State ex rel. Morrison v. Beck Energy Corp. , 143 Ohio St. 3d 271 ( 2015 )

French, J.

{¶ 1} R.C. Chapter 1509 regulates oil and gas wells and production operations in Ohio. While it preserves certain powers for local governments, it gives state government “sole and exclusive authority” to regulate the permitting, location, and spacing of oil and gas wells and production operations within the state. R.C. 1509.02. In this case, we decide whether the Home Rule Amendment to the Ohio Constitution grants to the city of Munroe Falls the power to enforce its own permitting scheme atop the state system. We hold that it does not.

Background

{¶ 2} In 2011, appellee, Beck Energy Corporation, obtained a permit from a division of the Ohio Department of Natural Resources (“ODNR”) for the purpose of drilling an oil and gas well on property within the corporate limits of appellant, the city of Munroe Falls. This appeal arises from the city’s attempt to stop Beck Energy from drilling based on its own municipal ordinances.

R.C. Chapter 1509

{¶ 3} Beck Energy obtained its state permit through R.C. Chapter 1509. In 2004, the General Assembly amended that chapter to provide “uniform statewide regulation” of oil and gas production within Ohio and to repeal “all provisions of law that granted or alluded to the authority of local governments to adopt concurrent requirements with the state.” Legislative Service Commission Bill Analysis, Sub.H.B. No. 278 (2004); R.C. 1509.02, Sub.H.B. No. 278, 150 Ohio Laws, Part III, 4157.

{¶ 4} In its current form, R.C. 1509.02 centralizes regulatory authority in state government, entrusting a division of ODNR with “sole and exclusive authority to regulate the permitting, location, and spacing of oil and gas wells and production operations” within Ohio (excepting certain activities regulated by federal laws). R.C. 1509.02 preserves the regulatory powers granted to local governments by R.C. 723.01 and 4513.34. R.C. 723.01 grants municipal corporations “special power” to control public highways, streets, avenues, alleys, sidewalks, public grounds, bridges, aqueducts, and viaducts. R.C. 4513.34 grants local authorities the power to grant permits to operate certain heavy vehicles on highways within their jurisdiction. But R.C. 1509.02 expressly prohibits a local government from exercising those powers “in a manner that discriminates against, unfairly impedes, or obstructs oil and gas activities and operations regulated under [R.C. Chapter 1509].”

{¶ 5} A state permit is essential for any person seeking to drill a new well, drill an existing well deeper, reopen a well, convert a well to any use other than its original purpose, or plug back a well to a source of supply different from the existing pool. R.C. 1509.05. An applicant may obtain a permit through the procedures outlined in R.C. 1509.06, and the division chief must promulgate standards for obtaining a permit, including standards that address the safety of well drilling and operation, protection of the public and private water supply, fencing and screening of surface facilities, waste containment and disposal, construction of access roads, and noise mitigation. R.C. 1509.03(A); see also Ohio Adm.Code Chapter 1501:9-1. The regulations also establish well spacing and setback requirements based on the depth of the well and the well’s proximity to other wells and private dwellings. See Ohio Adm.Code 1501:9-1-04(0 and 1501:9-1-05.

{¶ 6} In this case, Beck Energy’s state permit contained a total of 67 conditions. The first 38 related to the site’s designation as a “Municipal Wellhead Protection Area” and addressed issues including site preparation, pit construction, and waste disposal. The remaining 29 conditions governed “Urbanized Areas” and included site-specific restrictions relating to issues such as tree trimming, erosion control, noise mitigation, and parking. See R.C. 1509.01QO (defining “urbanized area”). To obtain a permit to drill a new well in an urbanized area, an applicant must provide a sworn statement that it has provided notice to the owner of each parcel of real property located within 500 feet of the surface location of the well, as well as to the “executive authority of the municipal corporation” in which the well is to be located. R.C. 1509.06(A)(9).

The Ordinances

{¶ 7} Soon after Beck Energy began drilling, the city issued a stop-work order and filed a complaint seeking injunctive relief in the Summit County Court of Common Pleas. The complaint alleged that Beck Energy was violating multiple provisions of the Munroe Falls Codified Ordinances. This appeal concerns five of those ordinances, which the city passed between 1980 and 1995.

{¶ 8} The first is a general zoning ordinance in Chapter 1163 that prohibits any construction or excavation without a “zoning certificate” issued by the zoning inspector. Munroe Falls Codified Ordinances 1163.02(a). To obtain the zoning certificate, the applicant must obtain various approvals from the planning commission, the city council, the zoning inspector, and when a variance is being requested, the board of zoning appeals. Munroe Falls Codified Ordinances 1163.02(a)(1) through (4). For example, an applicant seeking approval of a conditional use must obtain a “conditional zoning certificate” by following the procedures in section 1163.04, which include notice and a public hearing. Munroe Falls Codified Ordinances 1163.02(a)(3); see also section 1163.04. The conditional zoning certificate includes any “conditions, stipulations, and safeguards that have been approved by the Planning Commission and Council.” Munroe Falls Codified Ordinances 1163.02(a)(3).

{¶ 9} The remaining four ordinances are in Chapter 1329, which specifically relates to oil and gas drilling. Munroe Falls Codified Ordinances 1329.03 prohibits any person from drilling a well for oil, gas, or other hydrocarbons “until such time as such persons have wholly complied with all provisions of this chapter and a conditional zoning certificate has been granted by Council to such person for a period of one year.” Munroe Falls Codified Ordinances 1329.04 and 1329.06 require an applicant to pay a fee of $800 and deposit $2,000 for a performance bond at the time of filing. Finally, Munroe Falls Codified Ordinances 1329.05 requires a public hearing at least three weeks prior to drilling and requires the permit applicant to schedule the hearing and notify all property owners and residents within 1,000 feet of the well head.

{¶ 10} A person who violates any of the ordinances in Chapter 1329 of the Munroe Falls Codified Ordinances is guilty of a first-degree misdemeanor and “shall be imprisoned for a period not to exceed six months, or fined not more than one thousand dollars ($1,000), or both.” Munroe Falls Codified Ordinances 1329.99. Each day of a violation constitutes a separate offense. Id.

The Injunction

{¶ 11} In opposing the city’s request for injunctive relief, Beck Energy argued that the city’s ordinances conflicted with the statewide regulatory scheme in R.C. Chapter 1509. The trial court disagreed and granted the city’s request for a permanent injunction prohibiting Beck Energy from drilling until it complies with all local ordinances.

{¶ 12} The court of appeals reversed, holding that R.C. 1509.02 prohibited the city from enforcing the five ordinances. 9th Dist. Summit No. 25953, 2013-Ohio-356, 989 N.E.2d 85. The court of appeals rejected the city’s argument that the Home Rule Amendment allowed it to impose its own permit requirements on oil and gas drilling operations. Id. at ¶ 74.

{¶ 13} We accepted jurisdiction over the city’s appeal.

Analysis

{¶ 14} The question here is whether the city’s ordinances represent a valid exercise of its home-rule power. Under the Home Rule Amendment to the Ohio Constitution, “[mjunicipalities shall have authority to exercise all powers of local self-government and to adopt and enforce within their limits such local police, sanitary and other similar regulations, as are not in conflict with general laws.” Article XVIII, Section 3. This amendment gives municipalities the “broadest possible powers of self-government in connection with all matters which are strictly local and do not impinge upon matters which are of a state-wide nature or interest.” State ex rel. Hackley v. Edmonds, 150 Ohio St. 203, 212, 80 N.E.2d 769 (1948).

{¶ 15} The Home Rule Amendment does not, however, allow municipalities to exercise their police powers in a manner that “conflicts] with general laws.” Article XVIII, Section 3; see also State ex rel. Mill Creek Metro. Park Dist. Bd. of Commrs. v. Tablack, 86 Ohio St.3d 293, 296, 714 N.E.2d 917 (1999). Therefore, a municipal ordinance must yield to a state statute if (1) the ordinance is an exercise of the police power, rather than of local self-government, (2) the statute is a general law, and (3) the ordinance is in conflict with the statute. Mendenhall v. Akron, 117 Ohio St.3d 33, 2008-Ohio-270, 881 N.E.2d 255, ¶ 17.

{¶ 16} Under this three-step analysis, we conclude that the city’s ordinances must yield to R.C. 1509.02.

The Ordinances Constitute an Exercise of the Police Power

{¶ 17} The city does not dispute that its ordinances constitute an exercise of police power rather than local self-government. Our precedent is clear on this point. “[A]ny municipal ordinance, which prohibits the doing of something without a municipal license to do it, is a police regulation” within the meaning of the Home Rule Amendment. Auxter v. Toledo, 173 Ohio St. 444, 446, 183 N.E.2d 920 (1962); see also Rispo Realty & Dev. Co. v. Parma, 55 Ohio St.3d 101, 103, 564 N.E.2d 425 (1990) (“Ohio law has long recognized that the enactment of zoning laws by a municipality is an exercise of its police power * * * ”).

{¶ 18} Here, the city’s ordinances do not regulate the form and structure of local government. Instead, they prohibit — even criminalize — the act of drilling for oil and gas without a municipal permit. Therefore, we agree that the ordinances represent an exercise of police power rather than local self-government. Now, we must turn to the question of whether R.C. 1509.02 is a general law.

R.C. 1509.02 Is a General Law

{¶ 19} A statute qualifies as a general law if it satisfies four conditions. It must (1) be part of a statewide and comprehensive legislative enactment, (2) apply to all parts of the state alike and operate uniformly throughout the state, (3) set forth police, sanitary, or similar regulations, rather than purport only to grant or limit legislative power of a municipal corporation to prescribe those regulations, and (4) prescribe a rule of conduct upon citizens generally. Menden-hall, 117 Ohio St.3d 33, 2008-Ohio-270, 881 N.E.2d 255, at ¶ 20; Canton v. State, 95 Ohio St.3d 149, 2002-Ohio-2005, 766 N.E.2d 963, syllabus.

{¶ 20} The city disputes only the second of these conditions, arguing that R.C. 1509.02 does not apply to all parts of the state alike and does not operate uniformly throughout the state. According to the city, the statute fails the uniformity requirement because only the eastern part of Ohio has economically viable quantities of gas and oil. This argument is unpersuasive.

{¶ 21} Even if we were to accept the city’s factual premise that drilling for oil and gas cannot occur in Ohio’s western counties, this does not prevent R.C. 1509.02 from operating uniformly throughout the state. The uniformity requirement comes from Article II, Section 26 of the Ohio Constitution, which states that “[a]ll laws, of a general nature, shall have a uniform operation throughout the State.” The purpose of this provision is not “to render invalid every law which does not operate upon all persons, property or political subdivisions within the state,” State ex rel. Stanton v. Powell, 109 Ohio St. 383, 385, 142 N.E. 401 (1924), but simply to ensure that a general law operates uniformly with respect to every person and locality to which it relates. Id.; Beachwood v. Cuyahoga Cty. Bd. of Elections, 167 Ohio St. 369, 372, 148 N.E.2d 921 (1958). We have recognized that a general law can operate uniformly throughout the state “even if the result * * * is that the statute does not operate in all geographic areas within the state.” Clermont Environmental Reclamation Co. v. Wiederhold, 2 Ohio St.3d 44, 49, 442 N.E.2d 1278 (1982); see also E. Liverpool v. Columbiana Cty. Budget Comm., 114 Ohio St.3d 133, 2007-Ohio-3759, 870 N.E.2d 705, ¶ 15 (stating that a law does not lack uniformity simply because it has a “disparate geographic effect”).

{¶22} The city’s argument is similar to the one we rejected in Clermont. There, we considered a statute that regulated hazardous-waste facilities and prohibited any political subdivisions from imposing additional regulations. Id. at 44, 49-50. While recognizing that such facilities might not be environmentally feasible in “some areas of the state,” we concluded that the law operated uniformly throughout the state because its terms applied to all political subdivisions equally and did not create any classifications or exemptions favoring some over others. Id. at 50.

{¶ 23} We reach the same conclusion here. Whether or not every acre of Ohio constitutes viable drilling land, R.C. 1509.02 imposes the same obligations and grants the same privileges to anyone seeking to engage in oil and gas drilling and production operations within the state. Moreover, the statute applies to all municipalities in the same fashion, see Ohioans for Concealed Carry, Inc. v. Clyde, 120 Ohio St.3d 96, 2008-Ohio-4605, 896 N.E.2d 967, ¶ 45, by prohibiting all local governments from interfering in the regulation of any oil and gas activities covered by R.C. Chapter 1509. R.C. 1509.02. Accordingly, we agree that R.C. 1509.02 constitutes a general law for purposes of our analysis.

The Ordinances Conflict with R.C. 1509.02

{¶ 24} Having found that the ordinances constitute an exercise of police power and that the statute is a general law, we must determine whether the ordinances and the statute conflict. A conflict exists if “the ordinance permits or licenses that which the statute forbids and prohibits, and vice versa.” Struthers v. Sokol, 108 Ohio St. 263, 140 N.E. 519 (1923), paragraph two of the syllabus; see also Ohioans for Concealed Carry at ¶ 26.

{¶ 25} The city’s ordinances conflict with R.C. 1509.02 in two ways. First, they prohibit what R.C. 1509.02 allows: state-licensed oil and gas production within Munroe Falls. Beck Energy’s state permit expressly “granted permission” to “Drill [a] New Well” for “Oil & Gas” within Munroe Falls. But the city ordinances would render the permit meaningless unless Beck Energy also satisfied the permitting requirements in Chapters 1163 and 1329 of the Munroe Falls Ordinances. Section 1163.02(a) prohibited Beck Energy from building any structure or beginning “any excavation” until it followed all of the procedures necessary to obtain a zoning certificate. Munroe Falls Codified Ordinances 1163.02(a) and (b). Even if Beck Energy were to satisfy the conditions of Chapter 1163 without violating the 67 conditions of its state permit, Beck Energy still could not “drill a well for oil, gas, or other hydrocarbons” until it “wholly complied with all provisions” in Chapter 1329. Munroe Falls Codified Ordinances 1329.03(a). To comply with these provisions, Beck Energy would need to (1) wait one year after the city council approved the conditional zoning certificate, 1329.03(a), (2) pay a nonrefundable $800 application fee, 1329.04, (3) deposit a $2,000 “performance bond,” 1329.06, and (4) schedule a public meeting at least three weeks prior to drilling, 1329.05(a).

{¶ 26} This is a classic licensing conflict under our home-rule precedent. We have consistently held that a municipal-licensing ordinance conflicts with a state-licensing scheme if the “local ordinance restricts an activity which a state license permits.” Ohio Assn. of Private Detective Agencies, Inc. v. N. Olmsted, 65 Ohio St.3d 242, 245, 602 N.E.2d 1147 (1992); Auxter, 173 Ohio St. at 447, 183 N.E.2d 920; Anderson v. Brown, 13 Ohio St.2d 53, 58, 233 N.E.2d 584 (1968); see also Am. Fin. Servs. Assn. v. Cleveland, 112 Ohio St.3d 170, 2006-Ohio-6043, 858 N.E.2d 776, ¶ 46 (stating that “any local ordinances that seek to prohibit conduct that the state has authorized are in conflict with the state statutes”).

{¶ 27} In Auxter, for instance, the plaintiff obtained a state license to sell beer and wine, but the city ordinance prohibited such sales without a municipal license. Recognizing a conflict, we determined that “the ordinance forbids and prohibits what the statute permits and licenses,” because “[e]ven though plaintiff has a state license authorizing him to carry on the business of selling beer in Toledo, the ordinance prohibits him from doing so if he does not pay for and secure a municipal license to do so.” (Emphasis sic.) Id. at 447. Likewise, in Anderson, we concluded that any municipal ordinance that prohibits the operation of a mobile-home park without a municipal license is in conflict with a statute that gave state-license holders the right to operate those parks. Id. at 58. We have found a conflict to exist between a statewide regulatory scheme governing construction and demolition debris facilities and a general zoning ordinance that prohibits such facilities, Sheffield v. Rowland, 87 Ohio St.3d 9, 12, 716 N.E.2d 1121 (1999), between an ordinance that requires a licensing fee for private investigators and a “statewide regulatory program” that specifically prohibits the imposition of municipal fees, Ohio Assn. of Private Detective Agencies at 245, and between a statute regulating the permitting of concealed handguns and a municipal ordinance prohibiting handguns in a public park, Ohioans for Concealed Carry, Inc. v. Clyde, 120 Ohio St.3d 96, 2008-Ohio-4605, 896 N.E.2d 967, ¶ 53.

{¶ 28} Beneath this weight of authority, the city argues that there is no conflict, because the statute and the ordinances “regulate two different things.” It explains: the ordinances address “traditional concerns of zoning,” whereas R.C. 1509.02 relates to “technical safety and correlative rights topics.” This distinction is fanciful, and it ignores the plain text of the ordinances as well as the statute. The ordinances and R.C. 1509.02 unambiguously regulate the same subject matter — oil and gas drilling — and they conflict in doing so. Under the city’s ordinances, a state permit holder cannot begin “any excavation” or “drill a well for oil, gas, or other hydrocarbons” without fully complying with local provisions. Munroe Falls Codified Ordinances 1163.02(a) and 1329.03(a). And state law prohibits any person — including a municipal permit holder — from drilling for oil or gas “without having a permit to do so issued by the chief of the division oil and gas resources management.” R.C. 1509.05. This case is indistinguishable from our long line of conflict precedent. See Auxter, 173 Ohio St. at 447, 183 N.E.2d 920; Anderson, 13 Ohio St.2d at 58, 233 N.E.2d 584; Am. Fin. Servs. Assn. at ¶ 46; Neil House Hotel Co. v. Columbus, 144 Ohio St. 248, 58 N.E.2d 665 (1944), paragraph three of the syllabus. Because Beck Energy obtained a valid state permit in accordance with R.C. Chapter 1509, the city cannot “extinguish privileges arising thereunder through the enforcement of zoning regulations.” Westlake v. Mascot Petroleum Co., Inc., 61 Ohio St.3d 161, 573 N.E.2d 1068 (1991), paragraph two of the syllabus.

{¶ 29} The city’s ordinances create a second type of conflict with R.C.„ 1509.02. “In determining whether a conflict does exist, a court refers to the language of the statute to determine whether the General Assembly intended to preempt local regulation on the subject.” Westlake v. Mascot Petroleum Co., 61 Ohio St.3d 161, 164, 573 N.E.2d 1068 (1991). See, e.g., Clermont, 2 Ohio St.3d 44, 442 N.E.2d 1278; Ohio Assn. of Private Detective Agencies, 65 Ohio St.3d at 245, 602 N.E.2d 1147.

{¶ 30} R.C. 1509.02 not only gives ODNR “sole and exclusive authority to regulate the permitting, location, and spacing of oil and gas wells and production operations” within Ohio; it explicitly reserves for the state, to the exclusion of local governments, the right to regulate “all aspects” of the location, drilling, and operation of oil and gas wells, including “permitting relating to those activities.” While R.C. 1509.02 preserves the extensive regulatory control given to municipalities over a wide range of infrastructure — from alleys to aqueducts, see R.C. 723.01 and 4513.34 — it explicitly prohibits them from exercising those powers in a way that “discriminates against, unfairly impedes, or obstructs” the activities and operations covered by R.C. 1509.02.

{¶ 31} In Clermont, 2 Ohio St.3d 44, 442 N.E.2d 1278, we rejected a home rule challenge involving a similar provision, which prohibited any political subdivision from requiring additional zoning or other approval for the construction and operation of a state-licensed hazardous-waste facility. Id. at 49, quoting R.C. 3734.05(D)(3), now (E). In our view, this language was sufficient to supersede “any conflicting municipal ordinance.” Id. at 49. We reach the same conclusion here.

{¶ 32} Our recent decision in Cleveland v. State, 138 Ohio St.3d 232, 2014-Ohio-86, 5 N.E.3d 644, does not stand for a contrary proposition. In fact, that decision does not even involve the conflict prong of the home-rule analysis. We applied the general-law prong to R.C. 4921.25, the statute granting state regulatory authority over towing companies. Id. at ¶ 1, 15. Applying the four-part general-law analysis in Canton, 95 Ohio St.3d 149, 2002-Ohio-2005, 766 N.E.2d 963, we struck down a part of the statute that exempted towing entities from municipal licensing and registration ordinances. Id. at ¶ 16. We reasoned that the exemption did not prescribe police, sanitary, or similar regulations, but instead purported only to limit legislative power of a municipal corporation to prescribe police, sanitary, or similar regulations. Id. at ¶ 8, 16. We did not decide whether the city ordinances in that case conflicted with general law: “that issue [was] not before us.” Id. at ¶ 23.

{¶ 33} The city presents a variety of policy reasons why local governments and the state should work together, with the state controlling the details of well construction and operations and the municipalities designating which land within their borders is available for those activities. This is no doubt an interesting policy question, but it is one for our elected representatives in the General Assembly, not the judiciary. The issue before us is not whether the law should generally allow municipalities to have concurrent regulatory authority, but whether R.C. 1509.02 and the Home Rule Amendment do allow for the kind of double licensing at issue here. They do not. We make no judgment as to whether other ordinances could coexist with the General Assembly’s comprehensive regulatory scheme. Rather, our holding is limited to the five municipal ordinances at issue in this case.

Conclusion

{¶ 34} Article II, Section 36 vests the General Assembly with the power to pass laws providing for the “regulation of methods of mining, weighing, measuring and marketing coal, oil, gas and all other minerals.” (Emphasis added.) With the comprehensive regulatory scheme in R.C. Chapter 1509, the General Assembly has done exactly that. We hold that the Home Rule Amendment to the Ohio Constitution, Article XVIII, Section 3, does not allow a municipality to discriminate against, unfairly impede, or obstruct oil and gas activities and production operations that the state has permitted under R.C. Chapter 1509.

{¶ 35} Accordingly, we affirm the judgment of the court of appeals.

Judgment affirmed.

O’Connor, C.J., and Kennedy, J., concur. O’Donnell, J., concurs in judgment only. Pfeifer, Lanzinger, and O’Neill, JJ., dissent.