Here's one of the decisions we've been meaning to post for a while.
In Schmude Oil Co., Inc. v. Dep't of Envt'l Quality, No. 313475 (July 1, 2014), the Michigan Court of Appeals held that there was no wipeout per se taking, nor was there a Penn Central taking, when the DEQ refused to permit the plaintiff to drill for shale oil on its private property.
The plaintiffs' land was partially in a "nondevelopment region" which absolutely banned drilling, while the other portion was in a "limited development region" in which "drilling could occur, subject to certain limitations." The plaintiffs requested the DEQ issue 8 permits for the nondevelopment region, and 3 permits for the limited region. The DEQ denied all the applications.
The court of appeals determined that within the nondevelopment region, the DEQ was required to have rejected the drilling requests (nondevelopment means no drilling), and that within the limited development region, the DEQ was within its discretion when it denied the permits.
The court also rejected the claim that the permit denials were takings. The court concluded that it wasn't a wipeout, because even though application of the no-development rule absolutely prohibited the plaintiffs from drilling, it didn't eliminate all use of the land. It also rejected the Penn Central claim, holding that (1) the drilling ban did not single out the plaintiffs (the "character of the government action" prong), but applied to all land within the nondevelopment region; (2) although the ban severely impacted the owners' right to use the shale oil, "petitioners are not without some value in the leases;" and (3) the owners' investment-backed expectations were small, since they acquired their interests after the adoption of the ban. See slip op. at 10-11.
More here, from lawprof John Echeverria, who agrees that this decision is diametrically opposite an earlier court of appeals opinion on nearly identical facts, Miller Bros. v. Department of Natural Resources, 513 N.W.2d 217 (Mich. App. 1994). The Schmude Oil court attempted to distinguish Miller on the basis that in that case, "the plaintiffs had one, and only one, interest and viable economic use in the land—the extraction of oil and gas. Id. at 679-680. The denial of permits denied the plaintiffs this only viable economic use; therefore, by exercise of regulatory power, the government so restricted the use of the plaintiffs’ property that they were deprived of all economically viable use of the land. Id. at 680. By contrast, petitioners can still operate wells in the limited development region. They can also utilize horizontal drilling." Slip op. at 10. Count us as not convinced.
Schmude Oil, Inc. v. Dep't of Envt'l Quality, No. 313475 (Mich. App. July 1, 2014)
