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Eminent Domain:
Property Owners Beware!
By Jan Boyer, Senior Scribe
www.darkecountyseniors.us
Lyn Bliss photo
“We will know the true value of water when it is gone!” With this time
honored quotation, Judge Julie Monnin concluded an eye opening talk to
60 citizens about eminent domain and the pitfalls property owners could
face when drilling companies come knocking on their doors.
Municipal Judge Monnin’s presentation was a continuation of the League
of Women Voters’ goal to provide educational information to citizens of
the county.
With the title “Property Owners Beware!”, Monnin explained eminent
domain as the process could happen in Ohio and is happening in
Indiana. Although traditionally, the owner of property has a
right to possession, control, exclusion, enjoyment and disposition,
known as the bundle of rights.
Governments can use eminent domain to take over property for government
purposes. Article I, Section 19 gives the state authority to use
eminent domain for roads, public utilities, economic development.
It is not defined as the government taking property to give to private
entities for development.
In 2005, public use, under the U.S. Constitution, was interpreted to
mean that a state can make decisions that promote jobs, economic
generation and tax base. This interpretation was pursuant to the 5th
Amendment.
In 2006, case law in Ohio citing Norwood v. Horney allowed the economy
may be considered but is not sufficient. It cannot be taken if it
is against the public interest. This could happen if the property was
blighted. However, the idea that it could become blighted in the
future is not sufficient and this may not be used as the sole
reason.
Ohio law “Fundamental Right to Own” protects the landowner. The
state cannot seize a property just because of a deteriorating
condition. Ohio Senate Bill 7 (SB 7) statutorily by the
Legislature defines that “deteriorating” cannot be just because it
might be put to better use.
The state must adopt an economic development plan documenting the
public need and that it is necessary for public needs and can’t be just
an emergency measure. This is a procedure and cannot be
rushed. Since SB 7 if there is an disagreement on the issue, it
must be settled in Ohio State Court. The restrictions imposed by
Norwood v. Horney and by SB 7 have curtailed this process as well as
has the economic downturn.
Judge Monnin emphasized precautions property owners should take before
signing any contracts. “Traditionally, ownership meant owning
real property from the center of the earth to the infinity of the
sky. Or do we?” Monnin asked.
Today this is not so clear cut since the advent of air travel when
planes daily cross our owned space in the sky. We have the right to
prevent invasion of owned subsurface if it interferes with owner’s
reasonable and foreseeable use of that subsurface.
With oil and gas drilling, new technology now allows reaching those
formations for gas that has previously been unavailable. The Utica
Shale in Pennsylvania and eastern Ohio as a viable source of gas has
brought this to public attention. Drilling in northeast Ohio has
already begun.
Legislature is pending to allow drilling on state lands including
parks, alarming environmental and conservation groups. Further raising
concerns, Governor Kasich has appointed former executive of the gas
industry, David Mustine, to head the Department of Natural Resources.
Landowners were cautioned not to sign anything without first seeking
legal advice, without having the proposed agreement review by an
attorney. Several factors should be spelled out in a
contract: annual base rental fees, pipeline location restriction,
infrastructure of the pipeline location or easement. Language should
spell out whether the contract could be sold to another company and
also planned storage provisions. Also, know whether the process will be
by injection or infusion. Ask for references and follow up on those
references.
A landowner needs to be specific in contract requirements. It should
include a water protection clause so that if the water supply is
affected, the company would be responsible for a new well or
filtration. All liability should be on the company
Judge Monnin advised landowners to have records and photos of their
sites before and after drilling. This gives a starting point when
thinking about causation. Water should be tested for quality and
quantity by an independent agency before drilling starts.
Neighbors within 1000 ft should also test their water.
Unitization may allow company to form several properties into a single
unit. Disrupting of electricity and power lines may also be
disrupted. And with today’s technology, once drilling has reached
a certain depth, horizontal drilling up to a mile to either side is a
possibility. Your neighbor may sign the contract and be getting
the royalty checks but in fact they could be horizontally drilling
under your property and you get nothing.
Your contract may want to limit what can be extracted. Also, what
compensation would be available if you are unable to use property while
drilling continues, which could be up to 3 years. Know specifics
about location of drilling, roadways, structures, electrical lines,
fence relocation for livestock and about location and depth of
pipelines to transport gas away from the site. Include a clause
about whether negotiations or arbitration is available.
Offers of free gas may sound good but if the drilling does not result
in a successful gas well or it fails to produce adequately, it could
cost $20K plus to repair and restore the land. So, most
importantly, have a restoration or exit clause to protect your assets.
Landowners need to be aware that when a contract has expired, if the
landowner receives another royalty check, cashing it automatically
extends the contract.
Monnin concluded that there is much more than money involved as she
delivered the famous quotation about the value of water.
She accepted questions, one being about taxes being raise if gas is
found to which she answered that was likely. One audience member
noted that 35 - 40 years ago in Morrow County drilling resulted in well
water contamination. Judge Monnin cited new technology used today
but there are no guarantees.
One questioned whether the company had to be transparent about their
methods. The answer was that once the contract was signed, the
company had the proprietary right to proceed. They do not have to
tell what they are pumping down to crack shale and the resulting waste
water has sometimes contaminated land water and can be
radioactive. Three types of contamination were found in water in
Pennsylvania.
There are oil/gas safety inspectors to check on drilling projects, but
too their numbers are too few to adequately police the companies.
The bottom line is know who you are dealing with, what their past
history is, the specifics of the contract they offer. Then, do
not sign until all anticipated outcomes have been included in the
document and it has passed legal inspection.
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