Colorado Takes On The Issue of Preemption of Local Fracking Ban

Last month, I posted on the New York Court of Appeals highly charged decision addressing preemption of local fracking bans within the state of New York.  There, the Court rejected the oil and gas companies’ preemption argument, upholding the local fracking ordinances under the towns’ home rule authority. This month, a Colorado District Court found just the opposite.  In Colorado Oil and Gas Association v. City of Longmont, the Court found that the City’s fracking ban was invalid as preempted by the State’s Oil and Gas Conservation Act.  This decision emphasizes that the issue of preemption of local fracking bans will be determined on a state by state basis, depending on the individual state’s statutory scheme and judicial precedent.

Back in 2011, the Colorado Commission adopted rules regarding operator disclosure and reporting of chemicals used in fracking.  In November 2012, the voters of the City of Longmont passed an amendment, Article XVI, to the city charter, which banned fracking and the storage and disposal of fracking waste within the City’s borders.  The City claimed that Article XVI was a valid exercise of its home rule police and land use authority.

In analyzing the issue of preemption, the Court explained that there are three ways a state statute can preempt local government regulations: 1) express preemption, 2) implied preemption; and 3) operational conflict preemption.  Although Plaintiffs first attempted to argue implied preemption, the Court found that it would not “go so far as to find[] [] implied preemption[,]” instead, opting for the more “traditional approach of conducting an operational conflict analysis.”

Under operational conflict preemption, the Court considers four factors: 1) whether there is a need for statewide uniformity of regulation; 2) whether the municipal regulation has an extraterritorial impact; 3) whether the subject matter is one traditionally governed by state or local government; and 4) whether the Colorado Constitution specifically commits the particular matter to state or local regulation.

Applying the first factor, the court found that the need for statewide uniformity weighed in favor of preemption.  “Patchwork regulation can result in uneven production and waste.”  As to the second factor, the Court found that the City’s ban had an extraterritorial impact.  The Court provided an example of a company that drilled a well from a well pad outside of the City, but that went under acreage that was considered part of the City of Longmont as well.  Because of the City’s ban, the company could only frack the portions of the well that did not underlie the City of Longmont, which resulted in less oil and gas produced.  Applying the third factor, the Court found that oil and gas activity has traditionally been governed by the State.  The Court did not address the fourth factor because the Colorado Constitution does not address whether oil and gas activity should be regulated by state or local government.

As a result, the threshold issue in the case turned on whether the City’s ban stemmed from a purely local concern since under Colorado law, regardless of a conflict, a city’s ordinance supersedes a state statute if derived from a purely local concern.  Where there is mixed local and state concern, however, a state statute supersedes the local ordinance where a conflict exists.  The District Court found that this matter was one of mixed local and state interest.  In support of the City’s interest, the City submitted affidavits from its citizens who expressed concerns with fracking, including concerns of water contamination, chemical spills, and health effects.  Although the Court “appreciate[d] the Longmont’s citizens’ sincerely-held beliefs about risks to their health and safety,” the Court found this insufficient to “completely devalue the State’s interest, thereby making the matter one of purely local concern.”

Moving on to whether a conflict existed, the Court found that the operational conflict was “obvious.”  The Commission permitted fracking, while the City prohibited it.  Furthermore, the Commission permitted storage and disposal of fracking waste, while the City prohibited it.  Because an “irreconcilable conflict” existed, the Court found that the City’s regulation must yield to the State’s interest.  Accordingly, the Court granted summary judgment in favor of Plaintiffs, finding that the City’s ban was invalid as preempted by the Colorado Oil and Gas Conservation Act.  The Court, however, stayed the order during the time permitted for filing a notice of appeal.

We will continue to monitor this case to see if Colorado’s highest court will face this hotly debated issue. Meanwhile, we should expect to see many more cases addressing preemption while more cities and towns across the country attempt to regulate fracking within their borders.