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Federal Court Issues Injunction Preventing Issuance of Pacific Offshore Hydraulic Fracturing Permits, Pending ESA and CZMA Consultations 11-13-2018

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.

Both Proposition 112 and Amendment 76 Rejected by Colorado Voters 11-07-2018

On November 6, 2018, Colorado voters rejected both Proposition 112 and Amendment 76, sparing both the oil and gas industry and the state economy more broadly from uncertain and potentially disastrous consequences. Proposition 112 (formerly Initiative 97) sought to increase oil and gas facility setback distances on non-federal lands to 2,500 feet, which would have foreclosed oil and gas development on an estimated 54% of Colorado’s total land surface, including 85% of the non-federal lands in the state. Amendment 74 (formerly Initiative 108), which was widely viewed as a response by the oil and gas industry to Proposition 112, would have required that property owners be compensated for any reduction in property value due to any new governmental law or regulation.

The final voting margins are not yet available. Colorado counties have until December 3 to compile their returns (including any ballots received by mail and any provisional ballots) and submit them to the Colorado Secretary of State. Both Proposition 112 and Amendment 76 will be officially rejected once the Colorado Secretary of State issues the final certification of the election results, an action likely to follow by mid-December.

The voters of Colorado have decided that the status quo will prevail, for now. For oil and gas operators in the state, that means that Colorado’s current setback measure, which requires setback distances of 500 feet from “Residential Building Units” such as single-family residential homes, and 1,000 feet from “High Occupancy Building Units” such as schools, hospitals, and nursing homes, will continue to apply without change.

The broader question moving forward is whether the voters’ rejection of Proposition 112 will be revisited by a future measure, leaving the Colorado oil and gas industry facing some degree of continued uncertainty even after voters’ sound rejection of Proposition 112. In certain jurisdictions, supporters of ballot initiatives seeking to place limits on oil and gas development have continued to push rejected measures in successive election cycles, even in the face of repeated failures. For example, voters going to the polls in Youngstown, Ohio on November 6, 2018 voted on a proposed ban on hydraulic fracturing and related oil and gas activities for the eighth time in five years, having rejected the prior seven attempts. It remains to be seen whether supporters of Proposition 112 in Colorado will pursue a similar approach in future elections and force Colorado voters to regularly reaffirm the results of the 2018 election going forward. Similarly, groups opposed to oil and gas activities in other jurisdictions may copy Proposition 112’s “setback as a sword” approach in an effort to disguise future efforts to all but ban oil and gas activities under the pretext of a “setback” measure that may appear more palatable to voters.

Colorado Secretary of State Certifies Initiatives 97 and 108 for November Ballot 08-30-2018

On August 29, 2018, the Colorado Secretary of State (the “Secretary”) certified that Initiative 97, which would increase oil and gas development setback distances to 2,500 feet from “occupied structures” and “vulnerable areas,” had gathered a sufficient number of valid signatures to appear on the ballot this November.  The certification of Initiative 97 comes the day after the Secretary similarly announced that industry-backed Initiative 108 will also appear on the November ballot.  A direct response to Initiative 97, Initiative 108 would provide property owners with just compensation when a state or local government takes action diminishing the “fair market value” of their properties.  Initiative 108 appears designed to provide a compensation mechanism for oil and gas interests on private property that would no longer be exploitable because of setback distances such as those made effective and enforced as a result of Initiative 97, among other things.

The certification of both Initiatives 97 and 108 sets the stage for a showdown on the November ballot which is sure to be preceded by 9 plus weeks of intense campaigning given the significant effects these measures would have on Colorado’s oil and gas industry as well as the state economy more broadly.  For example the Colorado Oil and Gas Conservation Commission has estimated that Initiative 97 would foreclose oil and gas development on 54% of Colorado’s total land surface, including 85% of the non-federal lands in the state.  Although both of Colorado’s gubernatorial candidates—Democrat Jared Polis and Republican Walker Stapleton—have announced publicly that they do not support Initiative 97, the fates of both Initiatives 97 and 108 will lie solely with the voters on November 6.

Read more about the potential consequences of these ballot initiatives on the Colorado oil and gas industry on the Vinson & Elkins Environmental Blog here.

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