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Colorado Supreme Court Vindicates the Colorado Oil and Gas Commission: Recent Ruling In Favor of the Oil and Gas Industry

In an important victory for Colorado’s oil and gas industry, the Colorado Supreme Court unanimously supported the decision of the Colorado Oil and Gas Conservation Commission (the “Commission”) to decline a rulemaking sought by environmental activists that could have eliminated new oil and gas drilling. The Commission, which has regulatory authority under the Colorado Oil and Gas Conservation Act, declined to act on a proposed rule that would have required oil and gas developers to prove that every future oil and gas development project, individually and cumulatively with other projects, had zero impact on the environment and public health, and would not contribute to climate change.

The Background

The Colorado Oil and Gas Conservation Commission v. Martinez case began in 2013 when environmental activists requested the Commission implement a rule that would have prohibited it from issuing any permits for the drilling of oil and gas wells “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.”

After holding extensive hearings on the proposed rule, the Commission ultimately declined to consider it given that the state statutes under which the Commission regulates oil and gas development require it to balance certain considerations with other factors, including the responsible development of Colorado’s oil and gas resources. The Commission was also addressing the activists’ concerns in conjunction with the Colorado Department of Public Health and Environment.

While a Colorado district court affirmed the Commission’s decision, a panel of the Colorado Court of Appeals reversed the district court’s order in a split decision based on Commission’s construction of the Colorado Oil and Gas Conservation Act.

The Decision

On January 14, 2019, the Colorado Supreme Court announced its decision in Colorado Oil and Gas Conservation Commission v. Martinez, 2019 CO 3, unanimously reversing the decision of the Court of Appeals, thereby affirming the Commission’s rejection of the proposed rule. The Supreme Court relied primarily on the language of the Colorado Oil and Gas Conservation Act, C.R.S. §34-60-101 et seq., which directs the Commission to foster the development of oil and gas resources, protecting and enforcing the rights of owners and producers, and in doing so, to prevent and mitigate significant adverse environmental impacts to the extent necessary to protect public health, safety, and welfare - but only after taking into consideration cost-effectiveness and technical feasibility.

In addition, the Supreme Court found support in the Colorado Oil and Gas Conservation Act’s statutory and legislative history. The Act’s statutory history was initially entirely pro-development and later evolved to include environmental considerations. The Court also considered the Act’s legislative history, particularly how sponsors of the latest amendments that added environmental factors to the Commission’s balancing explained the amendments were not intended to halt all oil and gas production – which the proposed rule would have likely done.

What it means for your business

The proposed rule in Martinez, if adopted and implemented, might have caused a complete shut-down of Colorado’s oil and gas industry. The Supreme Court’s affirmance of the Commission’s rejection of this proposed rulemaking establishes that Colorado’s courts will not presume to direct agencies to implement such potentially significant regulatory proposals, but will defer to the political process to make any such changes to the state’s regulatory landscape.

© Polsinelli PC, Polsinelli LLP in California

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About this Author

Bennett L. Cohen, Polsinelli PC, Appellate Practice Lawyer, Commercial Litigation Attorney,
Of Counsel

Ben Cohen's deep knowledge of appellate practice makes him a valuable resource to clients. He focuses on litigation that is on appeal, might involve an appeal, or needs to be managed so as to obviate an appeal. Ben is part of the Denver office's commercial litigation practice group and chairs the office’s appellate division. He has handled matters at every level of the Colorado and federal courts, including several trials and more than 30 appeals. He also is called upon to represents clients specifically for appeals, where a fresh perspective and experience in appellate...

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Ghislaine G. Torres Bruner, Polsinelli Law Firm, Denver, Environmental and Litigation Law Attorney
Shareholder

Ghislaine G. Torres Bruner counsels energy clients through all aspects of planning, siting, permitting issues and complex litigation affecting natural resource and energy companies, including current high-profile, complicated and sometimes contentious issues impacting exploration and production oil, gas and other mineral assets near urban and suburban areas in the Rocky Mountain Region and abroad.

Ghislaine is often consulted on the onset of projects, and assists clients in drafting complex agreements and negotiation of terms incorporated in memoranda of understandings, use by special review permits, surface use agreements, right-of-way agreements, settlement agreements among other agreements entered with local governments. Ghislaine is skilled in the preparation of local and state permits and navigating through state and local rules and regulations governing mineral development. Because of her significant experience in drafting and negotiating agreements, Ghislaine is poised to litigate zealously when disputes arise and has successfully represented many clients in both quasi-judicial proceedings before local and state agencies and court proceedings.

303-583-8259
Philip Bledsoe, Polsinelli Law Firm, Denver, Litigation Law Attorney
Senior Partner

Philip Bledsoe is a trial lawyer. But he knows that litigation, much less a trial, is rarely a client’s first choice, and in many cases settlement is the best and most appropriate option.  Phil believes that handling a lawsuit is not an exercise in academic game theory; it calls for collaborative and practical problem solving, and a nuanced evaluation of the risk present in a dispute. Phil has guided clients through many difficult challenges in his 50+ completed trials and arbitrations, and his 30+ years of deep commercial litigation experience brings substance and...

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Megan Garnett, Polsinelli Law Firm, Denver, Energy and Litigation Law Attorney
Associate

Megan Garnett cares about getting her clients the best results. Megan takes the time to listen to her clients to fully understand their business and industry. Her experience navigating civil litigation from pre-trial complaints through the appellate process, provides her clients the expertise needed to develop a comprehensive strategy to achieve their desired outcomes. Megan strives to be the go to resource for any questions that may arise for her clients and utilizes her resources to construct creative resolutions. Megan’s practice focuses on general commercial...

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