Submitted by Cameron A. Grant
Recently the Denver Post reported that Boulder County could be liable for $1 billion in petro “takings” if local governments adopt and enforce bans on the drilling practice called fracking. On June 24th, voters in the City of Loveland rejected a measure that would have extended a moratorium on drilling in the city limits. Clearly, the issues surrounding oil and gas development in Colorado are heating up. Sensational claims continue to be made during this energetic election season. The potential threat of petro takings is one such claim.
Despite the Denver Post report, a takings claim in this situation could prove challenging. Takings claims are claims by property owners against government entities for depriving an owner of property without just compensation. Among other things, the Fifth Amendment to the US Constitution includes the following language: “nor shall private property be taken for public use, without just compensation.” In a nutshell, a mineral owner must demonstrate that a local ordinance prohibiting oil and gas drilling deprives them of all economic benefit from their rights.
In his article in the Vermont Law Review, Timothy Riley provides a comprehensive explanation of the current state of takings law and the issue of municipal regulation of oil and gas. While courts in other states have considered this issue we have yet to see a successful regulator takings claim in response to drilling regulation. Colorado could join the vanguard and we may see new takings law develop as the interplay between the expansion of cities and towns with the exploding growth in oil and gas development.