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9

owner of land owns separately, distinctly and exclusively all the oil and gas under his

land and is accorded the usual remedies against trespassers who appropriate the

minerals or destroy their market value.

The Court then concludes: “We now hold that this correctly states the common law regarding the ownership

of groundwater in place.”

4

Regulatory takings.

While the Court was very clear about ownership of groundwater in place, the opinion

gives much less guidance about exactly how far a groundwater district may

limit pumping before it amounts to a taking of private property

that entitles a landowner to compensation. The Court admitted

the difficulty of establishing a clearly defined standard for these

“regulatory takings.” and quotes the U.S. Supreme Court, which said

the general rule is that “while property may be regulated to a

certain extent, if regulation goes too far it will be recognized as a

taking,” adding “this is a question of degree – and therefore

cannot be disposed of by general propositions.”

5

Ultimately, the Court concluded that it did not have

sufficient evidence before it to decide the takings claim

as a matter of law, and affirmed the court of appeals’ decision to

remand the case to the trial court. But first, the Court discussed the application of

the case law to the EAAA and the landowners. The Court noted that federal case

law has developed three analytical frameworks for courts to apply when

engaging in an ad hoc, factual inquiry into whether a regulatory taking

has occurred. First, a per se taking occurs when government requires an

owner to suffer a permanent physical invasion of his or her property.

Second, a per se taking occurs when regulation deprives an owner of

all economically beneficial use of the property. Third, outside the two

per se categories, regulatory takings are governed by the standards

set out in

Penn Central Transp. Co. v. New York City

.

6

Penn Central

identified three factors for courts to consider in making

regulatory takings decisions: (1) the economic impact

of the regulation on the claimant; (2) the extent

to which the regulation has interfered with distinct

investment-backed expectations; (3) the character of the

governmental action.

7

The Court noted that there was no physical invasion in the

Day

case, so the first per se takings category does not apply.

8

The Court found that the evidence before it is not sufficient to

establish whether the Authority’s decision deprived the farmers

of

all economically beneficial use of the property, the second per se

takings category.

9

As to the

Penn Central

factors, the court found that the evidence was

not sufficient to establish the economic impact of the regulation under

the first

Penn Central

factor.

10

The Court acknowledged that the second

Penn Central factor

– interference with investment-backed expectations

– “is somewhat difficult to apply to groundwater regulation under the [Act],”

and noted that “there is little in the record to illuminate what [the landowners’]

expectations were or reasonably should have been.”

11

In discussing the third

Penn Central

factor, the Court did not question districts’ rights

to limit groundwater production: “Unquestionably, the State is empowered to regulate

groundwater production.”

12

But the Court expressed concern that the Act’s production limits,