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Who Gets to Decide Where to Frack in Colorado?

On May 2, 2016, the Colorado Supreme Court answered that question – the State gets to decide where fracking will be allowed. The Court today decided two similar cases addressing this issue. The first case involved Longmont’s outright ban on fracking and the storage of fracking waste within the city. The second case involved Fort Collin’s five year moratorium on fracking and the storage of fracking waste within the city. (The Colorado Supreme Court ruled the same way in both cases. We therefore just address the Longmont case.)

The issue was whether state regulation of fracking preempted local regulation of fracking. Longmont passed its ban, as an amendment to the city’s charter, in 2012. After passage, the Colorado Oil & Gas Association sued Longmont, challenging Longmont’s fracking ban. The Colorado Oil and Gas Conservation Commission (COGCC) joined that lawsuit. The Plaintiffs argued that the COGCC’s extensive rules regulating fracking preempted any local regulation of the industry. In other words, the state agency was the exclusive authority to regulate fracking within the state.

The trial court ruled in favor of the Plaintiffs, finding that the Colorado Oil and Gas Conservation Act precluded Longmont’s total fracking ban, since the Longmont law created an “operational conflict.” While the trial court struck down the Longmont ban, its ruling was stayed pending the appeal.

The Colorado Supreme Court affirmed the trial court’s ruling. The Colorado Supreme Court first determined that the regulation of fracking was a matter which implicated both state and local concerns. The court then proceeded with a detailed technical analysis of the law of preemption. The court found that there was operational preemption because the Longmont ban would prevent oil and gas operators from using the fracking process, even where such use was in full compliance with state requirements.

Significantly, however, the Colorado Supreme Court rejected the Colorado Oil & Gas Association’s claim that the COGCC had the “exclusive” authority to regulate fracking. This potentially leaves open the possibility than municipalities could craft more limited zoning regulation of fracking.

What does this mean for the oil and gas industry in Colorado? It means simply that municipalities cannot ban the fracking process and that the use of fracking can proceed as allowed by state law. For mineral interest owners, this ruling preserves the value of those mineral interests regardless of where those interests are located, since it appears that local laws will not be able to destroy those mineral interests.

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