Some time back the city of Denton Texas passed a law outright banning all fracking. I believe this law was passed by a referendum of voters who voted for it.

Some investors holding property and mineral rights held property inside the city limits of that city with the specific intent of eventually drilling or fracking in order to recoup their investment.

Since the new law prevents those investors from doing so, and since the new law makes the sale of those assets to others who might also want to do the same, effectively lowering the worth of those assets, does this law results in a 'taking' of the property?


No, lowering the value of a asset does not constitute a "taking" of the property. The investors can still exercise their property and mineral rights, they are merely restricted from performing fracking. You mentioned drilling; as far as I am aware, the ordinance only prevents fracking, which I believe is a practice of inserting water in a well to force oil to the surface. There are several older techniques such as drilling and pumping that where developed centuries ago that could be used, that as I recall are not banned.

For another example: Say you had a car that got low gas mileage, but was desirable because despite this it had low running and maintenance costs. If the government (federal, state or local) passes a sufficiently high excise tax on gasoline, the running costs of the car may exceed it's competitors, causing it to lose value: this would not be considered "taking" your car either, since you own the same exact vehicle.

  • Or a better example: a speed limit does not constitute a "taking" of value from a car that can exceed said limit. – sharur Feb 7 '17 at 20:02

Governments generally have the power to compulsorily acquire property, for example, the Australian Constitution give this power to Parliament in under section 51(xxxi):

  1. The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:


(xxxi) the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws;...

As to your question, it would depend on the particular law that enabled the ban and if that constituted acquisition of property. In general, it wouldn't because the property has not been "acquired" by the government - that is, while the owner has lost the right to frack, the government has not gained that right.

For Australia, the state of the law is given by JT INTERNATIONAL SA v COMMONWEALTH OF AUSTRALIA; BRITISH AMERICAN TOBACCO AUSTRALASIA LIMITED & ORS v COMMONWEALTH OF AUSTRALIA [2012] HCA 43. From the summary of the judgement:

The Act imposes restrictions on the colour, shape and finish of retail packaging for tobacco products and restricts the use of trademarks on such packaging. The plaintiffs brought proceedings in the High Court challenging the validity of the Act, arguing that the Commonwealth acquired their intellectual property rights and goodwill otherwise than on just terms.

A majority of the Court held that to engage s 51(xxxi) an acquisition must involve the accrual to some person of a proprietary benefit or interest. Although the Act regulated the plaintiffs' intellectual property rights and imposed controls on the packaging and presentation of tobacco products, it did not confer a proprietary benefit or interest on the Commonwealth or any other person. As a result, neither the Commonwealth nor any other person acquired any property and s 51(xxxi) was not engaged.

As an aside, Phillip Morris Asia Ltd also failed in an arbitration under a treaty between Hong Kong and Australia that would have required Australia to pay compensation for limiting their IP rights. If the treaty would have had that effect was not decided as the matter was deemed outside the protection of the treaty as an abuse of process:

In light of the foregoing discussion, the Tribunal cannot but conclude that the initiation of this arbitration constitutes an abuse of rights, as the corporate restructuring by which the Claimant acquired the Australian subsidiaries occurred at a time when there was a reasonable prospect that the dispute would materialise and as it was carried out for the principal, if not sole, purpose of gaining Treaty protection. Accordingly, the claims raised in this arbitration are inadmissible and the Tribunal is precluded from exercising jurisdiction over this dispute.

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