Minnesota Sands, LLC, Appellant, vs. County of Winona, Minnesota, Respondent.
A18-0090
STATE OF MINNESOTA IN SUPREME COURT
Filed: March 11, 2020
Chutich, J. Dissenting, Anderson, J., Gildea, C.J. Concurring in part, dissenting in part, Thissen, J.
Court of Appeals
Bethany M. Gullman, Faegre Drinker Biddle & Reath LLP, Washington, D.C., for appellant.
Jay T. Squires, Elizabeth J. Vieira, Kristin C. Nierengarten, Rupp, Anderson, Squires & Waldspurger, P.A., Minneapolis, Minnesota, for respondent.
Peder A. Larson, Gary A. Van Cleve, Bryan J. Huntington, Sonali J. Garg, Larkin Hoffman Daly & Lindgren Ltd., Minneapolis, Minnesota, for amici curiae Aggregate and Ready Mix Association of Minnesota and Minnesota Industrial Sand Council.
Scott W. Carlson, Lynn A. Hayes, Lindsay Kuehn, Farmers’ Legal Action Group, Saint Paul, Minnesota; and
Susan L. Naughton, Saint Paul, Minnesota, for amicus curiae League of Minnesota Cities.
Harry N. Niska, Howse & Thompson, P.A., Plymouth, Minnesota; and
J. David Breemer, David J. Deerson, Sacramento, California, for amicus curiae Pacific Legal Foundation.
S Y L L A B U S
- Appellant has standing to challenge the provisions of a zoning ordinance related to mining for “local construction purposes.”
- The challenged county zoning ordinance does not violate the dormant Commerce Clause on its face, in purpose, or in effect.
- Appellant‘s mineral leases, which granted Appellant a speculative, contingent right to possess and use the land, did not create a compensable property interest under state law for the purposes of a takings claim under the Minnesota and United States Constitutions.
Affirmed.
O P I N I O N
CHUTICH, Justice.
In November 2016, the Winona County Board of Commissioners revised its comprehensive zoning ordinance to prohibit “[i]ndustrial mineral operations” within the county. See
This appeal arises from the district court‘s order granting summary judgment to the County on all of Minnesota Sands’ claims. A panel of the court of appeals affirmed, with one judge concurring in part and dissenting in part. Minn. Sands, LLC v. Cty. of Winona, 917 N.W.2d 775 (Minn. App. 2018). We granted Minnesota Sands’ petition for further review, and we now affirm.
FACTS
The southeastern Minnesota region, where Winona County is located, contains rich deposits of silica sand. Because silica sand consists of nearly 95 percent quartz—a hard mineral—it is used in the extraction process for drilling oil and natural gas known as hydraulic fracturing, or “fracking.” The recent upsurge in fracking in oil-producing states has created high demand for the raw silica sand found in southeastern Minnesota.
No end-user market for processed frac sand exists within Minnesota, because no significant reserves of oil or natural gas exist in this state. But the oil and gas industry is not the only industry that generates demand for raw silica sand. For example, silica sand is used in glass-making, in the abrasives industry, in agriculture as livestock bedding, and for sand traps on golf courses. It is also used in the construction industry. Unlike the market for frac sand, the silica sand that supplies these other markets is not necessarily bound to leave Minnesota. The record here shows that silica sand is used by Minnesota firms that manufacture countertops, glass, shingles, and more.
The County‘s efforts to manage industrial silica sand mining began in September 2011, when it received three conditional-use permit applications for silica sand mining operations. The county planning and environmental services department and county attorney raised concerns about the need to regulate silica sand mining operations. In January 2012, the Winona County Board of Commissioners (Board) denied the three applications and imposed a 3-month moratorium on silica sand mining operations to allow the County to conduct a land-use planning study. The moratorium was allowed to expire in May 2012, after the County adopted additional land-use regulations for silica sand mining.3
In February 2012—during the moratorium—Minnesota Sands acquired four leases to remove silica sand from property located within the County. It acquired a fifth lease in
Minnesota Sands submitted applications for conditional-use permits for two sites in August 2012, as required by the zoning ordinance then in effect. See
After June 1, 2013, therefore, Minnesota Sands was required to complete the environmental review process before it could receive any conditional-use permits for silica sand mining facilities. See
In 2016, the Board considered an amendment to the zoning ordinance, which was proposed by the Land Stewardship Project, that would prohibit “[f]rac sand operations.” After referring the proposal to the planning commission and county attorney‘s office for further analysis, the Board opened the amendment and several alternatives to public
At its October 25, 2016 meeting, the Board voted to adopt a version of the amendment recommended by the county attorney entitled “Large Scale Industrial Silica Sand Mining and Processing Prohibited.” The amended provisions of the ordinance have remained unchanged since their adoption. As noted above, before adoption of the amendment, the ordinance required all proposed mineral extraction projects to obtain a conditional-use permit.
Central to the issues presented here are the definitions of “industrial minerals” and “construction minerals” set forth in the ordinance. The term “industrial minerals” is defined as:
naturally existing high quartz level stone, silica sand, quartz, graphite, diamonds, gemstones, kaolin, and other similar minerals used in industrial applications, but excluding construction minerals as defined [elsewhere].
. . .
“Silica sand” has the meaning given in
Minnesota Statutes, section 116C.99, subd. 1(d) : ” ‘Silica sand’ means well-rounded, sand-sized grains of quartz (silicon dioxide), with very little impurities in terms of other minerals. Specifically, the silica sand for the purposes of this section is commercially valuable for use in the hydraulic fracturing of shale to obtain oil and natural gas. Silica sand does not include common rock, stone, aggregate, gravel, sand with a low quartz level, or silica compounds recovered as a by-product of metallic mining.”
natural common rock, stone, aggregate, gravel and sand that is produced and used for local7 construction purposes, including road pavement, unpaved road gravel or cover, concrete, asphalt, building and dimension stone, railroad ballast, decorative stone, retaining walls, revetment stone, riprap, mortar sand, construction lime, agricultural lime and bedding for livestock operations, sewer and septic systems, landfills, and sand blasting. The term “construction minerals” does not include “industrial minerals” as defined [elsewhere].
ANALYSIS
Because the case comes to us on the district court‘s order granting summary judgment, we review that decision “de novo to determine (1) whether there are any genuine issues of material fact, and (2) whether the district court correctly applied the law.” Rochester City Lines, Co. v. City of Rochester, 868 N.W.2d 655, 661 (Minn. 2015). We review the evidence in the light most favorable to the party against whom summary judgment was granted—here, Minnesota Sands. McBee v. Team Indus., Inc., 925 N.W.2d 222, 230 (Minn. 2019). In considering Minnesota Sands’ constitutional claims, we presume that the challenged law is constitutional. Minn. Voters Alliance v. City of Minneapolis, 766 N.W.2d 683, 688 (Minn. 2009). We are mindful that our power to declare a law unconstitutional “is to be exercised only when absolutely necessary and with
I.
As an initial matter, we must address the court of appeals’ conclusion that Minnesota Sands lacks standing to assert that the ordinance discriminates against interstate commerce by the County‘s use of the word “local” in the definition of “construction minerals.”9 Minn. Sands, LLC, 917 N.W.2d at 782–83. The court of appeals reasoned that, because Minnesota Sands has no interest in producing construction minerals, a challenge to the word “local” in the construction-minerals definition would not secure the company any relief because it would still be unable to engage in the industrial mining of silica sand. Id. at 782. We disagree that Minnesota Sands lacks standing to bring this case.
The standing doctrine requires only that a party “have a sufficient stake in a justiciable controversy to seek relief from a court.” McCaughtry v. City of Red Wing, 808 N.W.2d 331, 338 (Minn. 2011) (quoting Lorix v. Crompton Corp., 736 N.W.2d 619, 624 (Minn. 2007)). Standing is a question of law that we determine de novo. Glaze v. State, 909 N.W.2d 322, 325 (Minn. 2018).
Here, Minnesota Sands has demonstrated a colorable interest in producing silica sand under the leases that it holds within the County. The company alleges that it is prevented from doing so by an ordinance that violates the United States Constitution. Moreover, although Minnesota Sands seeks invalidation of the entire ordinance amendment (lifting the law‘s burdens from all affected), its alleged discrimination injury could conceivably be remedied by a narrowing construction that invalidated only the “local construction purposes” language of the ordinance (imposing any burdens on everyone equally). See
II.
The Commerce Clause states that Congress may “regulate Commerce . . . among the several states.”
The basic principle underlying the dormant Commerce Clause is that a state may not pursue “economic isolation” by placing “burdens on the flow of commerce across its
In light of this principle, the Supreme Court has articulated a three-part framework for analyzing dormant Commerce Clause issues. The first part asks whether the challenged law “discriminates on its face against interstate commerce.” United Haulers Ass‘n, Inc. v. Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330, 338 (2007). If not, the second part of the framework asks if the law discriminates against interstate commerce “on the basis of either discriminatory purpose or discriminatory effect.” Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 270 (1984) (emphasis added) (citations omitted); see also W. Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 201 (1994) (” ‘In each case it is our duty to determine whether the statute under attack . . . will in its practical operation work discrimination against interstate commerce.’ ” (quoting Best & Co. v. Maxwell, 311 U.S. 454, 455–56 (1940))).
Laws that fall in the facial discrimination category, or the discriminatory purpose or effect categories, are “subject to a virtually per se rule of invalidity” as a violation of Congress‘s exclusive right to make such regulations. United Haulers Ass‘n, 550 U.S. at 338 (quoting City of Philadelphia, 437 U.S. at 624). Unless the state demonstrates that it has no other means to achieve a legitimate local purpose, the law is unconstitutional. Id. at 338–39 (citing Maine v. Taylor, 477 U.S. 131, 138 (1986)).
The third part of the framework establishes a more flexible standard of scrutiny for a state law that “regulates ‘evenhandedly,’ and imposes only ‘incidental’ burdens on interstate commerce.” Clover Leaf Creamery Co., 449 U.S. at 471. Laws in this category are upheld unless the burdens that they impose on interstate commerce are “clearly excessive in relation to the putative local benefits.” Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).
A.
Applying this framework here, the first question is whether the Winona County Zoning Ordinance “discriminates on its face against interstate commerce.” United Haulers Ass‘n, 550 U.S. at 338. A law is facially discriminatory if it expressly provides for “differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.” Or. Waste Sys., Inc. v. Dept. of Envtl. Quality of Or., 511 U.S. 93, 99 (1994).
The operative provision of the ordinance states that “[i]ndustrial mineral operations, which includes excavation, extraction, mining, and processing of industrial minerals are prohibited in Winona County.”
Minnesota Sands argues that the ordinance is essentially a ban on the export of silica sand. It notes that the Supreme Court has applied strict scrutiny review to state laws that banned the export of minnows and natural gas. See Hughes, 441 U.S. at 337 (minnows); Pennsylvania v. West Virginia, 262 U.S. 553, 595–600 (1923) (natural gas); Haskell v. Kan. Nat. Gas Co., 224 U.S. 217, 218 (1912) (natural gas). Minnesota Sands contends that because the ordinance is also an export ban, it must meet strict scrutiny.
As a land-use regulation, the ban on industrial mining operations is foremost a restriction on the rights of Minnesota landowners, not an “export ban.” Specifically, the ordinance restricts the rights of any landowner who wishes to engage in industrial mining operations within the County. Unlike a typical export embargo that confers a home-state advantage by denying outsiders equal access to some in-state market, the ordinance is evenhanded on its face. It pays no regard to whether the person or entity who wishes to engage in industrial mining resides in-state or out-of-state or wishes to sell the industrially mined sand to in-state or out-of-state consumers.
In contrast to the types of embargos invalidated by the Supreme Court as effectively banning exports, the ordinance here does not, on its face, confer any benefit to in-state economic interests. See Hughes, 441 U.S. at 336; Pennsylvania, 262 U.S. at 596–97;
Minnesota Sands attempts to bolster its theory by citing to the ordinance‘s definitions of industrial and construction minerals. It contends that facial discrimination arises from the exception for the mining of “sand that is produced and used for local construction purposes.” See
First, “local” is not synonymous with “in-state.” The word “local” is not defined in the ordinance. And dictionary definitions do not suggest that “local” always or predominantly distinguishes between in-state and out-of-state areas. See, e.g., The American Heritage Dictionary of the English Language 1029 (5th ed. 2011) (“Of, relating to, or characteristic of a particular place“); The Oxford Dictionary of English 1037 (3d ed. 2010) (“relating or restricted to a particular area or one‘s neighbourhood“); Merriam-Webster‘s Collegiate Dictionary 730 (11th ed. 2014) (“of, relating to, or characteristic of a particular place: not general or widespread“).
Here, the term “local” can be interpreted to include, at the very least, the neighboring parts of Wisconsin located across the river from Winona County. And assuming that “local” denotes an in-state geographical restriction would be inconsistent with our duty to invalidate a law as unconstitutional “only when absolutely necessary and with extreme caution.” Caterpillar, Inc., 568 N.W.2d at 697 (quoting Miller Brewing Co., 284 N.W.2d at 356).
In any event, the Supreme Court has generally held that laws falling expressly along state lines are facially discriminatory. See, e.g., Or. Waste Sys., Inc., 511 U.S. at 108 (invalidating a state statute imposing a surcharge on waste generated out of state); Sporhase v. Nebraska, 458 U.S. 941, 943 (1982) (invalidating a state law restricting withdrawal of groundwater “from any well within Nebraska intended for use in an adjoining State“); Hughes, 441 U.S. at 337 (invalidating a state law that banned transporting “minnows for sale outside the state” which were procured within the state‘s waters); City of Philadelphia, 437 U.S. at 618 (invalidating a state law that banned waste originating “outside the territorial limits of the State“); cf. Taylor, 477 U.S. at 138 (upholding, under strict scrutiny, a ban on importing out-of-state baitfish). The absence of any express distinction between in-state and out-of-state interests causes Minnesota Sands’ claim of facial discrimination to fail. Because the zoning ordinance is facially neutral in its treatment of in-state and out-of-state interests, we hold that it is not facially discriminatory.
The dissent seeks a different result, concluding that a municipal law is invalid on its face if it mentions the word “local” because such a law “shield[s] local interests—even if not statewide interests—from interstate commerce.” We disagree. As discussed above, the ordinance in this case does not shield local interests from interstate commerce: the “local” restriction includes some interstate markets in Wisconsin. In addition, the cases cited by the dissent do not support its conclusion. Although those cases acknowledge that some laws that draw merely local, rather than statewide, distinctions may run afoul of the dormant Commerce Clause, none of them state that the use of the word “local” makes an ordinance facially invalid.
For example, Dean Milk Co. v. City of Madison, Wis., 340 U.S. 349 (1951) predates the Supreme Court‘s three-part dormant Commerce Clause framework. Dean Milk held
Similarly, the Court‘s decision in Sprout v. City of South Bend, Ind., 277 U.S. 163, 167–71 (1928), did not distinguish between local and non-local interests or traffic, relying instead on other factors. Likewise, the Court in C & A Carbone, Inc. v. Town of Clarkstown, N.Y, 511 U.S. 383 (1994), did not hold that a distinction between local and non-local interests made a restriction discriminatory on its face. See, e.g., id. at 390–91. Further, the Michigan statute at issue in Fort Gratiot Sanitary Landfill, Inc. v. Michigan Department of Natural Resources, 504 U.S. 353 (1992), unlike the zoning ordinance in this case, allowed counties to impose restrictions on all out-of-county commerce. Id. at 356−57. And the deficiency of the statute at issue in Chemical Waste Management was that it explicitly imposed an additional fee on waste “generated outside of Alabama.”
Second, even if Minnesota Sands and the dissent were correct that the zoning ordinance’s use of the term “local” is facially discriminatory—or, for that matter, discriminatory in practical effect—that conclusion would not lead to a different result in this case. If the “local” restriction were invalid, we would not invalidate the entire ordinance, but would “attempt to retain as much of the original [ordinance] as possible while striking the portions that render the [ordinance] unconstitutional.” State v. Melchert-Dinkel, 844 N.W.2d 13, 24 (Minn. 2014) (noting that severance is permissible unless the remaining provisions are “incomplete” or “incapable of being executed in accordance with legislative intent”).
In this case, if the definition of “construction minerals” were altered to eliminate the “local” restriction—defining “construction minerals” in relevant part as “sand that is produced and used for [any] construction purposes”—the resulting ordinance would be sensible and capable of being executed. See id. But the silica sand that Minnesota Sands intends to mine would still fall within the zoning ordinance’s ban. Minnesota Sands admits that it has no interest in mining sand to be used for “construction purposes,” and therefore the sand it intends to mine would continue to be classified as “industrial minerals” under the ordinance, even if the local restriction were absent. Accordingly, Minnesota Sands would not be entitled to relief even if we concluded that the local restriction is invalid because the ordinance does not discriminate on its face against interstate commerce.
Even if not discriminatory on its face, a state law is invalid under the dormant Commerce Clause if it has the purpose or practical effect of favoring in-state interests and burdening out-of-state interests. Bacchus Imports, Ltd., 468 U.S. at 270; see also W. Lynn Creamery, Inc., 512 U.S. at 201; Clover Leaf Creamery Co., 449 U.S. at 471 n.15. Laws in this category are unconstitutional unless the government shows that it has no other means of advancing a legitimate, non-protectionist purpose. W. Lynn Creamery, Inc., 512 U.S. at 192–93; see also United Haulers Ass’n, 550 U.S. at 338–39; Taylor, 477 U.S. at 138.
Although Minnesota Sands contends that the County’s ordinance was motivated by animus toward the primarily out-of-state fracking industry, it has not pointed to any concrete evidence to support that claim. Instead, the company bases its animus theory on the alleged motivation of actors who lobbied in favor of the amendment, namely, the initial proposal by the Land Stewardship Project and statements of private citizens during the public comment period at the zoning hearings.
The initial proposal, however, was rejected by the Board; tellingly, none of the comments that were critical of the fracking industry were credited by the Board in its findings adopting the amendment. These sources therefore have “little (if any) probative value in demonstrating the objective of the [Board] as a whole.” Portland Pipe Line Corp. v. City of S. Portland, 332 F. Supp. 3d 264, 303 (D. Me. 2018) (quoting Alliance of Auto. Mfrs. v. Gwadosky, 430 F.3d 30, 39 (1st Cir. 2005) (discussing statements by a law’s private proponents concerning a dormant Commerce Clause challenge)). The connection
Turning to the practical effect of the ordinance, the “crucial inquiry” is whether the ordinance is “basically a protectionist measure, or whether it can fairly be viewed as a law directed to legitimate local concerns, with effects upon interstate commerce that are only incidental.”13 City of Philadelphia, 437 U.S. at 624. For the ordinance to be considered as discriminatory in practical effect, Minnesota Sands must demonstrate that the ordinance “favors in-state economic interests over out-of-state interests.” IESI AR Corp. v. Nw. Ark. Reg’l Solid Waste Mgmt. Dist., 433 F.3d 600, 605 (8th Cir. 2006) (citing Smithfield Foods, Inc. v. Miller, 367 F.3d 1061, 1066 (8th Cir. 2004)). “Negatively affecting interstate
Minnesota Sands’ effects-based claim fails to show that the County’s ordinance functions to discriminate between in-state and out-of-state interests. Minnesota Sands maintains that discrimination occurs because the market for frac sand exists only in interstate commerce as there are no known oil or natural gas reserves in Minnesota. This argument ignores the ordinance’s entire scope. The prohibition here is not limited to sand destined for use in hydraulic fracturing; it applies to all industrial-scale silica sand mining operations that produce “well-rounded, sand-sized grains of quartz (silicon dioxide), with very little impurities in terms of other minerals,” no matter the ultimate consumer.14 Winona County, Minn., WCZO § 4.2.
In evaluating a dormant Commerce Clause claim, courts must assuredly be on alert for pure economic protectionism. See id. at 471. But the dormant Commerce Clause does not protect “the particular structure” of a given market from laws that do not discriminate against interstate commerce on their face, in purpose, or in practical effect. See Exxon Corp., 437 U.S. at 127–28 (rejecting the argument that the Commerce Clause “protects the particular structure or methods of operation in the retail market” and noting that it “protects the interstate market, not particular interstate firms, from prohibitive or burdensome regulations”); cf. Lochner v. New York, 198 U.S. 45, 75 (1905) (Holmes, J., dissenting) (“[The] Constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez faire.”)
III.
Minnesota Sands’ second claim is that the County’s prohibition, in the ordinance, of industrial mineral operations amounts to an unconstitutional taking of the rights that it acquired under five property leases located within the County. The district court and the court of appeals concluded that Minnesota Sands’ takings claims failed because the property interests that it claims were taken by the County had not yet accrued. For the reasons explained below, we agree with this conclusion.
Minnesota Sands raises its claims under both the state and federal constitutions. Unless a property owner contends that the Minnesota Takings Clause provides greater protections than the federal constitution, however, we may rely on cases interpreting the federal Takings Clause when interpreting our own. See id. at 633. Minnesota Sands does not maintain that the language in the Minnesota Takings Clause, or any decision of this court, gives it greater constitutional protection here than that afforded by the federal Takings Clause. Accordingly, we treat the company’s federal and state takings claims together.
The first question in any takings analysis is to determine what, if any, property interest is at stake. See Hall v. State, 908 N.W.2d 345, 352 (Minn. 2018); see also Phillips v. Washington Legal Found., 524 U.S. 156, 164 (1998); Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1000 (1984). The Takings Clause does not “compensate property owners for property rights they never had.” Wensmann Realty, Inc., 734 N.W.2d at 635 (citation omitted). Unless the party has a property interest, no takings claim arises. Property interests that are protected by the Fifth Amendment “are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.” Webb’s Fabulous Pharms., Inc. v. Beckwith, 449 U.S. 155, 161 (1980) (citation omitted); see also Phillips, 524 U.S. at 164.
Initially, we note that if the owners of the land affected had not partitioned their property rights, separating (at least part of) the mineral rights from their remaining rights in the land, this case would be relatively easy to decide. “[I]n instances in which a state tribunal reasonably concluded that the health, safety, morals, or general welfare would be promoted by prohibiting particular contemplated uses of land,” the Supreme Court “has upheld land-use regulations that destroyed or adversely affected recognized real property interests.” Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 125 (1978) (citation omitted) (internal quotation marks omitted). “Zoning laws are, of course, the classic example, which have been viewed as permissible governmental action even when prohibiting the most beneficial use of the property.” Id. (citations omitted). Of course, “if regulation goes too far it will be recognized as a taking.” Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). The Supreme Court has recognized that regulation goes “too far” when
That scenario is clearly not the case here. Before enactment of the zoning ordinance amendment that Minnesota Sands challenges, a landowner in Winona County was required to apply for a conditional-use permit “for all extraction pits and land alteration operations,” Winona County, Minn., WCZO § 9.10.1.a (2010). That requirement was without regard to whether the extraction involved “industrial minerals” or “construction minerals,” a distinction drawn only by the amendment. That is, the previous zoning ordinance generally prohibited a land use—extraction of minerals—but allowed a potential exception to the prohibition by way of a conditional-use permit.
After the amendment to the ordinance, the extraction of construction minerals was regulated in the same way—a general prohibition, with the possibility of an exception, by a conditional-use permit—but concerning the specific extraction of industrial minerals, the possible exception was eliminated. Winona County, Minn., WCZO §§ 9.10.2, 9.10.3.a (2016). We are unaware of any authority that would make such a restriction unlawful. Certainly the amendment did not deprive the landowners of “all economically beneficial or productive use of [the] land.” Lucas, 505 U.S. at 1015. When viewed as a land regulation in relation to the entire “bundle of rights”16 that the landowners held before the zoning ordinance amendment, the relatively limited regulation that the amendment
Our analysis is complicated, however, because in Minnesota the right to subsurface minerals is separable from the rest of the land. Washburn v. Gregory Co., 147 N.W. 706, 707 (Minn. 1914). And takings jurisprudence has historically recognized that such partitions must be respected. In Pennsylvania Coal, a landowner had conveyed the surface rights to certain land but reserved the right to remove coal from the land. 260 U.S. at 412. The Court held that a statute prohibiting the removal of coal in such a way as to cause the subsidence of surface structures—thereby making it commercially impracticable to mine the coal—was a taking. Id. at 414–15. In this case, Minnesota Sands alleges that it has leased the right to remove certain minerals. We therefore assume, for this takings-clause analysis, that the right to remove frac sand is a separate, concrete interest in land, the deprivation of which could be a taking.
Even granting that assumption, Minnesota Sands must still have a sufficiently concrete interest in the right to remove frac sand to be recognized as a property interest under Minnesota law. And of course, that Minnesota Sands has alleged that it holds a property right does not settle the issue of whether a taking has occurred. Indeed, as we set out below, we hold that Minnesota Sands’ interest in the right to remove frac sand is, under Minnesota law, inchoate and therefore cannot sustain a takings claim.
Minnesota Sands maintains that because it owns leases that afford it the right—under certain conditions—to remove and process frac sand, it has a compensable property
The very nature of a lease is the granting of some subset of the fee owner’s so-called “bundle of rights.” Cf. Gates v. Herberger, 279 N.W. 711, 712 (Minn. 1938) (“The relation of landlord and tenant exists where one person occupies the premises of another in subordination to that other’s title and with his consent.”); 6A Steven J. Kirsch, Minnesota Practice—Methods of Practice § 51.41 (3d ed. 1990) (“Generally, the term [of a tenancy] is limited only by the desires of the parties and the power of the lessor to make a lease, depending on the extent of the lessor’s interest in the premises.”). The property interests, if any, belonging to a lessee therefore depend upon the terms of the lease. Hous. & Redev. Auth. of St. Paul v. Lambrecht, 663 N.W.2d 541, 546–47 (Minn. 2003) (noting that a tenant’s right to just compensation depends on the specific terms of the lease agreement); see also Ruckelshaus, 467 U.S. at 1003 (noting that the term “property” as used in the Takings Clause may “denote the group of rights inhering in the citizen’s relation to the physical thing, as the right to possess, use and dispose of it” (citation omitted)).
Looking to the five leases at issue here, we are unpersuaded that the property interests purportedly conveyed to Minnesota Sands by the fee owners were affected by the County’s ordinance amendment. The leases cover the essential terms of a lease: they
But the essential terms of these leases are subject to specific conditions that govern Minnesota Sands’ rights to use and to possess the leased premises. The leases are confined to “the sole purpose of removing sand only.” Under paragraph 5, entitled “Use and Condition of Premises,” the leases state that the company “may use the Premises solely to mine Frac Sand to be used by [it] for commercial purposes.” The leases grant possession of the premises to Minnesota Sands “on the commencement date,”17 yet virtually annul the right to possession in a clause that reserves to the landowners the “absolute right to continue to complete cropping and farming activities on the portion of the premises not affected by the mining operation.”18 As a consequence of this reservation clause, Minnesota Sands
These lease terms are the fatal defect in Minnesota Sand’s takings claim as a matter of Minnesota law. A transfer of the right to possession of the leased property is the defining feature of a leasehold interest. See Gates, 279 N.W. at 712 (“No particular form of words is necessary to create a tenancy. Any words that show an intention of the lessor to divest himself of the possession, and confer it upon another, but in subordination of his own title, is sufficient.”); see also Restatement (Second) of Prop.: Landlord & Tenant § 1.2 (1977) (“A landlord-tenant relationship exists only if the landlord transfers the right to possession of the leased property.”) The right of possession, we have said, “is transferred when the lease agreement gives the tenant control over the property and the power to exclude all
exclude others—not even the landowners—except from portions of the land “affected by the mining operation.” At the “commencement date,” the existence of any mining operation—and therefore full rights to possession and to exclude others—was both highly contingent, and in the distant future.
The highly contingent nature of Minnesota Sands’ interests under the leases is demonstrated by other terms in those leases. Under paragraph 11, entitled “Zoning,” the leases state that Minnesota Sands’ obligations “are conditioned upon [it] obtaining any zoning or other governmental approvals required to permit the use set forth in paragraph 5,” yet give the lessors “the right to object to any approvals or permits at or before any type of zoning, planning, county or township or commissioning authority.” Minnesota Sands paid the lessors a one-time sum of $1,000.00 upon execution. Beyond this initial sum, however, Minnesota Sands’ remaining obligations to the landlord are all contingent upon the possibility that mining occurs: it promises to pay an additional $9,000.00 “on obtaining a Conditional Use Permit” from the County, pay royalties for any sand that it later removes, maintain a stockpile of sand for “miscellaneous use” by the landlord, and restore the surface condition of the premises once mining concludes.
Here, the conditions precedent to acquiring possession and control under any of the leases demonstrate that Minnesota Sands does not have a fully-fledged leasehold interest under Minnesota law. Rather, the agreements at most grant Minnesota Sands expectancy interests that are too speculative to support a takings claim.19 The steps that Minnesota Sands had to have taken to make choate its inchoate rights under the lease agreements illustrate this point.
First, Minnesota Sands would have had to obtain a conditional-use permit for each silica sand mining operation. Under the County’s zoning ordinance, a conditional-use permit applicant must submit “[a] statement of reasons warranting the intended use in the zoning district to insure compatibility of the proposed use with the County Comprehensive Plan.” Winona County, Minn., WCZO § 5.5.3.3 (2016); see also Winona County, Minn., Winona County Comprehensive Plan (2014) (a document created to preserve and enhance
The application must include a Township Acknowledgment Form, which documents the “concerns, observation, and/or recommendation” of the town board of the subject property for the Planning Commission to consider.
Only after Minnesota Sands obtained the conditional-use permit could it engage in mining silica sand—the only activity for which it had the right to enter upon and use the premises that it leased. Until Minnesota Sands actually began that activity, the property owners retained “the absolute right to continue to complete cropping and farming activities on the portion of the premises.” Thus, for example, if the company received a permit from the County to mine sand, but decided to wait until market conditions were optimal to do so, its right to possession and control of the premises would remain inchoate.22
For a variety of understandable reasons—including a downturn in the hydraulic fracturing industry—Minnesota Sands never came close to securing the possessory rights described in its lease agreements. When the ordinance was passed that prohibited industrial mineral operations, Minnesota Sands’ interest was, at most, a contingent-use interest under Minnesota law, for which it paid $1,000.00 to keep that interest open for a term of years.
Because under Minnesota law Minnesota Sands never had a present, or even non-contingent, possessory right to use, or to possess and control, the premises described in its lease agreements, we conclude that it did not have a property interest protected by
CONCLUSION
For the foregoing reasons, we affirm the decision of the court of appeals.
Affirmed.
D I S S E N T
ANDERSON, Justice (dissenting).
Respondent County of Winona passed an ordinance that allows silica sand to be mined and used for local purposes, but prohibits the export of that sand from Minnesota if the intended use of the sand outside the state is hydraulic fracturing of shale. Because protecting local mining and use of silica sand at the expense of out-of-state uses of that sand violates the Commerce Clause, and also because the analysis of the court defeats the purpose of the Takings Clause, I respectfully dissent.
I.
I first address whether the Winona County ordinance is valid under the Commerce Clause of the United States Constitution.
“The Commerce Clause presumes a national market free from local legislation that discriminates in favor of local interests.” C & A Carbone, Inc. v. Town of Clarkstown, N.Y., 511 U.S. 383, 393 (1994); see H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 537–39 (1949) (noting that the “economic unit is the Nation,” and production is encouraged “by the certainty that [the producer] will have free access to every market in the Nation, [and] that no home embargoes will withhold [its] exports”). The Commerce Clause “circumscribes a State’s ability to prefer its own citizens in the utilization of natural resources found within its borders, but destined for interstate commerce,” Hicklin v. Orbeck, 437 U.S. 518, 533 (1978), and precludes local protectionist measures, New England Power Co. v. New Hampshire, 455 U.S. 331, 339 (1982) (stating that the state’s export ban on energy “is precisely the sort of protectionist regulation that the Commerce
“If a restriction on commerce is discriminatory, it is virtually per se invalid.” Or. Waste Sys., Inc. v. Dep‘t of Envtl. Quality of Or., 511 U.S. 93, 99 (1994). The law “must be invalidated” unless ” ‘it advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.’ ” Id. at 100-01 (quoting New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 278 (1988)). “The virtually per se rule of invalidity applies not only to laws motivated solely by a desire to protect local industries from out-of-state competition, but also to laws that respond to legitimate local concerns by discriminating arbitrarily against interstate trade.” Chem. Waste Mgmt., Inc. v. Hunt, 504 U.S. 334, 344 n.6 (1992) (citations omitted) (internal quotation marks omitted).
In simple terms, Winona County‘s ordinance prohibits all excavation, mining, and processing of “industrial minerals.” See
It is on this point that I part ways with the court. The potential barrier constructed by the court for a hypothetical in-state purchaser of silica sand ignores the benefit conferred by the ordinance on permitted “local” uses of sand.1 Winona County admits that the permitted “construction minerals” under the ordinance includes silica sand that is “identical” to the silica sand that is a prohibited “industrial mineral.” The ordinance creates no barrier for an in-state purchaser of silica sand and imposes differential treatment only with respect to an intended out-of-state use for silica sand. See Or. Waste Sys., Inc., 511 U.S. at 99 (explaining that the Supreme Court uses the term “discrimination” to mean “differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter“). The term “industrial minerals” includes “silica sand” but then excludes that same sand when it would be used as “construction minerals.”
Despite the mutual exclusions in the definitions, the record suggests that one mineral is different from another only to the extent that its use is either local or nonlocal. One county official, who is charged with administering the zoning ordinance, recognized that
These facts, which we must accept as true for summary judgment purposes, see Rochester City Lines, Co. v. City of Rochester, 868 N.W.2d 655, 661 (Minn. 2015), establish that end use alone defines the mineral. If sand were to be used for “local” purposes—for construction purposes or animal bedding, for example—then it would be mined as a “construction mineral,” which is permissible. But if the same sand were “commercially valuable for use” in fracking that cannot occur locally (the court and the parties agree that fracking does not occur in Minnesota) and used as a fracking proppant, then the sand would be mined as an “industrial mineral,” which is not permissible under the ordinance. This differential treatment, which allows local mining to proceed without impairment, while selectively banning the mining of the same resource for nonlocal uses, violates the Commerce Clause.
The ordinance “preserves local commerce, to the benefit of local consumers of silica sand, who are insulated from the effects of unrestricted trade in silica sand,” Minn. Sands, LLC v. Cty. of Winona, 917 N.W.2d 775, 789 (Minn. App. 2018) (Johnson, J., concurring in part and dissenting in part), giving locals a “preferred right of access,”
Because the discrimination appears on the face of the ordinance by way of an affirmative distinction drawn between local and nonlocal uses of sand, the ordinance is subject to per se invalidation. See Or. Waste Sys., Inc., 511 U.S. at 99. Winona County does not explain why the ordinance “advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.” Id. at 100-01 (quoting New Energy Co. of Ind., 486 U.S. at 278). The ordinance, therefore, should be invalidated.2
I would reverse the district court‘s summary judgment in favor of Winona County.
The court also decides that local commerce is somehow transformed into interstate commerce because the local uses of construction sand might extend into neighboring counties that happen to be located in Wisconsin. The court‘s narrow view of interstate commerce is not supported by fundamental principles of the dormant Commerce Clause; longstanding case law also rejects this limited view of interstate commerce. See H.P. Hood & Sons, Inc., 336 U.S. at 539 (“Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the Nation, [and] that no home embargoes will withhold
In sum, Winona County‘s ordinance erects a facially discriminatory ban on silica sand mining when intended for hydraulic fracturing that is per se invalid. Minnesota Sands is entitled to relief, and the court of appeals should be reversed.
II.
But even if we concluded that the local ordinance at issue here does not fall on Commerce Clause grounds, Minnesota Sands has protected constitutional interests in its leasehold property under the Takings Clause. The court concludes otherwise, in the process defeating the constitutional protection of private property that the Takings Clause extends and reaching a result that is inconsistent with controlling Supreme Court decisions.
The
When determining the scope of “property” subject to the
Because mineral leases, including the leases at issue here, have been “long recognized” as property, Phillips, 524 U.S. at 167, the protected property interest defined by those leases may not be regulated out of existence by the government, see Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922) (explaining that regulation will be recognized as a
The court disagrees, rejecting the takings claim because it concludes that Minnesota Sands does not have a vested property interest protected by the
The court‘s reasoning presents both factual and legal difficulties. Factually, the court‘s conclusion requires that we simply ignore lease provisions that cut against a vesting theory. For example, the leases expressly state that Minnesota Sands “shall be entitled to possession on the commencement date.” With that entitlement to possession, Minnesota Sands also has “the right to make use of all roadways presently existing on the Property” and the right to “clear brush and undergrowth from such portions of the Property as may be reasonably necessary to explore for materials or to locate pits, quarries, roads and stockpile areas.” The leases also give Minnesota Sands an exclusive right to mine the leased premises. Each lessor “represent[ed] that it has not previously leased or assigned the mineral rights to the premises to any other party” and “covenant[ed] not to lease, grant or assign the mineral rights to the premises described above, during the term of this lease.” Thus, under the terms of the leases, Minnesota Sands has the right to enter the land, clear the land, and exclude others from the land, demonstrating that it has the required “immediate, fixed right of present or future enjoyment” of the property to have a vested leasehold. Vest, Black‘s Law Dictionary (11th ed. 2019).
Legally, even if we could accept the court‘s abridged take on the leases, I disagree with its abridged take on the
This vesting analysis defeats the very purpose of the
The court‘s logic is at odds with several Supreme Court decisions. See Lucas, 505 U.S. at 1026, 1032 (reversing the South Carolina Supreme Court, which took a
There is not now, nor has there ever been, a vesting requirement under the
The decisions on which the court relies add little weight to its vesting theory. In Conti v. United States, 291 F.3d 1334, 1337 (Fed. Cir. 2002), the federal government banned the use of gillnets for harvesting swordfish. A fisherman who used gillnets argued that the ban was a taking of his swordfishing permit. Id. Rejecting this argument, the Conti court looked to the fact that the fisherman “could not assign, sell, or otherwise transfer the permit” and that he “lacked the authority to exclude others from the Atlantic Swordfish Fishery,” both traditional hallmarks of property. Id. at 1341. Therefore, the court held, “[t]he absence of crucial indicia of a property right, coupled with the government‘s irrefutable retention of the right to suspend, revoke, or modify [the fisherman‘s] swordfishing permit, compels the conclusion that the permit bestowed a revocable license, instead of a property right.” Id. at 1342.
An interest in a revocable, nonexclusive, swordfishing permit is nothing like, and indeed is substantially less than, the interest of Minnesota Sands in its mineral-rights leases. These leases bear traditional hallmarks of property; for example, the right of quiet enjoyment as well as the right to alienate—after all, Minnesota Sands acquired its leasehold interests by assignment. Each lease gives Minnesota Sands an exclusive right to mine the leased premises. Not only did each lessor “represent[] that it has not previously leased or assigned the mineral rights to the premises to any other party[,]” but also expressly “covenant[ed] not to lease, grant or assign the mineral rights to the premises described
Moreover, the fact that the contract specified that certain payments under the lease were not due to the lessor until a conditional-use permit was obtained does not make the interest of Minnesota Sands in the right to mine sand, as the court states, “inchoate.” The court does not understand the effect of a conditional-use permit on property rights. A conditional-use permit allows the owner of a property to put his property to use in a manner that the ordinance expressly permits. Westling v. City of St. Louis Park, 170 N.W.2d 218, 221 (Minn. 1969) (stating that uses under a conditional-use permit are “legislatively [p]ermitted in a zone subject to controls” whereas uses requiring a variance are “legislatively [p]rohibited but may be allowed for special reasons” (citations omitted) (internal quotation marks omitted)). That Minnesota Sands temporarily chose not to pursue a permitted activity is a business decision driven by many factors, including the market price and demand for sand. When to actually extract sand is a business decision made by Minnesota Sands, not by our court. See Janssen v. Best & Flanagan, 662 N.W.2d 876, 882 (Minn. 2003) (“[C]ourts are ill-equipped to judge the wisdom of business ventures and have been reticent to replace a well-meaning decision by a corporate board with their own.“). The fact that sand mining had not yet begun under the exclusive mineral lease held by Minnesota Sands at the time of the total taking by the ordinance does not mean that Minnesota Sands had abandoned its interests, but rather that the business conditions were
Campbell v. United States, 134 Fed. Cl. 764 (Fed. Cl. 2017), is equally unpersuasive. In Campbell, the plaintiffs who brought the takings claim were “victims of accidents which occurred while driving General Motors vehicles.” Id. at 767. After General Motors filed a bankruptcy petition, the plaintiffs’ causes of action became unsecured claims. Id. at 768. The plaintiffs asserted that a taking of property occurred when “the United States took actions to obtain a particular restructuring” of General Motors that led the bankruptcy court to “extinguish[] plaintiffs’ successor liability causes of action” against the reorganized General Motors. Id. Looking to “the powers accorded the bankruptcy court,” the Campbell court found that plaintiffs’ interest in successor-liability claims was “targeted for—and was subject to—extinguishment by the conditions that the government imposed.” Id. at 776. Therefore, the court concluded, plaintiffs’ asserted interest in their unsecured claims becoming successor-liability claims “was not a cognizable property interest under the
A mineral lease is nothing like an expectancy that an unsecured claim will survive bankruptcy. It is, as we have long recognized in Minnesota, a valuable property interest. Washburn, 147 N.W. at 707; Evans, 108 N.W. at 960. The leases here give current, fixed, possessory rights to Minnesota Sands—the right to enter the land, the right to clear and develop the land, and the right to exclude others from the land. Before this decision, long-recognized private-property interests like those of Minnesota Sands were not subject to extinguishment by the government in the same way that unsecured claims are subject to
The novel analysis used by the court here has subtle, but serious, implications for Takings Clause jurisprudence. The court opines that environmental regulations, and regulatory schemes such as conditional-use requirements, are enough to deprive an owner of the full use of his property interests. This analysis starts at the wrong place; the analysis must start with the constitutionally protected interests. Both the
I do not dispute that some regulation of sand mining is necessary, beneficial, and constitutionally permissible. But Minnesota Sands has a property interest in the use, possession, and control of its mineral leases protected by the Takings Clauses of the
I would reverse the grant of summary judgment and remand to the district court for further proceedings—at a minimum, for an analysis under the Penn Central factors. For
GILDEA, Chief Justice (dissenting).
I join in the dissent of Justice Anderson.
THISSEN, Justice (concurring in part, dissenting in part).
I join in Part II of Justice Anderson‘s dissent.
CONCURRENCE & DISSENT
THISSEN, Justice (concurring in part, dissenting in part).
I join in the opinion of the majority with respect to parts I-II. With respect to part III of the majority‘s opinion, I dissent. Because I join part II of Justice Anderson‘s dissent, I would reverse the district court‘s grant of summary judgment on Winona Sand‘s constitutional claim under the Takings Clauses.
Notes
Id.; see also 1 William Blackstone, Commentaries on the Laws of England 138 (1771) (identifying property as an absolute right).Though the earth, and all inferior creatures be common to all men, yet every man has a property in his own person; this nobody has any right to but himself. The labour of his body and the work of his hands we may say are properly his. Whatsoever, then, he removes out of the state that nature hath provided and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature placed it in, it hath by this labour something annexed to it that excludes the common right of other men. For this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough and as good left in common for others.
In Minnesota, as recognized in Washburn and Evans, severed mineral rights are a recognized property interest. Minnesota Sands holds those rights, and only those rights. These rights were nearly completely extinguished by Winona County‘s ordinance, and thus, under Supreme Court precedent, it is necessary to analyze the facts here using the framework of full deprivation (i.e., as a deprivation of all economically viable use), rather than treating these circumstances as a deprivation in value.