On January 14, 2019, the Colorado Supreme Court reversed the Court of Appeals and issued a unanimous decision in favor of the Commission in Colorado Oil & Gas Conserv. Comm. v. Martinez. The Supreme Court held that providing for the economical development of oil and gas resources in the State of Colorado and minimizing adverse impacts to public health and the environment are each important goals of the Commission under the Oil and Gas Conservation Act (“Act”). However, the Court noted that these goals should not be balanced against or conditioned upon each other, but rather should be considered contemporaneously. As such, the Commission is expected to continue its current practice of considering multiple policy objectives and interests when determining whether to engage in rulemaking.
Last year, the Colorado Supreme Court granted certiorari to consider whether the Colorado Oil and Gas Conservation Commission (“Commission”) properly declined to engage in rulemaking requesting that the Commission adopt rules preventing the 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.” In making its determination, the Court analyzed the scope of authority granted to the Commission under the Act to regulate oil and gas production. Specifically, the Act states that “it is in the public interest to foster the responsible, balanced development, production, and utilization of the natural resources of oil and gas in the state of Colorado in a manner consistent with protection of public health, safety, and welfare, including protection of the environment and wildlife resources.”
The Supreme Court found that this language was susceptible to multiple interpretations. Accordingly, the Court looked to the Act’s statutory and legislative history to aid in ascertaining the meaning of the language at issue. In doing so, the Court found the legislature intended “to promote multiple policy objectives, including the continued development of oil and gas resources and the protection of public health and the environment, without conditioning one policy objective on the satisfaction of any other.” Thus, the Court disagreed with both Petitioners’ and Respondents’ interpretation of this language – a balancing test vs. a condition that must be fulfilled – and held that the intent was to charge the Commission with “minimize[ing] adverse impacts to public health and the environment while at the same time ensuring that oil and gas development, production, and utilization could proceed in an economical manner.” Thus, the Commission’s role as stated by the Colorado Supreme Court is as follows: to “(1) foster the development of oil and gas resources, protecting and enforcing the rights of owners and producers, and (2) 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 the cost-effectiveness and technical feasibility.” Based upon this interpretation of the Act, the Court found that the Commission correctly determined that it could not adopt the proposed rules without violating its charge from the General Assembly in the Act.
If you have questions on the Martinez case or how your operations may be impacted, please contact David Little, Diana Prulhiere, or Rachael Smith.