Next Energy, LLC v. Illinois Department of Natural Resources

Petitioner, Next Energy, LLC, commenced acquiring blocks of five-year oil leases in 2011 to drill high volume horizontal hydraulic fracturing (horizontal hydraulic fracturing) wells to recover oil from shale formations. Shale oil leasehold interests, like all mineral interests, are separate, distinct leasehold interests from the surface of the land. Horizontal hydraulic fracturing is the only economically viable method to recover shale oil from Next’s leases. The value of the shale oil constitutes the entire value of Next’s leases. At the time the leases were acquired, Illinois law allowed the horizontal hydraulic fracturing process. In mid-2012, after the lease blocks were acquired but before permits could be obtained to drill such wells, Respondent the Illinois Department of Natural Resources (Illinois), commenced an unannounced, unauthorized moratorium on permits for such wells. In 2013, the Illinois legislature passed an Act governing the drilling of such wells. Illinois then took over a year to promulgate said regulations. To date, none of these wells have been drilled in Illinois since the moratorium. The question presented is whether an unauthorized moratorium on permits needed by Next to drill its wells, together with the time required for onerous regulations and procedures which exceeded the term of Next’s leases, effects a categorical regulatory taking of those leases under the Fifth Amendment.