After a wait of nearly 18 months, the Kansas Supreme Court on Friday issued a much anticipated ruling on a case involving a number of key issued for wind developers. The case, Zimmerman v. Board of County Commissioners of Wabaunsee County, revolves around a dispute between the Board of County Commissioners of Wabaunsee County, Kansas and a group of landowners in Wabaunsee County who have entered into easement agreements to develop large-scale wind energy development systems on the landowners' property. Background In order to develop a wind farm in Wabaunsee County, it is necessary to apply for a Conditional Use Permit ("CUP") from the Wabaunsee County Board of Commissioners. In November of 2002, the Board passed a temporary moratorium on the granting of CUPs for wind development projects in the county. While this moratorium was in place, the Plaintiffs and the Plaintiff Intervenor entered into agreements which they contend severed the wind rights from the ownership of the underlying property and transferred the ownership of those wind rights to the Plaintiff Intervenor. On June 28, 2004, after the wind development agreements had been entered into by the Plaintiffs and Plaintiff Intervenor, the Board amended the county zoning regulations to allow for small wind energy conversion systems ("SWECs," essentially single turbines under 100' in height generating less than 100 kilowatts), but outright prohibiting the placement of commercial wind energy development systems ("CWECs") in the county. This decision killed any ability to develop large scale wind projects in the county, and thus the economic benefit of the agreements that the landowners had entered into had been effectively destroyed. Procedural History Not surprisingly, the Plaintiffs filed suit in the Wabaunsee District Court, asking that the Board's decision be declared void and requesting damages under a number legal theories. Among the arguments made, the Plaintiffs stated the County's actions destroyed the economic value of their wind rights in their own property, and therefore amounted to a taking of their property interest in violation of their Fifth Amendment rights. The Plaintiffs also argued that by allowing small wind projects, but banning utility-scale projects, the County was unjustly burdening out-of-state commerce in violation of the Commerce Clause of the United States. Ultimately, however, the District Court granted a Motion to Dismiss in favor of the Board, and the Plaintiffs and Plaintiff Intervenor appealed to the Kansas Supreme Court. On October 30th, 2009 the Kansas Supreme Court issued a decision in favor of the Board for the majority of the issues presented, with a few notable exceptions. Specifically, the Supreme Court decided to table the issues of whether the Board's amendment violated the Takings Clause or the Commerce Clause of the United States Constitution. These issues remained tabled until October 21, 2011, when the Court issued a ruling on the Takings and Commerce Clause arguments advanced by the Plaintiffs and Plaintiff Intervenors. The Takings Issues The Plaintiffs' essentially raised three legal bases for their contention that the County was unlawfully "taking" legal property interests: (1) the County violated Article 5 of the United States Constitution, which prohibits the taking of private property for public use, without just compensation; (2) the County's action constituted an act of inverse condemnation; and (3) the County's action constituted a violation of 42 U.S.C. § 1983. In its October 21 Order, the Court disposes of all three of these takings arguments in one swoop. Essentially, the Court notes that in order to prevail on a takings claim a party must first establish that a vested interest exists in the property in question. "Vested interest" has been defined by the Court in the past as a right that "is not dependent on any future act, contingency or decision to make it more secure." Here, the Court found that no such vested interests exist, as all of the Plaintiffs' and Plaintiff Intervenors' interests are conditioned upon the Board's discretionary issuance of a CUP. Thus, because there were no vested property interests, there can be no taking under any of the various legal theories advanced by the parties. The Commerce Clause Issues Overview of Dormant Commerce Clause Before describing the decisions, it might first be helpful to provide an overview of Commerce Clause jurisprudence. Article I, §8 of the U.S. Constitution (the "Commerce Clause") grants Congress the power to regulate interstate commerce. The "dormant" Commerce Clause refers to the prohibition, implied in the Commerce Clause, against states passing legislation that discriminates against or excessively burdens interstate commerce. In a Dormant Commerce Clause case, a court is initially concerned with whether the law facially discriminates against out-of-state actors or has the effect of favoring in-state economic interests over out-of-state interests. If the action is facially discriminatory, it will be deemed invalid unless the County can show that it has no other means to advance a legitimate local purpose. If the action is not facially discriminatory, the Court is much more flexible. If the law is not outright or intentionally discriminatory or protectionist, but still has some impact on interstate commerce, the court will apply a balancing test which examines whether the interstate burden outweighs the local benefits. If it does, the law is usually deemed unconstitutional. Remand of Commerce Clause Issues In addressing the Dormant Commerce Clause issues in this case, the Court first notes that, because the zoning regulations prohibit all CWECs in the county regardless of the connection to interstate commerce, there was no facial discrimination. Therefore, the Court must examine whether the burden imposed in interstate commerce is "clearly excessive in relation to the putative local benefits." Specifically, the Court notes that it should consider (1) the nature of the putative local benefits advanced by the County action; (2) the burden placed on interstate commerce by the statute; and (3) whether the burden is "clearly excessive" when weighed against these local putative benefits. Here, the Court noted that because the lower courts dismissed the case without allowing discovery or an evidentiary hearing, there is not enough evidence in the record to conduct a full analysis of the benefits and burdens of the County's actions. Therefore, the Court reversed the District Court's grant of the County's Motion to Dismiss and remands the case back to the District Court for a full analysis of whether the interstate burden outweighs the local benefits. If you have any questions about the impact of this ruling or would like any additional information about renewable project development in Kansas going forward, please feel free to leave a comment below or contact me directly at email@example.com.
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