California Court of Appeal decides Vaquero, an interesting private-delegation case

Banzai! Can surface rights owners control the rights of those who own the mineral rights underneath? In this case, yes.

About two weeks ago (Nov. 19, 2019), the California Court of Appeal decided Vaquero Energy, Inc. v. County of Kern, which has interesting implications for the constitutionality of delegation of power to private parties.

Basically, what if you own the mineral rights to a plot of land but someone else owns the surface rights, and you want an oil and gas permit? If the surface owner agrees with your site plan, you get an expedited 7-day permitting process. But if the surface owner disagrees with your site plan, you get a more expensive 120-day process. This is, in theory, supposed to promote cooperation between surface and mineral rights owners. But what it means is that the surface rights owner can slow you down enormously by denying his consent to your plan—and the surface rights owner can do so for purely self-interested reasons (like getting a lot of money out of you). Is this consistent with Due Process? Is this a forbidden delegation of permitting authority to private parties?

Answering this question requires making sense of some Supreme Court precedent—the classic cases are about a hundred years old, but the law is still good. These cases are Eubank v. Richmond (1912), Thomas Cusack Co. v. City of Chicago (1917), and Washington ex rel. Seattle Title Trust Co. v. Roberge (1926). Fortunately, I wrote an article discussing these issues — The New Private-Regulation Skepticism: Due Process, Non-Delegation, and Antitrust Challenges, published in the Harvard Journal of Law and Public Policy! The court asked for supplemental briefing on this particular issue, and I'm pleased that they found my analysis useful.

The Due Process analysis is at pp. 16-27 of the case (the earlier part of the case concerns an Equal Protection challenge, easily disposed of under the rational basis test). The court mainly upheld the scheme because the surface owners don't have the ability to finally determine whether the oil and gas plans can go forward—all they can do is trigger a governmental process where the government itself will decide. That makes the scheme look more like Fuentes v. Shevin, Gibson v. Berryhill, and New Motor Vehicle Board of California v. Orrin W. Fox Co.—I discuss all three in my article as examples of the "mandatory-discretionary distinction", and the court discusses New Motor Vehicle Board.

I'm not taking any position here on whether the court got it right, but these sorts of delegations of power to private parties (for instance, in zoning and similar contexts) are fairly common, and courts need to sort out Due Process challenges on a regular basis. (Often, courts confuse challenges to private regulation based on the non-delegation doctrine and based on the Due Process Clause—the non-delegation doctrine didn't apply here because this is a state law case; the non-delegation doctrine applies only to delegations by Congress, while the Due Process Clause applies to all levels of government.) Glad to see someone's thinking about these things!