2012 and 2013 Local Fracking Regulations Held Invalid and Preempted by State Law

In companion decisions issued May 2, 2016, the Colorado Supreme Court (Gabriel, J.) affirmed district court summary judgment orders invalidating home-rule oil and gas regulations concerned with hydraulic fracturing (“fracking”). The Court relied on the intent and scope of state-wide oil and gas legislation as reflected in the Colorado Oil and Gas Conservation Act, §§ 34-60-101 to -103, CRS (2015) (“the state Act”), and principles of operational preemption. The Court rejected express and implied preemption arguments.

In City of Longmont v. Colo. Oil and Gas Ass’n, Case No. 15SC667, the Court found Longmont’s voter-approved attempt to ban fracking to be in operational conflict with and, hence, preempted by the state Act. The Court noted that available alternatives to fracking did not lessen the state’s interest in fracking under the state’s Act and the district court’s factual finding that “virtually all oil and gas wells” in Colorado are fracked. The Court recognized that Longmont’s fracking ban implicated possible increased costs in producing oil and gas, reduced royalties, and the potential for a ripple-effect of local patchwork regulation across the state which could result in a de facto statewide ban notwithstanding the intent of the state Act. Similarly, in City of Fort Collins v. Colo. Oil and Gas Ass’n, Case No. 15SC668, the Court agreed that a 5-year voter-approved moratorium on fracking and storing fracking waste within the City was preempted by the state Act. The Court found the 5-year moratorium improperly rendered the state’s statutory and regulatory scheme superfluous, “at least for a lengthy period of time, because it prevents operators who abide by the Commission’s rules and regulations from fracking until 2018.” The Court, however, stated that it’s opinion expressed “no view as to the propriety of a moratorium of materially shorter duration.”

Hence, the Court invalidated Longmont’s ban and Fort Collins’s moratorium because they (i) involved questions of mixed state and local concern and (ii) each local regulation was preempted due to operational conflicts with the operation of the state Act. The Court also took the opportunity to reject a “beyond a reasonable doubt” standard of proof for the preemption proponent; rejected intervenor-citizens’ “inalienable rights” argument; and, clarified earlier Court preemption decisions (Voss and Bowen-Edwards), emphasizing (i) that the judicial question of “whether a matter is one of statewide, local or mixed state and local concern is separate and distinct from the question of whether a conflict between state and local law exists,” and (ii) that the preemption analysis requires the court to examine the interplay between state and regulatory schemes and to conduct “a facial evaluation of the respective regulatory schemes, not a factual inquiry as to the effect of those schemes ‘on the ground.’”

Once these Court decisions become final they are not subject to further review. Although these decisions may impact similar local government measures imposing local control over oil and gas activity in Colorado, they are not likely to stop or slow citizen-initiative efforts to increase local control of oil and gas activity.