The Battle over Local Control Heats up Again as Thornton’s Oil and Gas Regulations Challenged in Court

Six weeks following the City of Thornton’s adoption of strict new regulations on oil and gas operations, the Colorado Oil and Gas Association (“COGA”) and the American Petroleum Institute (“API”) have filed suit, in what looks to be just the latest clash in Colorado’s struggle over who manages oil and gas in the state – the Colorado Oil and Gas Conservation Commission (“COGCC”) or cities and towns?

In August, after what COGA described as “an extremely limited stakeholder process,” Thornton’s City Council adopted Ordinance No. 3477 by a 7-2 vote. The ordinance provides for much stricter standards than the rules of the COGCC. Some of the differences are highlighted below:

   Thornton's Ordinance COGCC Rules
Setback from Buildings/Lots Well pad must be at least 750 feet from existing or planned buildings and existing or platted residential lots (Section 18-881.(a)(1), (2)) Well must be at least 500 feet from a Building Unit (Rule 604.a.(1))
Setback from Water Bodies Well pad must be at least 500 feet from the ordinary High Water Mark (HWM) or the edge of the bank of any irrigation or lateral ditch (Section 18-881.(a)(3)) Setbacks only required for Drilling, Completion, Production and Storage Operations within Public Water System Surface Water Supply Areas (Rule 317B)
Surface Disturbance Multiple wells proposed by Operator must be located on a multi-well pad
(Section 18-881.(b)(1))
Operators must consolidate wells on multi-well pads only in Designated Setback Locations and only where technologically feasible and economically practicable (Rule 604.c.(2)E.i.)
Liability Insurance Operator must maintain general liability insurance of $5 million per occurrence (Section 18-881.(y)) Operator must maintain general liability insurance of $1 million per occurrence (Rule 708)
Flowlines  Abandoned flowlines must be removed (Section 18-881.(c)(1))  Flowlines may be abandoned in place if disconnected, buried, and permanently sealed (Rule 1103)

 

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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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More Local Government Control Over Oil and Gas Operations? Colorado House Says No.

Over the past several years there has been an ongoing debate on whether local governments have the authority to limit or even ban oil and gas operations. In 2012, residents of the City of Longmont voted to approve a ban on hydraulic fracturing within city limits. Similarly, in 2013, Fort Collins voters approved a five year moratorium on fracking within city limits. The Colorado Oil and Gas Association challenged both bans, and the cases reached the Colorado Supreme Court. A recap on the case history and oral arguments can be found in a prior blog, “State or Local for Colorado?” A decision is expected from Colorado’s high court in 2016.

The most recent battle between state and local control of oil and gas operations was fought in the Legislative branch. On March 11, 2016, Representatives Mike Foote, Su Ryden, Jessie Ulibarri and Matt Jones of the Colorado House of Representatives (“House”) introduced House Bill 16-1355 (“HB 1355”) in an attempt to provide local governments with control over the location of oil and gas facilities. HB 1355 declares that “governing bodies of local governments are in the best position to determine the appropriate locations for oil and gas facilities and will properly balance . . . the effects on public health, wildlife, and the environment.” The Colorado Oil and Gas Conservation Commission (“COGCC”) currently has authority over the siting of oil and gas facilities in all jurisdictions in Colorado. HB 1355 states that “statewide siting rules provide an ineffective protection for the public . . . [and] local governments are in the best position to determine the appropriate locations for oil and gas facilities.” Although the bill recognized the existing authority of the COGCC, it emphasized that “the oil and gas industry is not exempt from local governments’ authority to control the siting of oil and gas facilities through existing zoning and land use authority just as they do for every other industry.”

In an attempt to gain more supporters of HB 1355, several last minute amendments were made to the original bill. The original bill proposed an addition to Colorado statutes that would require an operator to “ensure that the location of oil and gas facilities complies with city, town, county, or city and regulations.” The proposed addition to the statute authoritatively stated that “nothing in this section impairs or negates the authority of local governments to regulate the location of oil and gas facilities.”

It became clear that the House would not pass a bill providing local governments with such overarching authority to regulate the location of oil and gas facilities, especially with the Longmont and Fort Collins cases pending before the Supreme Court. Accordingly, the morning of the vote, HB 1355 was amended to remove the language giving local governments broad authority to regulate the location of oil and gas facilities. Consequently, the amended HB 1355 merely restated the current law that oil and gas facilities may be regulated by local governments under current zoning regulations.

Colorado Governor John Hickenlooper urged the House not to pass HB 1355, stating his preference that the Legislature wait until the Colorado Supreme Court issues decisions on the pending cases. Ultimately, on April 4, 2016, the watered down version of HB 1355 failed to make it out of the Democratic-controlled House.

Even though HB 1355 was a failed attempt by the Colorado Legislature to provide local governments with the power to regulate oil and gas operations, its introduction is yet another example of the sentiment of many Coloradans that local municipalities should be able to limit or restrict oil and gas operations.
A copy of HB 1355 can be found here.

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