The much anticipated decision by the Ohio Supreme Court in the case of State ex rel. Morrison v. Beck Energy Corporation, et al. was decided February 17, 2015. Beck Energy Corporation (“Beck”) obtained a permit from the Ohio Department of Natural Resources (“ODNR”) to drill an oil and gas well in the city of Munroe Falls, Ohio. However, the city sought to enforce its own municipal permitting scheme pertaining to the drilling of oil and gas wells in addition to the state permitting scheme enforced by ODNR. Among other things, the city required that Beck obtain a zoning certificate, then wait for one year before commencing drilling, pay an $800 fee and deposit $2,000 for a performance bond, and conduct a public hearing with notice to nearby property owners at least three weeks prior to drilling. Beck argued that the city’s permitting scheme conflicted with Ohio Revised Code Section 1509.02, which grants ODNR “sole and exclusive authority” to regulate the permitting, location, and spacing of oil and gas wells. The city argued that it was authorized to enforce its own permitting scheme in addition to the ODNR system pursuant to authority granted by the Home Rule Amendment to the Ohio Constitution.
The city filed for and obtained an injunction from the Summit County Court of Common Pleas stopping Beck’s drilling operations until such time as Beck complied with all local ordinances. This decision was reversed by the Summit County Court of Appeals, which rejected the city’s argument and prohibited the city from enforcing its permitting scheme against Beck. In a 4-3 decision, the Ohio Supreme Court decided that the city lacks authority to obstruct oil and gas activities that ODNR has permitted. However, the Court left open the possibility that municipalities may be able to enforce general zoning regulations against oil and gas drilling.
In its analysis, the Court noted that municipal ordinances must yield to a state statute if: 1) the ordinance is an exercise of police power; 2) the statute is a general law; and 3) the ordinance is in conflict with the statute. A majority of the Court found that the city ordinances constitute an exercise of the police power, that Section 1509.02 of the Ohio Revised Code is a general law, and that the city ordinances conflict with Section 1509.02 of the Revised Code. Thus, the Court upheld the Court of Appeals’ decision and affirmed its ruling, effectively confirming Beck’s ability to proceed with its operations.
Justices O’Donnell and Kennedy joined in the holding but wrote separately to emphasize that the decision was limited to the five municipal ordinances at issue that effectively created an additional permitting scheme on top of the state’s permitting scheme. These justices explained that municipalities might still retain zoning authority aimed at addressing traditional concerns of zoning laws, such as preserving property values and ensuring compatibility with local neighborhoods. In other words, a general zoning regulation applied in a nondiscriminatory fashion to an oil and gas drilling operation might not be wholly supplanted by Section 1506.02. However, that question was not before the Court and was left undecided.
Justices Lanzinger, Pfeifer and O’Neill dissented from the majority’s ruling.