The U.S. Supreme Court has turned aside a last ditch effort from an oil and gas mining company to make its case that Illinois’ anti-fracking actions amounted to an illegal and unconstitutional taking of their property rights.
On June 1, the Supreme Court denied the petition from Next Energy LLC to hear their appeal in their legal action against the Illinois Department of Natural Resources.
Next Energy, a Wyoming-based company, filed suit in 2015, asking the courts to step in and declare the IDNR and Illinois lawmakers had illegally put a hold on issuing oil and gas drilling permits, and then created an impenetrable maze of regulations, designed to ultimately make it all but impossible for anyone to ever drill for oil and gas in Illinois using the process commonly known as “fracking.”
Illinois Attorney General Kwame Raoul
| illinoisattorneygeneral.gov
Known scientifically as “horizontal drilling and high-volume fracturing,” the petroleum extraction method of fracking uses a variety of techniques and hydraulic fluids to effectively split open rock formations, to access oil and natural gas deposits inside.
Fracking performed elsewhere in the U.S. has produced a renaissance in the American oil industry, turning the U.S. again into one of the world’s leading producers of oil and natural gas.
At the same time, the fracking innovations spurred a gold rush, of sorts, across the country, as oil and gas drillers rushed to secure rights to large shale fields, such as the Bakken field in North Dakota and the Marcellus field in Pennsylvania and West Virginia.
Investors also sought to tap into the New Albany shale field, which is centered on southeastern Illinois and Indiana. According to some estimates, the New Albany field has the potential to produce enough oil and gas to earn comparisons to the Bakken field, one of the world’s richest shale fields tapped, to date.
Much of the action centered on southern Illinois in the early years of the last decade, as investors, like Next Energy, moved to snap up drilling rights. Next Energy amassed drilling leases in Wayne County, just east of Mt. Vernon.
According to a study completed by the Illinois Chamber of Commerce in 2012, new natural gas production alone from the New Albany formation could result in the creation of 45,000 jobs and more than $9 billion in new investment in the economically struggling southern portion of the state.
The practice of fracking, however, has racked up big opposition, particularly from environmental activists and their allies in the Democratic Party, who are opposed to oil and natural gas extraction and use, in general, out of concern for the impact of burning petroleum on the global climate.
Before Next Energy could move to secure state permits to begin drilling, regulators in Illinois' Democrat-dominated state government declared a moratorium on new permits in 2012, even though existing law should have required them to continue to review permit applications and issue new permits to those qualifying under the existing rules.
The moratorium, declared under former Gov. Pat Quinn, a Democrat, continued until lawmakers passed a new law in 2013, erecting new, strict fracking standards. Permits, however, could not be issued until the IDNR formally created new permitting rules – a task the agency did not completed until more than a year later.
In its lawsuit, Next Energy asserted the permitting rules made it all but likely they would never be able to secure a state fracking permit until there was too little time remaining on their leases to turn a profit.
This, Next Energy asserted, would allow the state to ban fracking, without actually banning fracking, rendering leases and drilling rights all but worthless across the New Albany field in Illinois.
Next Energy asserted this decision ran afoul of U.S. Supreme Court precedent, which declared regulations that prevent landowners from productively using their land is no different than the government actually seizing the land or outright forbidding the productive activity, without paying just compensation.
At the same time, a swarm of other affected leaseholders and land owners across southern Illinois also filed similar legal actions against the state, also accusing Illinois lawmakers and regulators of unconstitutional and illegal rulemaking.
However, no one has yet to be granted a trial on those claims.
Rather, judges in Illinois, including a judge in Wayne County and the Illinois Fifth District Appellate Court in Mt. Vernon, granted the state’s request to toss Next Energy’s claims, because, the state said, Next Energy had never formally applied for a permit. Therefore, the oil and gas company never suffered any adverse outcomes from the state’s allegedly unconstitutional actions.
While Next Energy’s appeals wound through the courts, the other legal actions were put on hold, as the courts awaited the outcome from Next Energy’s case.
After the Illinois Supreme Court refused to hear Next Energy’s appeal, the company sought to take its case to the U.S. Supreme Court, asserting the Illinois state courts had refused to hear its constitutional claims.
In a brief supporting its petition, Next Energy argued the state’s actions made it “futile” for anyone to invest the time and money needed to apply for a permit.
They noted the “impediments” erected by Illinois lawmakers and regulators have “resulted in not a single horizontal hydraulic fracturing well being drilled in Illinois,” anywhere, by anyone.
“Here, Illinois manipulated the application and permitting process to ensure the time for oil leases would expire before Next or any other oil production company could obtain permits and drill scores of horizontal hydraulic fracturing oil wells,” Next Energy wrote in its petition.
“And to date, none have.”
In response, the Illinois Attorney General’s office, on behalf of the IDNR, maintained their position that Next Energy needs to be denied a permit before they can sue to challenge the actions taken by the state.
They noted at least one other mining company, identified as Woolsey Energy, had obtained one permit under the state’s rules.
“… Even if there were some reason to believe that petitioner would be granted only a conditional permit, or that the licensing process would take longer than petitioner would prefer, the uncertainty regarding these issues is precisely the reason that this Court requires takings claimants to seek a final decision by the relevant agency before proceeding to court,” the Attorney General wrote in the state’s reply brief.
“Petitioner may believe that the (IDNR) would have imposed ‘complicated conditions’ on its proposed fracturing activities, but absent a final decision from the (IDNR) actually imposing such conditions - or not - petitioner’s takings claim ‘simply cannot be evaluated,’” the Attorney General wrote.
The lawyers for the state further argued the Supreme Court should refuse to consider the case, because, they said, Next Energy is asking the nation’s high court to hear arguments that all lower courts that have received the case have refused to hear.
“The fact that no court has ever addressed the question on which petitioner seeks certiorari—the question whether Illinois’s regulatory regime, as applied to petitioner’s oil and gas leases, constitutes a taking—is, standing alone, sufficient reason to deny review,” the Attorney General’s office wrote in their reply brief.
The U.S. Supreme Court then denied Next Energy its appeal, effectively ending the matter.
The U.S. Supreme Court denied the petition without explanation or further comment from any of the high court’s nine justices.
Next Energy has been represented in the case by attorneys Rodney V. Taylor and Hilary A. Barnes, of the firm of Christopher & Taylor, of Indianapolis, and Morris L. Harvey, of Harvey & Baker, of Mt. Vernon.