Thursday, March 7, 2019

Shale Law in the Spotlight – Overview of Recent Oil and Gas Regulatory and Legal Developments in Colorado


Written by Chloe Marie – Research Specialist

Last November, national attention was focused on Colorado as voters considered, and ultimately rejected Proposition 112, which would have imposed rigorous set-back requirements upon oil and gas operations within the state. Since that time, while not getting as much attention as Proposition 112, a number of legal and regulatory developments have occurred within Colorado. These developments have attempted to address, or have been initiated due to concerns over, the impacts of oil and gas activities in the state. This article will provide a brief overview of some of these recent developments within Colorado. This article will not address Senate Bill 19-181, which was introduced into the Colorado Senate on March 1, 2019, and would make extensive changes to Colorado’s oil and gas regulations. If this bill advances through the legislative process, we will address its provisions in a future Shale Law in the Spotlight article.

The Colorado Supreme Court declines to impose further rulemaking responsibilities upon the Colorado Oil & Gas Conservation Commission (COGCC)

Colorado Oil & Gas Conservation Commission v. Martinez

In November 2013, some youth activists urged the Colorado Oil and Gas Conservation Commission (COGC) to promulgate a rule aimed at suspending the issuance of permits for activities using hydraulic fracturing. The activists requested that the Commission “not issue any permits for the drilling of a well for oil and gas unless the best available science demonstrates, and an independent, third party organization confirms, that drilling can occur in a manner that does not cumulatively, with other actions, impair Colorado’s atmosphere, water, wildlife, and land resources, does not adversely impact human health and does not contribute to climate change.”

After analysis, however, in May 2014, the Commission denied the request to engage in rulemaking, holding that it did not have the jurisdiction to enact some of the proposed rule, as this would mean that the Commission would have to “readjust the balance” between the development of oil and gas resources and protection of Colorado public health, safety, and welfare. According to the Commission, conducting such a rebalance would conflict with the language of the Colorado Oil and Gas Conservation Act. The Commission also noted that most of the concerns behind this proposed rulemaking are currently being addressed in cooperation with the Colorado Department of Health and Environment.

Petitioners challenged the Commission’s decision before the Denver District Court; however, the court upheld the Commission’s decision. The youth activists then appealed the District Court’s judgment to the Colorado Court of Appeals.

In a published opinion issued on March 23, 2017, the Court of Appeals agreed with the activists, holding that “the language of the [Oil and Gas Conservation] Act does not create a balancing test weighing safety and public health interests against development of oil and gas resources, but rather, the Act indicates that fostering balanced, nonwasteful development is in the public interest when that development is completed subject to the protection of public health, safety, and welfare, including protection of the environment and wildlife resources.” Therefore, the Court of Appeals reversed the lower court decision and remanded the case for further proceedings.

The Commission filed a Petition for Writ of Certiorari with the Colorado Supreme Court on May 18, 2017, seeking review of the Court of Appeal’s decision. On January 29, 2018, the Colorado Supreme Court agreed to consider whether the Commission properly interpreted the Act language as a ground for denying petitioners’ proposed rulemaking.

On January 14, 2019, the Colorado Supreme Court granted the Commission’s Petition for Writ of Certiorari and quashed the decision of the Colorado Court of Appeals agreeing that the Commission properly refused to initiate petitioners’ proposed rulemaking. In its opinion, the Supreme Court emphasized that the rulemaking authority of the Commission did not encompass a right to condition all new oil and gas development on a finding of no cumulative adverse impacts to public health and the environment. The court explained that “[r]ather, the [Act’s] provisions make clear that the Commission is required (1) to foster the development of oil and gas resources, protecting and enforcing the rights of owners and producers, and (2) in doing so, to prevent and mitigate significant adverse environmental impacts to the extent necessary to protect public health, safety, and welfare, but only after taking into consideration cost-effectiveness and technical feasibility.”

Quickly thereafter, the youth activists filed a motion on January 24, 2019, to vacate the Supreme Court’s order. On January 28, 2019, however, the Colorado Supreme Court denied their motion.

The town of Superior, Colorado, approves ordinance prohibiting any future oil and gas development project for a period of 6 months

On January 14, 2019, the town of Superior, Colorado, passed an ordinance placing a 6-month moratorium on future oil and gas exploration and production projects in the vicinity of the town. This ordinance followed after Highlands Natural Resources Plc – made a decision in November 2018 to withdraw all of its recent spacing and permit applications in relation to the company’s West Denver project for the drilling of wells under the Rocky Flats and Standley Lake.

The Rocky Flats is a former nuclear weapons production facility shut down in the 1980s due to concerns over radioactive contamination. The authorities declared the Rocky Flats to be a Superfund Cleanup Site in 1989 and proceeded to convert portions of the site into a National Wildlife Refuge.

In light of this proposal to drill under the Rocky Flats, residents of Superior expressed concerns over the potential for contamination of surrounding areas via plutonium, which has been previously buried within the former plant site. In addition, residents worried that such development would negatively impact nearby residential districts and impair the water quality of the Standley Lake, which represents a significant drinking water supply for Superior and surrounding towns.

As a result of these concerns, the Superior Board of Trustees considered whether local land use regulations relating to oil and gas activities were sufficient to protect the public health, safety and welfare of the town’s residents. In this regard, the Board of Trustees enacted an ordinance, the purpose of which was impose a moratorium to “maintain the status quo and to provide time for the Town Manager, Town Attorney and staff to study applicable law and regulations, a permitting procedure, the appropriate zoning and land use regulation for such uses, and to recommend adoption of regulatory standards and conditions to be imposed on such operations.”

The town of Erie, Colorado, extends existing moratorium on oil and gas development projects for a 6-month period, waiting for potential new oil and gas legislation

On January 22, 2019, the town of Erie, Colorado, approved an emergency ordinance that extended an existing moratorium on oil and gas development projects that was set to expire on February 20, 2019. This new moratorium will be in effect until August 13, 2019. The Erie Board of Trustees initially established the moratorium in July 2018 pending an investigation of regulatory practices associated with oil and gas developments used in other cities and towns across the state. The Board of Trustees has explained that the extension of the moratorium will be beneficial as the 2019 session of the Colorado General Assembly is expected to consider new oil and gas legislation “and that legislation may broaden municipal authority over oil and gas development.”

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This material is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.

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