Another win for statewide regulation of hydraulic fracturing

Heather Palmer and Elizabeth Corey, Bracewell LLP

Colorado has joined a growing list of states that prohibit municipalities from banning hydraulic fracturing. The Colorado Supreme Court held in a pair of decisions issued on Monday that the state's oil and gas law preempts local bans and moratoria on hydraulic fracturing. The decisions resolve an ongoing dispute in Colorado regarding the extent to which municipalities can ban or substantially constrain hydraulic fracturing activities within their borders.

Before the Colorado Supreme Court were two district court decisions – one involving a ban on hydraulic fracturing in Longmont and another involving a five-year moratorium on hydraulic fracturing in Fort Collins.

The legal dispute began in 2012 when Longmont citizens voted to ban hydraulic fracturing. In 2013, citizens in Fort Collins voted for a five-year hydraulic fracturing moratorium. The Colorado Oil and Gas Association (COGA) sued to overturn the measures, the district court held in COGA’s favor, and the cities appealed to the Colorado Court of Appeals, which, before hearing oral argument, requested the case be transferred to the Colorado Supreme Court.

The supreme court affirmed both district court decisions, concluding that measures to substantially constrain hydraulic fracturing are preempted by state law because they operationally conflict with the Colorado Oil and Gas Conservation Act (COGCA).

Under the state's well established preemption law, three types of preemption exist – express preemption, implied preemption and preemption by operational conflict. COGCA does not expressly or impliedly preempt local prohibitions on hydraulic fracturing; it does, however, operationally conflict with them by regulating statewide oil and gas development in a manner that leaves no room for incompatible local regulations.

Oil and gas development, the court explained, is a matter of statewide concern that should be regulated by the state, not by local governments.

COGCA and the regulations promulgated thereunder establish and promote the state's interest in effectively developing its oil and gas resources while ensuring compliance with safety, health and environmental regulations. Local hydraulic fracturing prohibitions conflict with this interest by creating a patchwork of regulation that would substantially complicate regulatory compliance and would materially impede efficient development of resources.   

Longmont and Fort Collins are just two of several Colorado municipalities – including Boulder County, the City of Boulder and Broomfield – that have banned or otherwise restricted hydraulic fracturing. These municipalities assert that they have home-rule authority to regulate hydraulic fracturing within their borders. Home-rule authority enables municipalities to pass local laws as necessary to govern matters of local concern, provided that the local laws do not conflict with state or federal law.

The Colorado Supreme Court agreed that a municipality may indeed govern matters of local concern via its home-rule authority, but emphasized that such authority is limited when the matter regulated extends beyond the municipality’s borders. While municipalities do have some authority over land-use decisions, bans and moratoria on hydraulic fracturing interfere with matters of statewide concern.

Colorado joins a series of states that have prohibited municipalities from banning hydraulic fracturing. In 2015, Texas Governor Greg Abbott and Oklahoma Governor Mary Fallin both signed bills prohibiting the practice in their respective states. Ohio and New Mexico are considering similar bills and may follow suit.

While states appear to be winning the fight with local governments over authority to regulate hydraulic fracturing activities, the battle with the federal government over hydraulic fracturing continues. Challenges to the Bureau of Land Management’s Hydraulic Fracturing Rule are currently pending before the US District Court for the District of Wyoming and the US Court of Appeals for the Tenth Circuit. The preliminary injunction of the rule, which was entered by the US District Court in September 2015, remains in place as the case moves forward at the lower court and appellate levels.

About the authors
Heather Palmer, a partner in the environmental strategies group at Bracewell, practices all aspects of environmental law, advising clients on regulatory requirements, the evaluation and negotiation of corporate and real estate transactions, and in environmental litigation and enforcement matters.

Elizabeth Corey, an associate at Bracewell, helps companies seeking guidance on environmental compliance.

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