Martinez v. COGCC: Colorado Supreme Court Rejects Adverse Impacts Pre-Condition

On January 14, 2019, the Colorado Supreme Court reached a decision in COGCC v. Martinez, ending more than five years of litigation between seven youth activists from Boulder-based Earth Guardians and the Colorado Oil and Gas Conservation Commission (“COGCC”). The Court held that the COGCC appropriately exercised its agency discretion when it declined to undertake a rulemaking that would have conditioned approval of applications for oil and gas drilling permits on a conditional finding of no adverse impacts to health, safety, or the environment.

The facts of the highly publicized case are well known. In 2013, Earth Guardians petitioned the COGCC to promulgate a rule requiring that COGCC withhold issuance of any new drilling permits “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.” COGCC declined to undertake the proposed rule-making, finding, inter alia, that the proposed rule was beyond COGCC’s limited statutory scope. The petitioners appealed to district court, which affirmed COGCC’s denial of the petition.

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Trump NEPA Initiatives to Expedite Energy Infrastructure: “One Federal Decision”

One of President Trump’s first actions was to issue Executive Order 13766, “Expediting Environmental Reviews and Approvals for High Priority Infrastructure Projects” (Jan. 24, 2017), directing the Council on Environmental Quality (“CEQ”) to begin efforts to identify high priority infrastructure projects and expedite federal environmental reviews required by the National Environmental Policy Act (“NEPA”). This was followed by the more detailed EO 13807, “Establishing Discipline and Accountability in the Environmental Review and Permitting Process for Infrastructure Projects” (Aug. 15, 2017) describing the “One Federal Decision” (“OFD”) policy. The CEQ, the Department of the Interior (“DOI”) and the Bureau of Land Management (“BLM”) have taken several actions to implement this presidential OFD direction.

The challenge the EO is trying to address is the integration and timely coordination of the multiple federal agencies, federal laws and permit decisions that are triggered by a major infrastructure project. Expediting NEPA is not new; Congress and prior administrations have addressed the need for permit streamlining for at least the last 15 years. For example, in 2001, President George W. Bush created a NEPA Task Force to modernize agency regulations implementing NEPA. In 2004, BLM issued a “cooperating agency” rule directing that BLM invite state, local and tribal governments to participate as cooperating agencies in the Bureau’s NEPA processes. In 2003, as part of the President’s Healthy Forest Initiative, bi-partisan legislation, the Healthy Forest Restoration Act, was enacted to expedite NEPA and court review of hazardous fuels reduction projects. Congress also created expedited NEPA for airports (Vision 100 Act of 2003), for highway and transit construction (SAFETEA-LU Act of 2005), and for oil and gas and LNG terminals (Energy Policy Act of 2005).

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Paris Agreement Exit: Who Holds the Real Power?

President Trump announced on June 1 that the United States is withdrawing from the Paris Agreement. The announcement follows months of uncertainty about whether President Trump would fulfill his campaign pledge to withdraw U.S. participation in the deal (which was signed by 195 countries with only two countries in opposition--Nicaragua (because it wasn’t stringent enough) and Syria).

According to the President, the decision is necessary to protect the U.S. economy from burdensome emissions restrictions and foreign interference in U.S. energy policy:

In order to fulfill my solemn duty to protect America and its citizens, the United States will withdraw from the Paris climate accord . . .[s]o we're getting out, but we will start to negotiate, and we will see whether we can make a deal that’s fair.

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More Oil and Gas Regulation Headed for Colorado Ballots?

Come November, Colorado voters may decide whether oil and gas development should be subjected to more stringent regulation. Three ballot initiatives proposed by Boulder-based Coloradans Resisting Extreme Energy Development have survived legal challenges and are now headed for signature collection. Supporters have until August 8 to collect the necessary signatures to get these measures on the November ballot. Opponents, like Protecting Colorado’s Environment, Economy, and Energy Independence (PCEEEI), argue that passage of any of these measures could cripple Colorado’s oil and gas industry.

Proposed Initiative 63 (Right to Healthy Environment) creates a fundamental “right to a healthy environment” under the Colorado Constitution. It also specifies that local regulations that are more protective of a “healthy environment” will not be preempted by state law. Finally, the proposal creates a private right of action allowing any “aggrieved” party to sue for injunctive or declaratory relief, as well as punitive damages in some instances.

See text of the proposal here:
http://www.sos.state.co.us/pubs/elections/Initiatives/titleBoard/filings/2015-2016/63Final.pdf

Proposed Initiative 75 (Local Government Control of Oil and Gas Development) declares that “[o]il and gas development, including the use of hydraulic fracturing, has detrimental impacts on public health, safety, general welfare, and the environment.” It transfers the regulatory authority over oil and gas operations from the state to local governments, and specifically recognizes local authority to ban oil and gas development entirely.

See text of the proposal here:
http://www.sos.state.co.us/pubs/elections/Initiatives/titleBoard/filings/2015-2016/75Final.pdf

Proposed Initiative 78 (Mandatory Setback from Oil and Gas Development) increases minimum setbacks for new facilities (or for re-entry to a previously plugged and abandoned well) to 2,500 feet from schools, homes, hospitals, and “areas of special concern.” Current regulations require 500 foot setbacks from homes and 1,000 foot setbacks from “high occupancy buildings,” such as schools and hospitals. The proposal also authorizes local governments to require even greater setbacks.

PCEEEI estimates that this measure could eliminate “at least 87 percent of all new production in Weld County alone.” Governor Hickenlooper also weighed in on the matter, stating that the increased setbacks “would in many cases, invalidate people’s opportunity to extract natural resources that they own.”

See text of the proposal here:
http://www.sos.state.co.us/pubs/elections/Initiatives/titleBoard/filings/2015-2016/78Final.pdf

For more on the citizen initiative process, see:
http://www.wsmtlaw.com/cms-assets/documents/191009-726917.gpsolo-article-novdec-2014.pdf

Does any of this sound familiar? In 2014, two oil and gas related initiatives – one requiring 2,000 foot setbacks and one authorizing increased local regulation of oil and gas development –garnered the requisite signatures and headed for the ballots. At the eleventh hour Governor Hickenlooper and Democratic Rep. Polis announced a compromise which kept these (and two industry-backed initiatives) off the ballots in exchange for the creation of a task force charged with addressing citizens’ concerns about hydraulic fracturing. If Initiatives 63, 75, and 78 move forward, we may be headed for a repeat of this drama in the fall.

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2016 Wyoming Energy Plan – Doubling Down on Coal

In the face of a radically altered economic and energy picture for Wyoming, Governor Matt Mead released an updated energy strategy for the State on March 14, 2016. Titled “Leading the Charge: Wyoming’s Action Plan for Energy, Environment, and Economy,” the plan is an update of a similar report issued by the State in 2013, the first of its kind in the nation. The State is facing significant budget challenges from the loss of royalty income, severance taxes, and jobs from low oil and gas prices and the even more dramatic decline of coal mine revenue as key coal mining companies in the State seek bankruptcy protection. Approximately 60% of State government revenues come from mineral development.

Gov. Mead proposes to meet the budget challenges by addressing the backbone of the State’s economy – energy development. The 2013 report set forth 45 initiatives, 28 of which have been completed, and the 2016 strategy adds several new priorities. Emphasizing his commitment to the coal industry, the Governor summed up his approach as “a doubling down on coal and a very good start on renewables.” Specifically, the energy plan includes:

• A “carbon innovation” effort for the development of “clean coal” technologies by building on the success of the Integrated Test Center, a public-private partnership with the XPRIZE, to develop and test new technologies for the capture of CO2 emissions.
• Harnessing Wyoming’s Class 5-7 wind energy resources with a new Wind Energy Manufacturing Initiative, led by the Wyoming Business Council. The goal would be to attract wind turbine manufacturing to the State.
• Hosting a symposium to explore how to turn the devastation caused to Wyoming forests by the Pine Beetle on its head by integrating biomass energy into the State’s overall energy plan.
• Forming a National Environmental Policy Act Team to work with federal agencies to expedite the NEPA process to work more collaboratively with BLM in land use planning and combatting invasive species on public land.
• Identifying and working to reduce areas of duplication in State and Federal regulations.
• In light of coal company bankruptcies and self-bonding the State had permitted earlier, Wyoming must urgently address coal mine reclamation liabilities. The energy strategy accordingly calls for an examination of the adequacy of reclamation formulas, reviewing reclamation goals and definitions, and analyzing the self-bonding program.
• Diversifying the State’s economy by increasing the emphasis on international exports including coal, oil and gas (LNG), uranium and other resources.
• The strategy also addresses rulemaking proposals, including baseline groundwater testing before oil and gas drilling, setback requirements, a review of flaring rules, and mitigation banking and additional efforts for the protection of Greater sage-grouse.

Gov. Mead hopes that this year’s plan will continue to allow the State to be proactive in planning its future energy development, which will in turn create additional economic and business opportunities for both new and existing industries. The Governor asked for $500,000 to implement the energy strategy in the 2017-2018 budget, which was rejected by the Legislature, so it remains to be seen how much of the plan he will be able to implement.

The full text of Wyoming’s Action Plan can be found here: http://governor.wyo.gov/media/news-releases/2016-news-releases/governormeadannouncesupdatedenergystrategy.

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CLAIMANTS MAY SUE INDUSTRY FOR DAMAGES RESULTING FROM EARTHQUAKES

On June 30, 2015, the Oklahoma Supreme Court ruled in Sandra Ladra v. New Dominion LLC, Spess Oil Co. [and other unnamed companies], that Plaintiff could sue operators of wastewater injection wells in and around Lincoln County, Oklahoma, for personal injury damages resulting from injuries she suffered from an earthquake while in her Lincoln County home. Plaintiff claimed that the Defendants' high-pressure disposal wells were responsible for the earthquake. The Court rejected the argument that the Oklahoma Corporation Commission (Oil and Gas Conservation Division) had exclusive jurisdiction and held that allowing "district courts to have jurisdiction in these types of private matters does not exert inappropriate 'oversight and control' over the OCC," and that it "conforms to the long-held rule that district courts have exclusive jurisdiction over private tort actions when regulated oil and gas operations are at issue." The Oklahoma Court's ruling also supports a finding of district court jurisdiction in a similar class action suit brought by representative plaintiff Jennifer Lin Cooper against New Dominion LLC, Spess Oil Co., and other unnamed companies which was also filed in Lincoln County, Oklahoma, earlier this year. Since the Oklahoma Court’s June ruling, the OCC and some industry members have taken preventative and regulatory steps to avoid or mitigate seismic activity.

In Colorado there have been several seismic events related to oil and gas activities, particularly near Greeley and Trinidad. Since 2011, the Colorado Oil and Gas Conservation Commission has engaged in rule-making that has increased regulatory requirements with respect to hydraulic fracturing and disposal activities. The COGCC now has enhanced technical, bonding and insurance requirements as well as geophysical reporting and seismic monitoring. The COGCC has also taken steps to shut down injection wells utilizing a ‘stoplight system’ – if a seismic event is only a magnitude 1 to 2 on the Richter Scale, underground injections wells may receive a green light from the COGCC; if the seismic activity is rated at M2 but below M5, a modified operations amber light may be given; and, if the seismic activity is measured at M5 or more, underground well operations are suspended and red-lighted by the COGCC.

Like Oklahoma, it is the Colorado courts that have jurisdiction to address private claimants’ damages claims based on concussion-related damage or injury. Moreover, Colorado law imposes strict liability for concussion damage and proscribes the outsourcing of liability. Thus, Colorado provides claimants with broad, direct damages relief. For a further discussion, see Richards, Emery Gullickson, “Finding Fault: Induced Earthquake Liability and Regulation,” COLUMBIA JOURNAL OF ENVIRONMENTAL LAW, 1 April 2015.

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ENERGY TRANSFORMATION: CLEAN POWER PLAN AND THE WEST

When candidate Obama was running in 2008, he identified energy as his top priority and described his goal as the “transformation of American energy” to address the threat of climate change. On August 2, 2015, the President and the EPA Administrator announced the final rule to implement his Clean Power Plan. The focus of the rule is the reduction of carbon emissions from 2005 levels by 32% in 2030.

The rule is issued under the authority of the Clean Air Act Section 111(d) in what many acknowledge is a big stretch for language that was drafted long before climate change was an issue. The rule came as the result of a 2012 settlement of litigation brought by environmental groups and several northeastern states against EPA. See a just-released Senate Majority Staff, Environment and Public Works Committee Report, “Obama’s Carbon Mandate: An Account of Collusion, Cutting Corners, and Costing Americans Billons” on this “sue and settle” tactic. http://goo.gl/gLaviN

The rule addresses new and existing power plants and establishes a different carbon target reduction from a 2012 baseline for each state. According to EPA, each state has the flexibility to choose how it meets its own carbon targets, but the rule is built on three EPA “building blocks”:
• Make fossil fuel power plants more efficient
• Increase generation form lower-emitting combined cycle natural gas plants for reduced generation from higher emitting coal/gas-fired power plants
• Increase generation from new zero-emitting renewable energy power sources
If a state refuses to develop a plan consistent with the rule, EPA will enforce a federal model plan. The rule encourages states to work together and to develop a “cap and trade” program, similar to a proposal that failed to pass Congress in the President’s first term.

EPA projects compliance costs for the rule of between $$5.1-8.4 billion, with an individual’s energy costs increasing by 3%-1% early in the compliance period, but dropping to a net “savings” in 2030 as a result of reduced energy consumption.

Winners and losers? Obviously coal is the big loser, but surprisingly natural gas also came up short with the Administration backing away from gas as a “bridge fuel” in favor of incentives to support wind and solar generation and demand reduction.

The rule is voluminous – existing power plants are addressed in over 1800 pages, new and modified plants are covered in 900 pages and the EPA model federal plan clocks in at 755 pages. See http://www2.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants

What does the rule mean for the West? Much to the relief of Alaska (and Hawaii) there is no carbon target for these states, yet. Several western states are already on track to meet their carbon targets by 2030 as the result of state law and/or an energy mix already reliant on renewables: California, Washington, Oregon, Nevada and South Dakota. The biggest loser among the states is North Dakota, which saw its 2030 target quadruple from an initially proposed 10.6% reduction to a 44.9% reduction in the final rule. Democratic North Dakota Senator Heidi Heitkamp described the rule as a “slap in the face.” Wyoming, which supplies 70% of the nation’s coal, saw its target double from the draft rule to a 37-44% reduction in the final rule. Wyoming elected officials uniformly attacked the plan with Wyoming Senator Barasso (R) calling it a “job crushing mandate.” Montana was also hit hard with a doubling of its draft goal to a 41% reduction. Montana’s Democratic Governor Bullock said he was “extremely disappointed” by the change, and Montana’s AFL-CIO, which had planned to attend a rally in support of the rule, withdrew in light of the impact of the changed targets on union jobs.

In Utah, where 80% of its power is coal-fired and its renewable energy is sold out of state, elected officials denounced the plan; Senator Orrin Hatch (R) said the rule is “unjustified and potentially devastating for Utah and the nation.” In Colorado, reaction to the state target of a 28% reduction was divided along party lines, with the Democratic Governor Hickenlooper saying he will work to implement the target while Republican Attorney General Cynthia Coffman is considering joining in litigation to challenge the rule. In New Mexico, Republican Governor Susana Martinez and Democratic Senator Tom Udall were united in their belief that New Mexico was ready to comply with the law. See EPA-prepared charts for good summary of state-by-state impacts. https://goo.gl/4rScB4

Opinion among green groups is divided with Environmental Defense Fund Fred Krupp praising the rule as “historic” and an example of Presidential leadership, while the climate researcher and former NOAA scientist, James Hansen, derided the rule as “practically worthless.” The New York Times, in a front page story this week seemed to be “shocked” (see “Casablanca”) that the coal industry was already planning on how to defeat the rule before the rule was published. http://goo.gl/x0yzd3

There is 100% agreement on one thing -- the Clean Power Plan is headed for the courts as soon as EPA publishes the official version of the rule in the Federal Register expected later this month.

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