Residential Zoning

Energy Tycoon and Michigan Town Embroiled In Land Use Litigation

Fairly or not, some in Seattle still blame, at least in part, billionaire Aubrey McClendon for helping to move their NBA Supersonics to Oklahoma City, Mr. McClendon’s hometown and the locale of his Chesapeake Energy Corporation. Well, the angry in Seattle may have kindred spirit with a vocal group in the small municipality of Saugatuck Township, Michigan.

The story goes a little something like this. Some ten years ago, Mr. McClendon — the CEO of Chesapeake Energy, which he co-founded in 1989 with a $50,000 initial investment — was tipping the whitecaps of Lake Michigan on his jet ski when he spotted what he described as one of the most beautiful pieces of land he’d ever seen: 400 acres of undeveloped eden in Saugatuck Township, Michigan. For those familiar with the southeastern shores of Lake Michigan, with its duned majesty, water-framed sunsets, and decidedly provincial feel, you’ll know that Mr. McClendon is as accurate in his impression as he is effective in his business post. Chesapeake Energy has documented 20 consecutive years of production growth and, in 2005, Forbes magazine named Mr. McClendon one of its top performing executives.

That moment of unadulterated awe caused Mr. McClendon to envision development on the scale of luxury homes and condominiums, a hotel (or an “inn,” depending on which side you favor), a marina, and a nine-hole golf course. With that in mind, Mr. McClendon bought a half-interest in those 400 acres in 2004; in 2006, he was about to finalize his purchase of the entire property when the five-member Saugatuck Township Board voted unanimously to rezone, lowering the density of permissible development. According to the Board, the rezoning was properly conducted and entirely consistent with a land-use plan adopted the year before.

Despite the rezoning, Mr. McClendon bought his full interest in the property for $39.5 million, which is less than I would have guessed. It seems Mr. McClendon did so with the impression that he could work with the town fathers to find a mutually agreeable land use result, thereby avoiding litigation.

Enter the almost inevitable opposition. A non-profit group calling itself the Saugatuck Dunes Alliance has voiced concern that the proposed development would mar the decliate ecology of a sand dune system as well as harm local business interests. With that kind of organization, Mr. McClendon and the Town could not reach an amicable medium.

In March of this year, Mr. McClendon filed a federal lawsuit seeking to overturn the 2006 rezoning of the property. According to news outlets, the lawsuit claims the Town illegality singled out his property.

In May, residents voted by a razor-thin margin to raise taxes to pay for legal bills, which have been reported to exceed $250,000. That’s a significant amount for any entity, especially considering the Town’s annual budget hovers close to $700,000. In any event, and adding to the histrionics of the whole matter, the ballot initiative is currently subject to legal challenge.

See? Land use is the universal language. We’ll watch this high-profile matter with interest.

Mike Thelen is a lawyer in Womble Carlyle’s Real Estate Litigation practice group. He regularly represents a wide variety of clients in land use and land development issues, from local governments to businesses, in both state and federal venues throughout North Carolina.

Categories: Residential Zoning

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