Here's the latest in a case we've been following that involves a local government prohibiting, via a zoning ordinance, the mining of silica (used as "frac sand"). Kind of like how Pennsylvania barred certain coal mining in our old friend, Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922).
In Minnesota (where our story takes place) the right to subsurface minerals is separate from the rest of the land. Kind of like how Pennsylvania law recognized subsurface rights as a separate "stick" in Mahon. Here, the plaintiff owned several leases which allow it to mine silica. Sounds like a property interest, no?
Well, no. At least not to a majority of the Minnesota Supreme Court, which held in Minnesota Sands, LLC v. County of Winona, No. A18-0090 (Mar. 11, 2020) (affirming the court of appeals) that the right to mine silica was a property right, but because it was "inchoate," it was not really a vested property right that covered by either the U.S. or Minnesota takings clause.
We won't go into great detail in this post (you can either read the opinion itself, or our earlier write up on the court of appeals' decision), but the overall vibe of the majority opinion is summarized in footnote 19 on page 34 of the slip opinion:
The dissent’s claim that our decision affords the government immunity to regulate the leases "out of existence" is incorrect. Our decision proceeds on the uncontroversial premise that the government cannot "take" property rights that a party never had. See Murr v. Wisconsin, __ U.S. __, __, 137 S. Ct. 1933, 1951 (2017) (Roberts, C.J., dissenting) (noting that the first question in a Takings Clause claim is “what ‘private property’ the government’s planned course of conduct will affect”). Likewise, the government does not regulate out of existence a leaseholder’s rights that terms of the lease never granted. It bears emphasizing that the rights granted under the terms of the lease agreements were determined by the parties. The decision to limit Minnesota Sands’ rights to a contingency interest that would not become definite unless the government granted a conditional-use permit was the company’s.
Slip op. at 34 n.19. In short, Minnesota Sands had not obtained a Conditional Use Permit.
We're not sure that the majority's reading of the lease terms to make the property rights granted by the lease "conditional" on the mining company obtaining a CUP, but this was the majority's way of trying to insulate the opinion from U.S. Supreme Court review. After all, what a lease means is a matter of state contract law, no?
As we did with the court of appeals' opinion, we focused on the rationale set out by the two dissenting Justices. The dissenting opinion begins after page 39 of the slip opinion, and the "takings" analysis begins on page D-8. We urge you to read it in depth. The heart of the dissent's arguments is that the court should not have thrown the case out on the threshold property question, but should have reached the merits of whether the ban is a taking:
Because mineral leases, including the leases at issue here, have been “long recognized” as property, Phillips, 524 U.S. at 167, the protected property interest defined by those leases may not be regulated out of existence by the government, see Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922) (explaining that regulation will be recognized as a Fifth Amendment taking if it “goes too far”). Put another way, leasehold interests are protected by the Takings Clause of the United States Constitution. Because Minnesota Sands argues that its mineral leases were taken by the county ordinance, this case should, at a minimum, be remanded to the district court for an inquiry that considers factors “such as the economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action.” Horne v. Dep’t of Agric., ___ U.S. ___, ___, 135 S. Ct. 2419, 2427 (2015) (discussing the takings factors to be considered under Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 124 (1978)).
Dissent at D-10-D-11 (Anderson, J., dissenting) (footnote omitted).
We think Justice Anderson's dissent teed up a pretty good SCOTUS cert petition on either Penn Central or Palazzolo:
Legally, even if we could accept the court’s abridged take on the leases, I disagree with its abridged take on the Fifth Amendment. Under the court’s view of this constitutional protection, it does not matter how significant the interference of a regulation is with the “reasonable investment-backed expectations” of a property owner. Horne, ___ U.S. at ___, 135 S. Ct. at 2427 (discussing the Penn Central factors). Indeed, according to the court, it does not matter if the government subjected the owner’s private property to a total regulatory taking, see Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1016 (1992), if the owner’s property was not sufficiently “vested” before the regulation became effective. An owner’s regulatory takings claim, partial or total, may proceed only after the owner has a “vested interest to use” the property as expected. Here, according to the court, that means that Minnesota Sands has no constitutionally protected property interest until Winona County approves mining silica sand for hydraulic fracturing, which is the proposed use of Minnesota Sands’ leaseholds. Therefore, under the court’s logic, Minnesota Sands may not bring a Takings Clause challenge to Winona County’s frac sand mining ban until Winona County first permits frac sand mining.
Dissent at D-12-D-13 (Anderson, J., dissenting) (footnote omitted). As we wrote in our post about the court of appeals' decision, the majority's rationale is a classic bootstrap argument:
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.
Now, just wait til the cavalry arrives.
Postscript: for you Con Law types, much of the majority and dissenting opinions delve into the question of whether the "dormant" Commerce Clause was offended by the County's ban (was this a backhanded way of discriminating against non-County miners?), but we shall leave that issue to you, if interested.
Minnesota Sands, LLC v. County of Winona, No. A18-0090 (Minn. Mar. 11, 2020)
