When we hear “Pennsylvania” and “coal,” our ears perk up and we naturally think of this case and regulatory takings.

But the Pennsylvania Supreme Court (Western District)’s opinion in DPBS Coals, Inc. v. Penn. Dep’t of Transportation, No. 41 WAP 2019 (Jan. 20, 2021) isn’t a regulatory takings case, but dealt with more traditional inverse condemnation. We’ve been meaning to post about the case for some time, but in the interim a colleague has written it up on his blog, so our own post shall be short. Check it out: “Coal Companies in Pennsylvania Fail to Make Out Inverse Condemnation Claim” by Matt Hull. (PS – don’t feel bad if you are sometimes a procrastinator; delay can be rewarding and could save you some work.)

Matt’s post summarized the facts:

The companies held the mineral rights to a large tract in southwestern Pennsylvania. A portion of the tract had no road frontage, but the companies may have been able to develop private rights-of-way through adjoining tracts that would have allowed mining on that portion of the tract. The coal companies asserted that the paths of these rights-of-way were obstructed when the Pennsylvania DOT took a strip of land through the adjoining parcel for the construction of a highway.

The coal companies therefore filed an inverse condemnation suit. The trial court ultimately ruled in favor of the Pennsylvania DOT, finding that, among other things, the coal companies had not established a reasonable likelihood that they would be able to secure the environmental permits necessary to conduct mining on the parcel at issue. The coal companies appealed, arguing that the likelihood of obtaining a permit is irrelevant to the determination of whether a taking had occurred. Instead, they argued, that factor should only be considered by the commissioners who assigned a value to the taking once it was determined that the government had interfered with the companies’ property rights. The intermediate appellate court agreed with the coal companies and ordered the trial court to reinstate the case. The DOT then appealed to the state supreme court.

The Pennsylvania Supreme Court concluded there was not a reasonable likelihood that the property could be used as a coal extraction site, because the state environmental agency was unlikely to grant a permit for such use. See slip op. at 30 (“The Coal Companies are not presently using their coal estate, and their inability to establish a likelihood of securing a permit implicated the legal question of whether a taking occurred, not damages for a de facto taking.”). The court’s big problem was that the coal companies had not shown they had any kind of property interest. Yes, they possessed a coal estate, but could they do anything with that? Not really:

Highway 219 does not block the Coal Companies from enjoying their coal estate, and the Coal Companies have failed to meet their heavy burden to establish that a de facto taking has occurred. The Commonwealth Court identified the de facto taking test as having three elements. PBS Coals, 206 A.3d at 1219. The first is that the condemnor has the power to condemn, which is not at issue here. The second element is whether the act substantially deprived the owner of the beneficial use and enjoyment of the property. The third requires a finding of causation, namely that the deprivation is the immediate, necessary and unavoidable consequence of the governmental action. The Commonwealth Court’s analysis essentially skipped the second element by concluding “it is beyond question that the Coal Companies were deprived of the use of their property as a direct and immediate consequence of PennDOT’s actions.” PBS Coals, 206 A.3d at 1223.

We disagree, as the Coal Companies failed to establish the second element of the takings test. They presented insufficient evidence to demonstrate that they possessed any “beneficial use and enjoyment of the property” (the coal estate). The Coal Companies cannot use and enjoy their coal estate because there is no mining operation on the Parcel 55 property, and they did not meet their heavy evidentiary burden to establish any likelihood that they will be able to obtain a surface mining permit to begin a mining operation to extract the coal.

Slip op. at 32-33.

Justice Mundy dissented, and would have concluded that there was more than enough evidence that the coal companies were likely to obtain a permit. Or, more accurately, that “‘[s]ubstantial evidence of record’ does not support the trial court’s finding that PBS Coals, Inc. and Penn Pocahontas Coal Co. (Coal Companies) were unlikely to obtain a mining permit from the Pennsylvania Department of Environmental Protection [.]” Dissent at 2.

Matt gives us one additional takeaway in his blog post:

While the ruling was undoubtedly bad for the coal companies, the court did offer them a potential silver lining. The coal companies claimed that, if the government’s action fell short of a taking, it still damaged their mineral estate by landlocking it. Because the claim had not been considered by the lower courts, the supreme court remanded this claim to the intermediate appellate court with instructions to remand the case to the trial court for consideration of the companies’ damage claim.

The case serves as a reminder that speculative and contingent claims of future use, whether they be future commercial development or future mineral extraction, are not permitted in eminent domain cases.

Check out both the opinion, and Matt’s post.

PBS Coals, Inc. v. Penn. Dep’t of Transportation, No. 41 WAP 2019 (Pa. W.D. Jan. 20, 2021)