U.S. Supreme Court Denies Petition by Next Energy, LLC, for Hearing Regarding Illinois Moratorium and Onerous Regulations on Fracking
On June 1, 2021, the U.S. Supreme Court denied a petition for a writ of certiorari filed by Next Energy, LLC to hear its case alleging a regulatory taking by the Illinois Department of Natural Resources relating to Illinois’ 2012 moratorium on issuance of permits for horizontal hydraulic fracturing wells, and Illinois’ subsequent onerous regulation of fracking. (https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/20-885.html.) In 2011, Next Energy acquired 5-year leases on land for the purpose of extracting shale oil, which would require horizontal hydraulic fracturing wells. (https://www.supremecourt.gov/DocketPDF/20/20-885/164901/20201229140403326_Next.Writ.Cert.pdf.) In mid-2021, the Illinois Department of Natural Resources commenced an unannounced moratorium on fracking. In 2013, the Illinois legislature passed an act (“Act”) governing the drilling of such wells, and subsequently promulgated regulations on fracking in 2014. As its leases would expire before permits could practically be issued under the 2014 regulations, and based on Next Energy’s belief that the onerous 2014 regulations would render an application economically prohibitive and therefore futile, rather than file an application for well permits – Next Energy filed an action in 2015 alleging a regulatory taking. Next Energy’s brief to the U.S. Supreme Court points out that not one horizontal hydraulic fracturing well has been drilled in Illinois since passage of the Act, supporting the argument that the onerous Act and regulations constitute a taking of property in violation of the U.S. Constitution.
The Illinois trial court held that the action was not ripe, as Next Energy has not actually applied for a well permit. This decision was appealed to the Illinois Appellate Court, which affirmed the trial court’s decision, and then appealed to the Illinois Supreme Court, which denied to review the decision. Next Energy filed a petition for review by the U.S. Supreme Court on December 29, 2020, which was ultimately denied without a hearing on June 1, 2021. This decision is relevant to the oil and gas industry, as states such as California are considering outright bans on fracking. (http://www.mitchellchadwick.com/2021/04/california-gov-newsom-to-unilaterally-ban-fracking-by-2024/.) One important lesson from this case is that owners of oil and gas leases should likely apply for well permits, even where onerous regulations are in place, to ensure that any subsequent claim is considered “ripe” when litigation is filed.