Court rules company's sand 'not property'

A legal team known for defending property rights contends the Minnesota Court of Appeals failed to uphold a mining company's Fifth Amendment rights when it determined a lease to mine silica sand did not constitute "property" and therefore required no compensation when such mining later was banned.

Winona County banned the mining of silica sand because of its use in fracking operations outside the state, making leases purchased by Minnesota Sands worthless, explained attorney David Deerson of the Pacific Legal Foundation.

He noted the Fifth Amendment provides that "private property shall not be taken for public use, without just compensation."

"When government regulations severely limit a person’s property rights, it may constitute a 'regulatory taking,'" Deerson argued.

Before the ban, he said, Minnesota Sands entered into leases with several property owners, giving it the exclusive right to mine silica sand on those properties.

"At the time, such mining activities were permitted by the county upon the grant of a conditional use permit," he said. "But because of the ban, the leases are now worthless."

When the company sued, the Minnesota Court of Appeals determined there was no "takings" claim. The company did not have a property interest, the court concluded, because there was no conditional use permit.

"The problem is, it can't get the permit because the once-permitted activities are now banned outright," Deerson said.

"Not only is this reasoning circular, but it fundamentally misunderstands the nature of property," Deerson contended. "Property, for purposes of the Fifth Amendment, is far more than merely title to an object or land. As the Supreme Court has explained, property 'denote[s] the group of rights inhering in the citizen's relation to the physical thing, as the right to possess, use and dispose of it.'"

PLF has filed a brief in the case explaining the company bought the rights to mine silica sand in 2011 and 2012. It wasn't until 2016 that the county adopted an ordinance banning the mining.

The lower courts reasoned the leases were not property because the county hadn't issued a conditional use permit.

But the filing argued the "leasehold interests are a recognized property interest under both state law and federal constitutional law." As such, it said, Minnesota Sands' leases "are subject to the protection of the Takings Clause and cannot be taken for public use without just compensation."

PLF contended the reasoning of the lower courts was flawed.

"The ban on silica sand mining is the very government action alleged to be a taking. It cannot be held to preclude a takings claim on the theory that it eliminated Minnesota Sands' underlying property interest; the inability to get a CUP is properly analyzed as a taking of property, not a flaw in the property interest."

There was no time requirement or limit for the acquisition of the permit, and now they are no longer available.

"This court should therefore reverse the decision of the Court of Appeals and hold that petitioner's leases are compensable property interests."

The lower courts essentially said "a property owner may not challenge a regulation as a taking if that regulation made it impossible for it to exercise its property interests. But the very nature of a takings claim is that the government's regulation diminished or eliminated a property interest for right."