Scott Turner received his JD from the University of Colorado School of Law in 2008. Since joining the firm in 2010, Mr. Turner’s practice focuses on mineral title examination, oil and gas transactional work, and business and real estate services.

Colorado Supreme Court Rules in Favor of Condominium Developers in Construction Defects Cases

On June 5, 2017, the Colorado Supreme Court issued a decision in Vallagio at Inverness Residential Condo. Ass’n v. Metro Homes, Inc., 2017 CO 69, June 5, 2017 (“Vallagio”) that will likely benefit condominium developers in Colorado by helping to alleviate litigation costs related to construction defects claims, thereby incentivizing new construction of condominiums along the Front Range.

For the past several years, the Colorado General Assembly has ardently debated construction defects reform. Senate Bill 156, introduced earlier this year, was intended to make arbitration mandatory for construction defects claims, but failed to pass. House Bill 1279 requiring the consent of the majority of condominium unit owners to bring a claim, as opposed to just the HOA board, passed this session. Developers supported both of these bills as a means to decrease the amount of construction defects claims that would be brought, thereby spurring more condominium projects in Colorado.

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Earthquakes: State Regulation of O&G Injection Wells Is OK Oklahoma Judge Dismisses Federal Lawsuit on Jurisdictional Grounds

On Tuesday, April 4, 2017, Judge Stephen P. Friot, United States District Court for the Western District of Oklahoma, dismissed a nationally significant lawsuit brought over earthquakes linked to oil and gas wastewater injection wells on jurisdictional grounds.  See Sierra Club v. Chesapeake Operating, LLC, et al., No. CIV-16-134-F (W.D. Okla., Order dated 4/4/2017) (unpublished), The court deferred to the expertise of the Oklahoma Corporation Commission (“OCC”), the state body governing wastewater injection wells in Oklahoma. Citing the actions and capability of the OCC, Friot concluded:

Every night, more than a million Oklahomans go to bed with reason to wonder whether they will be awakened by the muffled boom which precedes, by an instant, the shaking of the ground under their homes. Responding to earthquake activity is serious business, requiring serious regulatory action. The record in this case plainly demonstrates that the Oklahoma Corporation Commission has responded energetically to that challenge. Of equal importance, it is plain that the Oklahoma Corporate Commission has brought to bear a level of technical expertise that this court could not hope to match.  The challenge of determining what it will take to meaningfully reduce seismic activity in and near the producing areas of Oklahoma is not an exact science, but it is no longer one of the black arts.  This court is ill-equipped to outperform the Oklahoma Corporation Commission in advancing that science and putting the growing body of technical knowledge to work in the service of rational regulation.

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The Uncertain Future of the Clean Power Plan under the Trump Administration

Since the Obama Administration announced its implementation in August of 2015, the Clean Power Plan (“CPP”) has managed to survive despite the many challenges brought against it. The Environmental Protection Agency (the “EPA”) rule was the centerpiece of the Obama Administration’s climate change plan and seeks to reduce carbon pollution from power plants by 32% from baseline 2005 levels by 2030 by setting reduction goals for each state. However, the CPP has encountered many legal roadblocks, and, with the election of Donald Trump and a Republican Congress, its future appears to be in doubt.

On February 9, 2016, the United States Supreme Court ordered the Obama Administration to stay any efforts to implement the CPP until the completion of all legal challenges to the same in a 5-4 ruling. While the Court stay of the CPP is not final, it placed the Obama Administration’s environmental agenda in peril. However, the death of Justice Scalia in February appeared to put the CPP in a much more stable position. The sitting panel of the United States Court of Appeals for the District of Columbia Circuit, which will decide the challenge, is composed of a majority of judges appointed by Democratic Presidents that would likely uphold the regulations. A majority of the Supreme Court would then be needed to overturn the Supreme Court’s decision. Prior to the election, that seemed unlikely, as the Court was deadlocked at 4-4. Oral arguments in case against the CPP were heard in the D.C. District Court on September 27, 2016, but no final ruling has been issued.

With the recent election of Mr. Trump to the presidency, however, the CPP will likely be rendered completely ineffective. Mr. Trump has stated that he believes that climate change is a hoax, and, in a May 2016 speech to the North Dakota Petroleum Council, he said that he would “rescind” the CPP in his first 100 days in office. Further, he has appointed Myron Ebell, the Director of Global Warming and International Policy at the Competitive Enterprise Institute, as the head of his EPA transition efforts. Mr. Ebell is a well-known skeptic of climate change and is a vocal opponent of the CPP.

In order to limit or block the CPP, the Trump Administration has several options:

• As a far-reaching option, the Trump Administration, working with the Republican-controlled Congress, could author and pass a bill amending the Clean Air Act that would reduce or eliminate the power of the EPA to regulate carbon emissions. This would effectively kill the CPP. Such a bill would be subject to a Democratic filibuster in the Senate; however, Senate Republicans have the constitutional option of removing or substantially limiting the filibuster. In the alternative, the Republican Congress may attempt to attach a rule reducing the regulation of carbon emissions to a more popular bill as a compromise with the Democrats to avoid a battle over the filibuster.

• If the D.C. District Court does not issue its decision before Mr. Trump’s inauguration, the Trump Administration’s newly-appointed Attorney General could move for a “voluntary remand” as discussed in SKF USA, Inc. v. United States, 254 F.3d 1022 (Fed Cir. 2001), whereby the agency, in this case the EPA, can ask that the court remand the action to the agency to conduct additional proceedings in the underlying case. The Trump Administration then could modify the CPP at the agency level to weaken or remove its more stringent regulatory requirements.

• If the D.C. District Court does uphold the CPP prior to January 20, 2017, the Trump Administration could require the EPA to re-write the CPP. The EPA would then need to follow the full necessary rulemaking procedures, including notice, drafts of the rule, and public comment on the same, which would typically take at least 12 to 15 months.

• The Trump Administration, through the EPA, could also decline to strictly enforce the CPP regulations and instead give states leeway to create very weak implementation plans.

If the Trump Administration is successful in weakening or overturning the CPP, various states, such as Colorado and California, will likely move ahead with their state-specific plans, while other states, such as Texas and West Virginia, may abandon their plans entirely. Moreover, economic factors such as the low price of natural gas and the continuing growth and efficiency of solar and wind energy will likely continue the decline in the use of coal-fed power plants. Regardless, the elimination of the CPP will slow the de-carbonization of the energy sector, and the Trump Administration’s actions on the CPP will likely be indicative of the coming political battles over energy production during the next four years.

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Revisiting Proposed Initiatives 75 and 78 and Amendment 71

On August 29, 2016, Colorado Secretary of State Wayne Williams found that the proponents of Proposed Initiative 75 (Local Government Control of Oil and Gas Development) and Proposed Initiative 78 (Mandatory Setback from Oil and Gas Development) did not collect the requisite number of sufficient signatures to make the November ballot. Mr. Williams also provided a signature petition to Attorney General Cynthia Coffman after identifying a section that included potentially forged signature lines for investigation. While the defeat of Proposed Initiatives 75 and 78 was seen by many as the end of the fight between environmental groups and the oil and gas industry for the time being, the battle has continued in new arenas.

Undaunted, the representatives for environmental groups behind the proposed initiatives, Yes for Health and Safety Over Fracking, stated their intent to challenge the ruling. The proponents of the measure have thirty days from August 29, 2016 to appeal the decision to the Denver District Court by filing a protest under C.R.S. § 1-40-118(1) and (2). Any protest is limited to either contesting the verification process, including defects in the Secretary of State’s methodology, or fraud, abuse, or mistake in the petition process. If the protest is successful, and a defect in the Secretary of State’s methodology is discovered, all of the signatures will need to be counted and verified by hand. Should a line-by-line review become necessary, the Secretary of State’s Office will be under added scrutiny following controversy earlier this year surrounding the petition verification process for the Republican Senate primary ballot. As of today, there have been no reported protests filed, but some expect a challenge to be forthcoming prior to Thursday’s deadline.

In the meantime, the oil and gas industry and environmental groups have shifted their focus to Amendment 71, which would make amending the Colorado Constitution more difficult. Specifically, it would require at least 2% of the total certified ballot petition signatures come from each of the state’s 35 senate districts, and would require a 55% majority instead of the current 50% required. (For more information on Amendment 71, formerly known as Initiative 96, see the 8/31/2016 blog post).

Under Colorado law as it stands today, petitioning for a ballot initiative can be and often is limited to populous cities located on the front range, such as Denver and Boulder. Last week, the industry group Protect Colorado released an report analyzing the source of the signatures submitted for Proposed Initiative 78 (Mandatory Setback from Oil and Gas Development), where it was revealed that of the 77,109 signatures validated by the Secretary of State, approximately 70% were obtained from Denver, Larimer, and Boulder Counties. Boulder County alone accounted for nearly 25% of the signatures submitted. To the contrary, Weld County, which produces much of the state’s oil, and Garfield County, which produces much of the state’s natural gas, were greatly underrepresented in the petitions.

Colorado oil and gas industry groups support Amendment 71 primarily to limit the recurring battles, such as those in 2014 and 2016, over ballot initiatives concerning oil and gas development in Colorado, and also to providing a voice for Colorado voters in more rural areas who may not support more oil and gas initiatives. “Amending the state constitution should not be left solely in the hands of a few counties," Karen Crummy, communications director for Protect Colorado said. “The entire state should have a say on what does or does not make the ballot. Under Amendment 71, all Colorado voters would have a voice.” Interestingly enough, the restrictions set forth in Amendment 71 have made for some strange bedfellows, as it has been endorsed by a wide variety of organizations, from pork producers to marijuana advocacy groups.

Unsurprisingly, grassroots environmental organizers are opposed to Amendment 71, as they believe it would effectively prevent them from qualifying newer oil and gas initiatives for the ballot. They argue the cost of gathering signatures in all 35 districts will prevent progressive measures from reaching the ballot, and will extend the control of politicians and special interest groups, such as the oil and gas industry. Through Amendment 71 and the potential for protest of the petitions underlying Proposed Initiatives 75 and 78, the battle over oil and gas development in Colorado continues.

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Department of Transportation Proposes Rules Expanding Safety Regulations for Gas Gathering and Transmission Lines

The recent shale boom has greatly increased the amount of natural gas produced and transported across the country’s network of pipelines in recent years. Unfortunately, the increase in production has resulted in several significant environmental and safety incidents, including a widely reported 2010 gas pipeline explosion in San Bruno, California, that killed 8 people and destroyed more than 100 homes. As a result, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”), an agency of the Department of Transportation (“DOT”) established in 2004 tasked with regulating gas gathering and transmission lines, issued a major and controversial Notice of Proposed Rulemaking (hereinafter, the “Proposal”) on March 17, 2016, which would revise the safety and monitoring standards pertaining to the regulation of onshore natural gas pipelines.

The stated intent of the Proposal is to clarify and broaden the scope of safety regulations, including the implementation of a standardized Integrity Management (“IM”) regulatory structure that governs risk-based integrity assessment, repair, testing, and validation of gas gathering and transmission lines. The 549-page Proposal addresses congressional mandates set forth in the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 and six National Transportation Safety Board recommendations, and contains major and minor changes that are intended to assert the PHMSA’s control over the design, implementation, operation, maintenance, and repair of the pipelines. The PHMSA believes that, in addition to improved public safety, the Proposal will significantly reduce methane and carbon dioxide gas emissions by lowering the number of environmental incidents that have occurred with the increases in production.

However, these benefits will come at a high cost to the industry. Experts expect compliance with these changes to cost the industry more than $40 million dollars a year due to high costs stemming from the age and lack of existing information on many miles of pipelines constructed prior to 1970 and the increased regulation of previously exempt pipelines, additional natural gas gathering pipelines, and pipelines located in moderately populated areas. Further, the Proposal expands the PHMSA definition of a “gathering line”, which will subject many previously unregulated lines to increased testing and monitoring. Industry analysts are also concerned with potential service disruptions related to the implementation of these new regulations.

Comments may be submitted within 60 days after the Proposal is published in the Federal Register as a Notice of Proposed Rulemaking. Due to the number of extensive changes to the current regulatory structure, the Proposal is likely to generate many comments from the industry, environmental interest groups, state regulatory authorities, and safety advocates. As a result, the Proposal could change greatly before it is finalized.

Some of the key components of the Proposal are:

• Increased IM requirements will be required for more categories of pipelines, including many that were previously exempt

• Additional reporting of incidents and unsafe conditions, pressure testing, and new design requirements for previously exempt facilities, including those built prior to 1970

• Removal of reporting exemptions for gas gathering lines

• Increased IM testing, inspection, monitoring and repair criteria for pipelines in densely-populated areas, defined as High Consequence Areas (“HCA”)

• Creation of Moderate Consequence Areas (“MCA”), which will be subsets of non-HCA pipeline locations, defined as an area containing five or more buildings “intended for human occupancy” and certain highway and street rights-of-way, and the required assessment, periodic assessment, and remediation of discovered defects of the same (Note that MCAs will be less heavily regulated than HCAs)

• Increased requirements for collecting, validating, and integrating pipeline data, including the monitoring and recording of the physical and operational characteristics of pipelines where records are currently not available

• Disaster inspections that will require the operator to inspect all pipelines that may have been adversely affected to detect any damages in the event of a natural disaster, such as a hurricane, flood, earthquake, landslide, or other adverse natural occurrence

The Proposal is available as written on the PMHSA website here, and has been provided to the Federal Register for publication. Please contact any of our attorneys at Welborn Sullivan Meck and Tooley, P.C. if you have questions or if you need assistance filing a comment on the Proposal upon its publication in the Federal Register.

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Upon the Death of Justice Scalia, the Clean Power Plan Gains New Life

The Obama Administration, through the Environmental Protection Agency (“EPA”), announced the implementation of the Clean Power Plan (“CPP”) in August of 2015. The CPP has the stated purpose of “establishing guidelines for states to follow in developing plans to reduce greenhouse gas emissions from fossil fuel-fired electric generating units,” or, in layman’s terms, to cut carbon emissions from power plants. At that time, fifteen coal-reliant states filed for an emergency stay of the CPP with the U.S. Court of Appeals for the District of Columbia Circuit. The court dismissed the petition on September 9, 2015, stating that it was untimely because the final regulation had not yet been properly published. On January 21, 2016, the D. C. Circuit Court denied the requested stay on its merits. On January 26, 2016, officials of twenty-nine states appealed to the U.S. Supreme Court, requesting a stay pending the resolution of litigation regarding the regulation. The appellants argued that the CPP provided the EPA with too much power, which would result in the EPA pushing for the use of wind and solar at the expense of older energy-generating plants that burn coal or oil.

In a 5-4 ruling on February 9, 2016, the Supreme Court ordered the Obama Administration to stay any efforts to implement the CPP until the completion of all legal challenges to the same. This stay will remain in place while courts consider more than 30 lawsuits pertinent to the CPP. While the Supreme Court stay of the CPP is not final, it placed the Obama administration’s environmental agenda in peril. Following the ruling, the White House expressed its disappointment as follows:

We disagree with the Supreme Court's decision to stay the Clean Power Plan while litigation proceeds. The Clean Power Plan is based on a strong legal and technical foundation, gives states the time and flexibility they need to develop tailored, cost-effective plans to reduce their emissions, and will deliver better air quality, improved public health, clean energy investment and jobs across the country, and major progress in our efforts to confront the risks posed by climate change.

Even if the rule is eventually upheld, the stay will adversely affect compliance timelines set forth for states and utilities. The CPP requires states to submit implementation plans as early as this year (with possible extensions to 2018) in order to reduce greenhouse gas emissions from existing power plants by 2022. This would result in carbon emissions reductions of 32 percent from 2005 levels by 2030.

The EPA enacted the CPP under a section of the Clean Air Act that has been rarely used since it was passed in 1970. Justice Antonin Scalia, writing for the majority, noted that “[w]hen an agency claims to discover in a long-extant statute an unheralded power to regulate a significant portion of the American economy, we typically greet its announcement with a measure of skepticism.” The stay indicated that the conservative majority of the Court foresaw a reasonably high likelihood that the challengers to the CPP would probably win their case, and that the denial of the stay would result in irreparable voluntarily harm.

However, the recent death of Justice Scalia puts the CPP in a much more stable position than it would have been otherwise. The sitting panel of the D.C. District Court, which will decide the challenge, is composed of a majority of judges appointed by Democratic Presidents that would likely uphold the regulations. A majority of the Supreme Court would then be needed to overturn the D.C. Circuit Court’s decision. This seems unlikely, as the Court as it stands now is deadlocked at 4-4. If the Obama Administration is able to fill the vacancy on the Court or if a Democratic successor to President Obama is elected, the Court would likely uphold the CPP by a 5-4 vote. On March 3, 2016, Chief Justice John Roberts refused a similar request by 20 states to stay an EPA regulation limiting mercury and other toxins from power plants as it undergoes a lower court challenge, a move that some pundits claim evidences a shift of power on the Court.

In any regard, the EPA plans on pushing forward with the implementation of the CPP. At a recent conference in Houston, EPA Administrator Gina McCarthy expressed confidence that the CPP would survive these on-going legal challenges, and she pledged that the EPA would, in the meantime, continue to help states that wanted to continue to implement the CPP by choice. In her words, “[t]he stay doesn’t preclude the EPA from continuing to make progress on climate change. Are we going to respect the decision of the Supreme Court? You bet we are. But that doesn’t mean we won’t continue to support any state that voluntarily wants to move forward.”

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1796 Hits

Early State Challenges to the Clean Power Plan Fall Short of Stay

On August 3, 2015, the Obama Administration through the Environmental Protection Agency (“EPA”) announced the implementation of the Clean Power Plan (“CPP”) which has the stated purpose of “establishing guidelines for states to follow in developing plans to reduce greenhouse gas emissions from fossil fuel-fired electric generating units,” or, in layman’s terms, to cut carbon emissions from power plants. The Final Rule addresses both new and existing power plants. Through the CPP, the EPA has set forth (1) carbon dioxide performance rates for fossil fuel-fired electric utility steam generating units and stationary combustion turbines; (2) state-specific carbon dioxide goals based on past carbon dioxide performance rates; and (3) guidelines for the development and implementation of state or multi-state plans that establish standards and other measures to implement these performance rates. http://www2.epa.gov/cleanpowerplan

The ultimate goal of the CPP is to reduce carbon pollution from power plants by 32% from baseline 2005 levels by 2030, and sets reduction goals for each state. In determining these reduction goals, the EPA considered each state’s current carbon dioxide emissions and fossil fuel generations. Individual state plans are due in June 2017 and multi-state plans are due in June 2018. States must begin complying with their plans by 2022, with reductions phased through a “glide path” to 2030. For western state targets see 8/5/15 post http://goo.gl/2desV2

In issuing the rule, the Obama Administration cited environmental and health effects of carbon dioxide, a primary greenhouse gas. According to the EPA, electric power facilities accounted for almost a third of greenhouse gas emissions in the U.S. in 2013. Options for meeting the rule presented by the EPA include increased reliance on alternative energy sources, transitioning from coal to natural gas, and increased energy efficiency.

However, many energy providers that currently rely on coal-fired power plants have already requested a delay in the implementation timeline set forth in the rule. They cite concerns such as increases in electricity rates, decreases in system reliability, and the loss of jobs due to the potential closure of non-compliant plants.

Fifteen coal-reliant states, led by West Virginia and including Alabama, Arkansas, Florida, Indiana, Kansas, Kentucky, Louisiana, Michigan, Nebraska, Ohio, Oklahoma, South Dakota, Wisconsin, and Wyoming filed a petition for an emergency stay of the CPP with the U.S. Court of Appeals for the District of Columbia Circuit on August 13, 2015. They argued that amendments to the Clean Air Act in 1990 prevent the EPA from regulating a carbon emissions source, such as existing power plants, under Section 111(d), as these emissions are already regulated under Section 112. The states also argued the EPA is requiring more stringent standards for existing coal-fired power plants than new power plants, thereby undermining the viability of continuing use of the existing facilities. The Court dismissed their petition on September 9, 2015, in a one sentence order stating only that the petition did not satisfy “the stringent standards that apply to petitions for extraordinary writs that seek to stay agency action.” There will be more challenges. Stay tuned.

The CPP is codified at 40 CFR Part 60 [EPA-HQ-OAR-2013-0602; FRL-XXXX-XX-OAR] and is available online at http://www2.epa.gov/sites/production/files/2015-08/documents/cpp-final-rule.pdf, and the Petition for an Emergency Stay is available at http://www.eenews.net/assets/2015/08/14/document_ew_04.pdf.

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New 500 Foot Wyoming Drilling Setback and Notification Rules To Go into Effect on June 28, 2015

On April 14, 2015, the Wyoming Oil and Gas Conservation Commission unanimously approved several changes to its drilling regulations, which will go into effect on June 28, 2015 (i.e. 75 days after approval). The Commission increased the minimum distance between drilling operations and homes or other occupied structures from 350 feet to 500 feet. The rule places the obligation on operators to distance themselves further from such structures if possible, stating that “[i]t is preferable that Production Facilities are located at a greater distance from Occupied Structure(s) where technically feasible.”

The updated regulations also require operators working within 1,000 feet of any such structures to provide at least 30 days notice to surface owners and to submit mitigation plans describing how the operators plan “to mitigate reasonably foreseeable impacts” of noise, light, dust, orientation of the drilling pad and traffic from the production facilities. Additionally, the setback distance will now be measured from the outermost edge of the production facilities instead of the wellhead, as was done previously.

The increase to a 500 foot setback brings Wyoming in line with other oil and gas producing states such as North Dakota and Colorado, which both require a 500 foot setback (subject to various exceptions). The rule is a compromise for both landowner advocates and industry groups. Landowner advocates, such as the Powder River Basin Resource Council, initially requested an increase to 1,320 feet, while industry groups, such as the Petroleum Association of Wyoming, requested that the 500 foot setback be measured from the wellhead, and not from the edge of the production facilities (i.e. the wellpad). While Wyoming Governor Matt Mead has acknowledged that the new setback rule will not satisfy everyone, he has publicly supported the compromise as an improvement, as it increases the setback distance and provides for notification to the surface owners for the first time in Wyoming.

Chapter 3, Section 47 of the Wyoming Oil and Gas Conservation Commission Rules, filed on June 3, 2015, sets forth the new rule and is available at http://soswy.state.wy.us/Rules/RULES/9860.pdf.

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