Colorado Oil and Gas Operators Breathe Sigh of Relief

Yesterday, the Colorado Supreme Court handed down its much-anticipated decision in the COGCC v. Martinez case (2019 CO 3).  To the relief of oil and gas companies operating in Colorado, the Colorado Supreme Court found in favor of the Colorado Oil and Gas Conservation Commission and overturned a hotly-contested Colorado Court of Appeals decision in favor of Respondents.

The case stems from a 2013 request made by a group of youth activists asking the COGCC to conduct a rulemaking that would effectively deny permits to operators “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.”  The COGCC considered and denied the requested rulemaking in 2014 and the case, supported by other environmental activists, was brought before the Colorado state courts.

While the District Court found in favor of the COGCC, the Colorado Court of Appeals handed down a ruling which would have required the COGCC to only allow exploration and development “in a manner consistent with public health, safety, and welfare” rather than balancing its statutory purpose of fostering oil and gas development with the protection of public health, safety and welfare.  The Colorado Supreme Court stated two reasons for its conclusion that the COGCC acted appropriately.  First, the COGCC correctly exercised its discretion in declining to engage in the requested rulemaking because the request was outside the scope of its statutory mandate.  And, second, the COGCC was already working with the Colorado Department of Public Health and Environment to address the environmental concerns contained in the proposed rulemaking.

While this is good news for operators in Colorado, the state continues to be a hotbed of challenges to oil and gas exploration and development.  Statewide ballot initiatives to curtail or outright ban exploration have been put before voters in 2014, 2016 and 2018, and will likely end up on the ballot again in the future.  Additionally, with a new slate of state legislators and a new governor recently taking office, priorities concerning exploration and development in Colorado are likely to shift, potentially making operating in Colorado more difficult.