American Oil and Gas Reporter - February 2019 - 106

Colorado's High Court Backs COGCC
DENVER-The Colorado Supreme Court
in January sided with industry and the Colorado Oil & Gas Conservation Commission
in finding that protecting the environment
is but one of several factors the COGCC
must decide in issuing drilling permits.
On Jan. 14, the high court overturned
a March 2017 ruling by Colorado's Division V Court of Appeals in Martinez v.
COGCC that when considering an application for a permit to drill, it first should
consider whether it is consistent with
protecting public health, safety and welfare, and not consider other factors in
making the determination.
According to court documents, Martinez originated in October 2013 when a
group of teenagers petitioned COGCC
to revise its rules so that no drilling
permits would be issued "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."
Mark Mathews, an attorney with
Brownstein Hyatt Farber Schreck in Denver who filed an amicus curiae in the
case on behalf of the Colorado Oil &
Gas Association, says the teenagers' proposed rule, if adopted by the COGCC,
would have precluded the agency from
issuing any permits for drilling oil and
gas wells that resulted in impairing the
environment to any degree.
The COGCC rejected the petition in
April 2014, court documents indicate,
contending the teenagers' proposed rule
would have required the agency to readjust
the balance of factors set forth in the
Colorado Oil and Gas Conservation Act,
and that the agency already was working
with the Colorado Department of Public
Health and Environment to address issues
raised in the petition.
That decision was upheld by the Denver
District Court in July 2014. However,
the plaintiffs appealed and in March 2017,
the appeals court held that the commission
improperly rejected the proposed rule
because the 1994 amendments to the Colorado Oil and Gas Conservation Act directed that development take place "in a
manner consistent with" environmental
protection did not create a balancing test,
but rather deemed development to be in
the public interest only when it protected
health, safety and welfare (AOGR, July
2017, pg. 116).

Court's Ruling
"(The Supreme Court) decision is favorable for the COGCC," responds Mathews.
"Not only does it unanimously uphold
(COGCC's decision not to engage in the
requested rule making), it emphasizes time
and again the great deal of discretion courts
need to give to agencies, not only in interpreting statutes and regulations, but also in
prioritizing how their resources are used."
The key issue-and the point on which
the district and appeals courts disagreed-
Mathews says, is whether the Oil and
Gas Conservation Act mandates protecting
the environment as a precondition for oil
and gas development, or is merely one
factor among others to consider.
On this point, he says, the ruling is
clear. It states, "The pertinent provisions
(of the Oil and Gas Conservation Act) do
not allow (COGCC) to condition all new
oil and gas development on a finding of
no cumulative adverse impacts to public
health and the environment. Rather, the
provisions make clear the commission is
required 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 cost-effectiveness
and technical feasibility."
Both COGA and the COGCC had argued the plain language of the Oil and
Gas Act mandated the COGCC balance
oil and gas development with environmental protection. But instead, Mathews
notes, the Supreme Court found the act's
language to be ambiguous, and so turned
to the statutory and legislative history.
"When it did that," he outlines, "it
said the test was whether an action fostered
developing oil and gas resources, including
protecting correlative rights, and in doing
so prevented and mitigated significant
environmental impacts, after taking into
consideration cost-effectiveness and technical feasibility.
"Both those provisions are in the Oil
and Gas Act, but the court altered a little
what the COGCC thought its standard
was, which was just to balance a number
of factors," Mathews continues. "The
court said it was not a balancing. Instead,
it used a two-pronged test to consider
whether the proposed rule fostered oil
and gas development, protected correlative
rights, and protected public health and
safety through cost-effective and technically feasible measures.

106 THE AMERICAN OIL & GAS REPORTER

"The court arrived at those two elements
after again looking at the statutory and
legislative history and saying it found no
evidence in either that the framers intended
this act to preclude oil and gas development
if there was any environmental impact,"
he goes on. "To the contrary, the court determined that the legislative history demonstrated an intent to promote multiple policy
objectives, including the efficient development of oil and gas, and protection of
public health, without conditioning one
over the other. That is the new standard."
Mathews says he doesn't anticipate any
practical effect on how the COGCC applies
its regulations. "I think it is going to be
business as usual," he evaluates. "Although
the Supreme Court came up with a slightly
different test, those tests are directly from
the Oil and Gas Conservation Act. They
are baked into the COGCC's regulations
already, so I don't anticipate any change,
based on this decision."
There are a couple other points in the
court's ruling that Mathews says are
worth noting. One is the time it spent
emphasizing the amount of deference
courts need to give agencies in making
these sorts of decisions.
Second, "and I think this is very telling,"
Mathews offers, "The court says the commission had additional bases for declining
to engage in a rule making, namely that it
already was working with the CDPHE to
address many of the concerns (raised by
the petitioners). The court noted it was
well within the agency's discretion to use
its limited resources in resolving the issue
in a manner that it deemed appropriate."
Industry Response
Both COGA and the Colorado Petroleum Council, which was a direct participant in the case alongside the COGCC,
praised the ruling.
The ruling, says COGA president Dan
Haley, "upholds the Colorado way of
doing business, which is to weigh many
interests and diverse views in overseeing
a regulatory framework that serves and
protects us all.
"The plaintiffs in Martinez v. COGCC
ignored and attempted to disrupt decades
of regulatory precedent and legal oversight,"
Haley continues. "The COGCC has enacted
the most extensive and stringent regulations
for the oil and natural gas industry in the
country. Colorado was one of the first states
to require that operators disclose the chemicals in hydraulic fracturing, conduct preand post-drilling groundwater monitoring,
and undertake comprehensive inspection
American Oil and Gas Reporter - February 2019

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