Colorado Supreme Court Affirms COGCC Role In Fostering Oil and Gas Development
On January 14, 2019, the Colorado Supreme Court issued an opinion in Colorado Oil and Gas Conservation Commission (“COGCC”) v. Martinez, No. 17SC297, clarifying the role of the COGCC in implementing the Colorado Oil and Gas Conservation Act (the “Act”). The Court had granted certiorari to determine whether the COGCC had “misinterpreted” its statutory authority under the Act “as requiring a balance between oil and gas development and public health, safety, and welfare.” The Court’s opinion confirms the common sense result that the COGCC is required “to foster the development of oil and gas resources” while “prevent[ing] and mitigat[ing] significant adverse environmental impacts . . . but only after taking into consideration cost-effectiveness and technical feasibility.”
The Martinez lawsuit began in 2013 when Boulder, Colorado teen Xiuhtezcatl Martinez and a group of teenage Colorado citizens requested that the COGCC halt the issuance of any new drilling permits until studies from the best available science could demonstrate that the drilling did not pose a threat to human health or contribute to climate change. After COGCC denied the request, Martinez and the group appealed the decision in July 2014 to the Denver District Court. In February 2016, the district court affirmed COGCC’s refusal of the request, but on appeal in 2017, the Colorado Court of Appeals held that COGCC’s refusal was improper under the Act because, as that court reasoned, it requires COGCC to make and enforce regulations “in a manner consistent with” the protection of public health and safety—“a condition that must be fulfilled.” The Colorado Supreme Court’s opinion expressly rejects this reading in favor of one that requires the COGCC to balance various policy goals, including the development of oil and gas resources.
While the Court’s opinion in Martinez is welcome news for the oil and gas industry, it is likely that it will not be the last chapter in this story. Legislation to codify the holding of the Colorado Court of Appeals was introduced in the Colorado General Assembly in January 2018. While that measure was postponed indefinitely by the Senate Agriculture, Natural Resources, & Energy Committee in March 2018, similar measures could be introduced in the future, and may find a more receptive audience in Colorado’s newly-elected General Assembly and Governor. Read the Court’s opinion in full here.
With Industry Support, Colorado Extends Setbacks from Schools Amid Continued Fight Over Broader Measures
On December 18, 2018, the Colorado Oil and Gas Conservation Commission (“COGCC”) voted unanimously to increase the setback distance from schools for new oil and gas wells or production facilities. The measure approved by the COGCC maintains Colorado’s existing 1,000-foot setback requirement, but measures the setback distance from newly-defined “school facilities,” which may include any “discrete facility or area . . . that students use commonly,” whether indoor or outdoor. Previously, Colorado had applied the 1,000-foot setback from school buildings.
The COGCC’s approval of the school facility setback measure comes roughly six weeks after Colorado voters rejected Proposition 112 (formerly Initiative 97) at the polls. That measure sought to more broadly increase oil and gas facility setback distances on non-federal lands to 2,500 feet, thereby foreclosing oil and gas development on an estimated 54% of Colorado’s total land surface, including 85% of the non-federal lands in the state. Unlike Proposition 112, the school facility setback measure was supported by industry, including the Colorado Petroleum Council.
While environmental groups also praised the COGCC’s approval of the school facility setback measure, it appears that the larger fight over oil and gas setbacks in Colorado will continue for the foreseeable future. 350 Colorado, a “grassroots network focused on taking action to stop climate change,” has released a petition that it intends to deliver to Governor-elect Jared Polis the day before he takes office. The petition calls for the increase of oil and gas facility setback distances to 2,500 feet and the legislative reform of the COGCC to change its focus away from “fostering” oil and gas development, as well as the suspension of further oil and gas permitting until the COGCC reforms have been achieved. Colorado Rising, the organization that sponsored Proposition 112, has also stated that it “definitely” plans another ballot initiative in 2020. While the COGCC’s approval of the school facility setback measure represents a significant moment of collaboration among the various stakeholders in Colorado, the broader debate over oil and gas facility setback distances in the state remains heated, and the potential consequences remain severe.
Read the final draft school facility setback measure here.
Federal Court Issues Injunction Preventing Issuance of Pacific Offshore Hydraulic Fracturing Permits, Pending ESA and CZMA Consultations
On November 9, 2018, the United States District Court for the Central District of California issued an injunction preventing the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement (collectively, the “Agencies”) from issuing any plans or permits for well stimulation treatments—namely, hydraulic fracturing and acidizing treatments—on the Pacific Outer Continental Shelf. In Environmental Defense Center et al. v. Bureau of Ocean Energy Management et al., plaintiffs the State of California and several environmental non-governmental organizations (“Plaintiffs”) challenged an Environmental Assessment (“EA”) prepared pursuant to the National Environmental Policy Act (“NEPA”) and issued by the Agencies examining the environmental impacts of well stimulation treatments on the Pacific Outer Continental Shelf. The Plaintiffs also alleged that the Agencies failed to complete necessary consultations under the Endangered Species Act (“ESA”) and Coastal Zone Management Act (“CZMA”) in connection with the Agencies’ proposed action. Both Plaintiffs and defendants (which include both the Agencies as well as industry intervenors) filed cross motions for summary judgment.
The opinion issued on November 9 grants in part and denies in part each of the seven motions for summary judgment. Specifically, the court found that (i) the Agencies’ EA complies with NEPA, (ii) the Agencies completed the required ESA consultation with the National Marine Fisheries Service, (iii) the Agencies began, but did not complete, the required ESA consultation with the U.S. Fish and Wildlife Service (“FWS”), and (iv) the Agencies failed to undertake the required CZMA consultation with the California Coastal Commission (“CCC”), the state agency responsible for managing the ocean up to three miles away from land. Due to the failure to complete the consultations with FWS and CCC, the court issued an injunction prohibiting the Agencies from issuing any plans or permits for well stimulation treatments on the Pacific Outer Continental Shelf until these consultations have been completed. Importantly, the opinion makes clear that the Agencies may proceed to issue such plans and permits once these consultations have been completed. While it remains to be seen whether and when the Agencies will complete the required consultations, the opinion acknowledges that relatively few operations are expected to be delayed as a result of the injunction; throughout the course of the proceedings, the Agencies noted that “operators are only rarely expected” to request permits authorizing well stimulation treatments on the Pacific Outer Continental Shelf. Read the court’s opinion in full here.