Challenging an ordinance that the court characterizes as an "even-handed" zoning regulation, even if it outlaws an existing conditional use, is going to be a tough one for a plaintiff. In theory, it need not be, given the right conditions. But any zoning lawyer will tell you that it is tough to overcome most courts' presumption that these things are ok. That's just the way it is.
The Minnesota Court of Appeals' opinion in Minnesota Sands, LLC v. County of Winona, No. A18-0090 (July 30, 3018), confirms that vibe. There, the county adopted an ordinance that banned all "industrial-mineral mining, including silica-sand mining." Slip op. at 1. If that sounds oddly specific, the backstory is that this is the stuff used in fracking.
Mr. Frick (and here you might think we'd try to work in both "Frick" and "frack" into this post's title) owned leases to mine silica-sand on several properties in the county, which he assigned to Minnesota Sands. Prior to the ban, industrial mining was a conditional use, meaning a permit (CUP) from the county was needed before a miner could mine. Neither Frick nor Minnesota Sands had applied for a CUP. Minnesota Sands sued, alleging both that the ordinance violated the dormant Commerce Clause, and that it was a taking. The trial court granted the county summary judgment on both claims.
The Court of Appeals affirmed. We won't go into detail on the Commerce Clause claim, but suffice it to say that the court concluded the ordinance didn't discriminate against out-of-state interests, because it bans all industrial-mineral mining. The court rejected the plaintiffs' argument that silica sand had been singled out -- and thus the ban was really aimed at fracking -- because silica sand's use is not limited to fracking. "It is evident that not all silica sand is frac sand." Slip op. at 8. Because the ban applies to all silica sand mining, it wasn't discriminatory. Con law mavens take note.
We, of course, focused on the court's takings analysis. The opinion didn't reach the merits of the takings claim, instead concluding that the plaintiffs did not own property. Yes, leases are property, but here, the leases allowed mining, but were "specifically conditioned upon Minnesota Sands obtaining any required zoning or governmental approvals[.]" Slip op. at 15. As noted earlier, the plaintiffs had not applied for a CUP. Thus, the plaintiffs had nothing by virtue of their own private agreement, which left the court a bit befuddled. Id. ("And Minnesota Sands explicably agreed in advance to such a term."). Thus, no taking:
Regulation of private property rights does not take private property when an individual’s reasonable, investment-backed expectations can continue to be realized as long as he or she complies with the regulatory restrictions imposed.
Slip op. at 16.
But wait a second. The majority's rationale was that there's no property interest because Minnesota Sands didn't get a CUP. Which overlooks the fact that under the ban, it cannot get a CUP. So the very ban being challenged is what eliminated the plaintiffs' claim of owning property. Bootstrapping at its finest, and inconsistent, in our view, with the rule in Palazzolo v. Rhode Island, 533 U.S. 606 (2001), that the enactment of a regulation does not deprive a property owner of the right to challenge the regulation.
One judge dissented and concurred. He concluded that the trial court should not have granted summary judgment to the county on the dormant Commerce Clause issue (citing, among others, a case involving Hawaii's exemption of alcohol taxes for okolehao and pineapple wine, Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984). He also picked up on the Palazzolo argument, and concluded that the majority's regulatory takings conclusion was wrong:
In essence, the majority opinion reasons that Minnesota Sands does not have a compensable property interest because it does not have a conditional-use permit. But of course, Minnesota Sands cannot obtain a conditional-use permit because the county will not grant one because of the ordinance that is being challenged in this case. As described above, the majority’s reasoning is inconsistent with the supreme court’s opinion in Wensmann Realty, in which the property owner’s desire to develop its property was forbidden by the city’s comprehensive plan, yet the supreme court ruled in the property owner’s favor and reversed and remanded for further consideration of the property owner’s takings claim. See 734 N.W.2d at 628-29, 641-42. The majority’s reasoning also is inconsistent with the United States Supreme Court’s opinion in Palazzolo v. Rhode Island, 533 U.S. 606, 121 S. Ct. 2448 (2001), in which a state agency made a similar attempt to defeat a property owner’s takings claim by narrowly defining the property owner’s property interest according to the agency’s own terms. The Supreme Court rejected the agency’s argument, stating, “The State may not put so potent a Hobbesian stick into the Lockean bundle.” Id. at 627, 121 S. Ct. at 2462. The Supreme Court explained that to accept the agency’s argument “would absolve the State of its obligation to defend any action restricting land use, no matter how extreme or unreasonable.” Id. at 627, 121 S. Ct. at 2462-63.Slip op. at CD-21-22.
Interestingly, the dissenting judge also dove deep into a Murr relevant parcel analysis (something which the majority didn't even try). But while the dissent criticized the majority for not doing so, it reached the same essential conclusion (no taking) and therefore concurred: the no-taking conclusion wasn't a matter of "property," but rather a case where the relevant parcel was the entirety of the properties at issue, and not just the leases. Thus, there had not been a Lucas wipeout, because the plaintiffs could mine sand as long as they sold for local construction purposes, and not fracking purposes. Id. at CD-25 ("Thus, the district court’s second reason for rejecting Minnesota Sands’s regulatory takings claims is not erroneous with respect to Minnesota Sands’s total regulatory takings claim.").
Minnesota Sands, LLC v. County of Winona, No. A18-0090 (Minn. App. July 30, 2018)