WARREN, Ohio – The Supreme Court of Ohio on Wednesday ruled that the owner of a local injection well is not entitled to compensation from the state after its operations were shut down more than 10 years ago.
The 7-0 opinion reverses an earlier ruling by the 11th District Court of Appeals, which found the Ohio Department of Natural Resources’ closure of AWMS Water Solutions’ injection wells in Weathersfield Township amounted to a “partial taking” of the company’s property.
ODNR ordered the injection wells shuttered after two small earthquakes – one a magnitude 1.7 and the other a magnitude 2.1 – were recorded near the site in August 2014. ODNR determined that the earthquakes were caused by the larger of the two injection wells and allowed the smaller one to reopen in September of that year.
AWMS has contested the closure and has appealed on several occasions to have the decision overturned or for the company to be awarded compensation for revenues it claims were lost because of the shutdown. The state had argued that the suspension was necessary in the interest of public safety. In 2011, for example, an injection well in Youngstown triggered a series of earthquakes, one of which was a magnitude 4.1 temblor.
The impasse led to a protracted legal dispute of appeals and cross appeals that has lasted nearly 12 years. At one point, ODNR said it would approve reopening the well if AWMS would install modifications and agree to highly regulated operating mandates – restrictions that AWMS felt went too far.
In its filing with the 11th District Court of Appeals, AWMS said it had lost $13.2 million because of the suspension. However, in a 2-1 decision, the appeals court found that the closure did not amount to a “total taking” of property as AWMS had argued but rather a “partial taking” of property, estimating damages at approximately $360,000.
According to court papers, AWMS said it had invested approximately $5.2 million to construct its facility in Weathersfield.
Both AWMS and ODNR appealed the decision to the Ohio high court. The company argued the state engaged in a “total taking” of the assets, while the state argued that the site is a “public nuisance.”
AWMS, a division of Howland-based Avalon Holdings Corp., received permits in 2013 to drill two injection wells along state Route 169 in Weathersfield Township. The wells were completed and began commercial operations the following year.
Injection wells are used to store contaminated wastewater generated from drilling and hydraulic fracturing operations used to produce oil and gas.
According to the Supreme Court decision, AWMS had recognized that it was engaging in a highly regulated industry, and wastewater disposal carried with it risks such as triggering seismic activity, which could cause further action by the state, the opinion says.
Writing for the court, Justice R. Patrick DeWine noted that a memorandum issued to prospective investors by AWMS cautioned that these operations risked a potential shutdown by the state in the event the wells were found to trigger earthquakes.
Moreover, the court found that the shutdown was not permanent and that the company could have made modifications to its wells in compliance with the state and reopened the operation profitably.
“Even though the evidence at trial showed that the earthquakes that had been experienced were of relatively small magnitude, they were still felt by people in the region, and the state did not have to wait to take action to protect the public until a larger, catastrophic seismic event,” DeWine wrote.