Promoting freedom, innovation, and growth

Connect with IPI

Receive news, research, and updates

November 19, 2014

Critics: Fracking ban unconstitutional

IPI expert referenced: Merrill Matthews | In The News | Media Hit
  The Evening Tribune

By Ryan Papaserge

HORNELL — A pair of Burns Town Board members who are opposed to a potential fracking ban have outlined their stance.

Dianne Freiner and Larry Thompson, the most recent additions to the board, submitted a letter to The Evening Tribune in which they argue the issue of “unconstitutional taking of landowners’ rights” was a major factor in a vociferous public response during the town board meeting in Canaseraga Nov. 6.

The letter, which will appear on Wednesday’s issue of The Evening Tribune, argues that New York State residents have missed out on money made from mineral rights ever since the state put fracking in a moratorium seven years ago.

“Landowners signed mineral leases with gas and oil companies,” The letter said. “They received anywhere from $1 to $25 per acre for the rights. These lease payments helped to defray the high cost of taxes. Once the moratorium was in place, the lease payments stopped.”

Those missing lease payments, the letter notes, could batter the bank accounts of municipalities if citizens decided to file lawsuits regarding mineral rights.

“The real possibility exists of lawsuits being field against towns and municipalities for the taking of these mineral rights,” the letter said. “Moreover, reimbursement to the landowners for the missed lease payments from the towns and municipalities would be part of the legal action. If one court decision favored the landowners in these cases, municipalities would experience monetary hardship.”

Along with the letter, Freiner sent The Evening Tribune an article from the Aug. 1, 2014 edition of The Wall Street Journal by Merrill Matthews, a resident scholar with the Institute for Policy Innovation in Dallas.

“The Fifth Amendment to the U.S. Constitution says, in part, that private property cannot be taken for public use ‘without just compensation,’” Matthews wrote. “Government regulations that substantially reduce the value of an owner’s property may also constitute a taking, according to the Supreme Court.

For example, suppose a family buys expensive, beach front property, and the government later prohibits its development. This would reduce the value of the land. The owners may be entitled to compensation.”

Matthews’ column mentions Denton, Texas as an example of a municipality mulling a decision on fracking one way or the other. The city decided to let the voters make a choice on Election Day after more than 500 people showed up to a city council meeting.

The people of Denton then voted to ban fracking, becoming the first municipality to do so. However, landowners and those in the oil and gas industry are planning to take the city to court.

The topic of having the public vote on a possible fracking ban came up during the Burns Town Board meeting Nov. 6. After a citizen raised the topic, attorney David Slottje — who served as legal counsel — said a vote would not be possible.

“The town cannot, may not, put it up for a vote,” Slottje said. “It is against New York state law to bring it up for a vote ... half the towns in the state would like to do that. They can’t.”

Freiner and Thompson believe Burns should wait to make a decision that is uniform with what Gov. Andrew Cuomo and New York state ultimately decides on the fracking issue, a stance similar to what neighboring townships Ossian, Grove, Dansville, Hornellsville, Birdsall and Almond have decided.

On top of potentially being unconstitutional, the letter argues that Burns would be left in the dust with no oil-related revenues to draw from should fracking become legalized.

“The value of land would decrease because the landowner would have no mineral rights to sell with the land,” the letter says. “If the landowner wishes to keep his/her mineral rights or has no mineral rights accompanying the land sale because of a ban, he/she either can’t sell it or must sell it for a much lower price. Lower land values trickle down to higher taxes for everyone, including village residents.”

According to Matthews’ column, municipalities that ban fracking would likely have to account for the oil that would be fracked.

“There is a process for estimating the net present value of untapped minerals, and drillers often use that process when contracting to drill on someone’s property, paying the mineral rights’ holder a flat amount, plus some royalties,” Matthews wrote. “Municipalities that refuse to let property owners drill might be required to use that or a similar process to assess the lost value.”

Freiner and Thompson’s closing statement argues that the Burns Town Board’s decision is an easy one to make.

“It is our belief that the best course of action for the town of Burns is to stay neutral,” the letter wrote. “A premature decision to ban exploration of gas and oil serves no purpose.”

 


 

  • TaxBytes-New

Copyright Institute for Policy Innovation 2017. All Rights Reserved Privacy Policy Contact IPI.

e-resources e-resources