to be an issue of first impression.¹

{¶ 3} In 2004, the General Assembly enacted statutes granting exclusive regulation over oil and gas wells in Ohio to the Ohio Department of Natural Resources. While we recognize that gas and oil drilling brings economic benefits to the entire state, we also recognize that the burden of potential risk and harm, especially to a local area's infrastructure, is borne by the local residents in the wells' immediate surroundings. But our role is not to make policy decisions and re-write either state law and regulations or local zoning ordinances; we are compelled to follow the established law in our application of the constitutional home-rule analysis to Monroe Falls' drilling ordinances. Because the drilling ordinances are in direct conflict with the state statutes, the city cannot enforce the ordinances as presently written. The city, however, is permitted to enforce pertinent right-of-way ordinances in the face of the drilling activities, provided these ordinances are not enforced in a discriminatory manner against oil and gas well drilling.

Substantive Facts and Procedural History

{¶ 4} Mr. Willingham leased gas rights to Beck Energy Corporation (“Beck Energy”) for several acres of property he owns within the City of Munroe Falls. Beck Energy applied for a well permit from the Ohio Department of Natural Resources (“ODNR”), Division of Mineral Resources Management, to drill a gas well on the property. After reviewing the application, the division issued a well permit (# 2–3126) to Beck Energy on February 16, 2011. The permit sets forth terms and conditions, including 29 Urbanized Area Permit Conditions, which include specific requirements governing tree trimming, fencing, parking, noise, erosion, drainage, landscaping, and site restoration.

{¶ 5} When Beck Energy began excavation and drilling at Mr. Willingham's residence, the city issued a Stop Work Order, alleging Beck Energy violated several ordinances in drilling at the property without first obtaining various necessary permits from the city. On April 6, 2011, the city and its Law Director, Jack Morrison, Jr. (hereafter “the city”), filed a complaint in the Summit County Court of Common Pleas to enjoin Beck Energy from engaging in drilling activities on Mr. Willingham's property until it complies with 11 ordinances and acquires the necessary permits pursuant to the ordinances. In conjunction with the complaint, the city also filed an application for preliminary and permanent injunction.

{¶ 6} The city claimed that in order to engage in the drilling activity, Beck Energy must, as prescribed in the city's ordinances: (1) obtain a drilling permit, a “conditional” zoning certificate, and a zoning certificate; (2) appear before the city's planning commission in a public hearing and obtain its approval; (3) pay the necessary fees and post the requisite performance bond; and (4) obtain a rights-of-way construction permit and pay the required fees.

{¶ 7} After the city filed the complaint, the parties agreed to maintain the status quo and refrain from any drilling activity, and to submit briefs to the trial court addressing whether an injunction should be issued. On May 3, 2011, the trial court entered a preliminary injunction, and subsequently entered an order granting a permanent injunction, enjoining Beck Energy from operations related to drilling on the subject property until all relevant Munroe Falls ordinances have been complied with.

{¶ 8} Beck Energy now appeals from that order.² It assigns the following error for our review:

{¶ 9} “The trial court erred as a matter of law when it held that local city ordinances, which prohibit defendants' gas drilling operations in the absence of City-issued permits, are not in conflict with Ohio state statutes, which specifically allow those operations pursuant to a State-issued permit. The trial court's ruling that the ordinances are within the city's home-rule authority should therefore be reversed.”

Standard of Review for Injunction

{¶ 10} “ ‘An injunction is an extraordinary remedy in equity where there is no adequate remedy available at law. It is not available as a right but may be granted by a court if it is necessary to prevent a future wrong that the law cannot.’ * * * The grant or denial of an injunction is within the trial court's discretion and will not be disturbed by a reviewing court absent an abuse of that discretion. * * * In order to find an abuse of that discretion, we must determine that the trial court's decision was unreasonable, arbitrary or unconscionable. Blakemore v. Blakemore, 5 Ohio St.3d 217, 219, 5 Ohio B. 481, 450 N.E.2d 1140 (1983).” (Internal citations omitted.) Heron Point Condo. Unit Owner's Assn. v. E.R. Miller, Ltd., 9th Dist. Nos. C.A. Nos. 25861, 25863, 25998, 2012-Ohio-2171, 2012 WL 1717903, ¶ 15.

Standard of Review for Conflict Determination

{¶ 11} The central issue in this case is whether Monroe Falls' ordinances governing drilling and related matters conflict with R.C. 1509.02. “Whether there is a conflict between a city's ordinance and the state's general law presents a question of law, which this Court reviews de novo.” Smith Family Trust v. City of Hudson Bd. of Zoning and Bldg. Appeals, 9th Dist. No. 24471, 2009-Ohio-2557, 2009 WL 1539065, ¶ 10, citing Ohio Bell Tel. Co. v. Pub. Util. Comm., 64 Ohio St.3d 145, 147, 593 N.E.2d 286 (1992).

R.C. 1509.02: The Oil and Gas Drilling Statute

{¶ 12} This appeal concerns the scope of R.C. Chapter 1509, Ohio's oil and gas drilling statutes. Pursuant to its constitutional authority, the General Assembly enacted R.C. Chapter 1509 in 1965 to regulate all oil and gas drilling and production operations in Ohio. See Redman v. Ohio Dept. of Industrial Relations, 75 Ohio St.3d 399, 662 N.E.2d 352 (1996). In 2004, the General Assembly enacted H.B. 278, which expanded the regulatory scheme and amended R.C. 1509.02 to give the Division of Mineral Resources Management of the Ohio Department of Natural Resources the “sole and exclusive authority to regulate the permitting, location, and spacing of oil and gas wells.”

{¶ 13} Subsequently, the General Assembly enacted S.B. 165, effective June 30, 2010, which further expanded ODNR's regulatory authority to include “production operations.”

{¶ 14} The General Assembly again expanded ODNR's authority in H.B. 153, effective September 28, 2011. It amended ODNR's authority to include “well stimulation,” “completing,” “construction” of site, and “permitting related to those activities.”

{¶ 15} R.C. 1509.02 in its current form reads, in pertinent part:

{¶ 16} “There is hereby created in the department of natural resources the division of oil and gas resources management, which shall be administered by the chief of the division of oil and gas resources management. The division has sole and exclusive authority to regulate the permitting, location, and spacing of oil and gas wells and production operations within the state, excepting only those activities regulated under federal laws for which oversight has been delegated to the environmental protection agency and activities regulated under sections 6111.02 to 6111.029 of the Revised Code. The regulation of oil and gas activities is a matter of general statewideinterest that requires uniform statewide regulation, and this chapter and rules adopted under it constitute a comprehensive plan with respect to all aspects of the locating, drilling, well stimulation, completing, and operating of oil and gas wells within this state, including site construction and restoration, permitting related to those activities, and the disposal of wastes from those wells. Nothing in this section affects the authority granted to the director of transportation and local authorities in section 723.01 or 4513.34 of the Revised Code, provided that the authority granted under those sections shall not be exercised in a manner that discriminates against, unfairly impedes, or obstructs oil and gas activities and operations regulated under this chapter.”

{¶ 17} R.C. Chapter 1509 thus provides a comprehensive regulatory scheme for oil and gas wells operations in the state. A person wishing to drill a well for oil or gas must first obtain a drilling permit from the Division of Mineral Resources Management. R.C. 1509.05 and R.C. 1509.06. R.C. 1509.021 governs minimum distance restrictions on the surface location of wells and...