Here’s the latest in a case we’ve been following for quite a while. (For prior decisions from the matter, see “Earthquake In Ohio: The Jury Should Decide Lucas And Penn Central Takings After State Shut Down Injection Wells For Causing Earthquakes,” and “Ohio: We Really Meant It When We Remanded For Weighing Of Evidence – Appeals Court Had No Business Dismissing.”)

In Ohio ex rel. AWMS Water Solutions, LLC v. Mertz, No. 2026-Ohio-1487 (Apr. 29, 2026), the Ohio Supreme Court held that the operator of injection wells (where the wastewater from fracking are disposed of) lacked an investment-backed expectation to continue operating because it did business in a highly-regulated environment, and it understood the risk that it would be further regulated. Slip op. at 17-18.

The state Department of Natural Resources ordered the wells to stop temporarily after they caused two small earthquakes. The operator asserted this caused it to lose money it had reasonably expected to make. The court of appeals agreed with the operator that this resulted in a taking, but the Ohio Supreme Court reversed unanimously, concluding that this was neither a total (Lucas) taking, nor a Penn Central taking.

To us, the most interesting part of the opinion is the court’s view of the investment-backed expectations factor, where it concluded that this views the regulatory scheme at the time of acquisition:

The analysis of this factor “is designed to account for property owners’ expectation that the regulatory regime in existence at the time of their acquisition will remain in place, and that new, more restrictive legislation or regulations will not be adopted.”

Slip op. at 16 (quoting Love Terminal Partners, L.P. v. United States, 889 F.3d 1331, 1345 (Fed.Cir. 2018)).

Again relying on Federal Circuit case, the Ohio Supreme Court concluded that the way to figure out whether an owner’s expectations are “reasonable,” is to examine three factors:

{¶ 43} This factor has three subfactors that guide the inquiry: “(1) whether the plaintiff operated in a ‘highly regulated industry;’ (2) whether the plaintiff was aware of the problem that spawned the regulation at the time it purchased the allegedly taken property; and (3) whether the plaintiff could have ‘reasonably anticipated’ the possibility of such regulation in light of the ‘regulatory environment’ at the time of purchase.” Appolo Fuels, Inc. v. United States, 381 F.3d 1338, 1349 (Fed.Cir. 2004), quoting Commonwealth Edison Co. v. United States, 271 F.3d 1327, 1348 (Fed.Cir. 2001); see also AWMS I at ¶ 64 (quoting Appolo Fuels with approval).

Id.

The court rejected the court of appeals’ conclusion that the operators here could not have anticipated the challenged restrictions:

AWMS has been in the business of hauling and disposing of waste since 1988 and saw an opportunity to expand into oil-and gas wastewater disposal. Even before AWMS entered this line of business, it knew that earthquakes had been linked to saltwater-injection wells. And the court of appeals found as a factual matter that AWMS’s expectations at the time that it acquired the leasehold “were fundamentally tempered by its express awareness of the serious risks of a shutdown.”

Slip op. at 17 (citation omitted).

In short, the operator knew (or should have known) that at the time it acquired the property “that the State would not be more cooperative in considering AWMS’s restart proposal.” Slip op. at 20.

In the end, the Ohio Supreme Court held that the court of appeals incorrectly balanced the Penn Central factors, since the expectations and character factors favored the government, not the owner as the appellate court had concluded:

{¶ 62} “Whether a compensable taking has occurred is a question of law based on factual underpinnings.” Maritrans Inc. v. United States, 342 F.3d 1344, 1350 (Fed.Cir. 2003). As we have already explained, the court of appeals erred in weighing the investment-backed-expectations factor in AWMS’s favor and gave too little weight to the character-of-the-state-action factor. The court of appeals also gave too much weight to the economic impact of the suspension order on AWMS in view of its factual determination that the impact was much less than AWMS had claimed.

{¶ 63} Balancing the Penn Central factors, we conclude that AWMS’s lack of investment-backed expectations and the character of the regulation outweigh the economic impact of the suspension order. See Appolo Fuels, 381 F.3d at 1351 (balancing Penn Central factors and concluding that lack of reasonable investment-backed expectations coupled with government action designed to protect health and safety outweighed economic injury).

Slip op. at 22.

More here (“State Not Required to Compensate Operator for Temporary Shut Down of Injection Wells After Earthquakes“) from the Ohio judiciary.

Ohio ex rel. AWMS Water Solutions, LLC v. Mertz, No. 2026-Ohio-1487 (Ohio Apr. 29, 2026)