The Future of Oil and Gas Development in Colorado After Martinez

Coloradoans continue to see fights over oil and gas development in the news.  Following last month’s Colorado Supreme Court decision in COGCC v. Martinez, mineral owners in the Wildgrass neighborhood of Broomfield, Colorado, with the help of an anti-development group, Colorado Rising, filed suit on behalf of in the United States District Court for Colorado challenging the forced pooling provision of the Colorado Oil and Gas Act (Wildgrass Oil and Gas Committee v. State of Colorado, et al.).  Additionally, there have been statements from both the Colorado House Speaker and Senate Majority Leader about redirecting the objectives of the Colorado Oil and Gas Conservation Commission (COGCC).

Wildgrass

On Tuesday this week, the federal judge overseeing the Wildgrass case declined to issue a temporary restraining order requested by the plaintiffs after the operator indicated that drilling on the project would not begin until June.  The ruling now allows the COGCC time to consider the merits of the operator’s pooling application, which is set for hearing in March.  Among other claims, the complaint filed in Wildgrass challenges the constitutionality of Colorado’s forced pooling statute, stating that the statute violates mineral owners’ rights to contract, equal protection, freedom of association, and due process.

Forced pooling is a common practice in many oil and gas producing states.  It allows for the orderly development of oil and gas fields, the prevention of waste and protection of correlative rights, and the allocation of costs amongst owners within a pooled unit.  Colorado’s statute requires that every mineral owner be given the opportunity to voluntarily pool and participate in the proposed well, lease their minerals, or to “force pool” their minerals (in which case the mineral owner is paid a statutory royalty on production).  The Colorado Oil and Gas Conservation Commission must review all forced pooling applications filed by operators and must ensure that all owners are treated fairly before a pooling application will be approved and an order issued.

The judge’s ruling this week sets up what is sure to be a hot and contentious hearing at the COGCC next month.

State Legislature

There have also been discussions at the state capitol regarding the future of oil and gas development in Colorado following the Martinez decision.  While most state lawmakers have abandoned an increased setback rule-a proposition which would have increased setbacks to 2,500 feet failed on November’s ballot-there is now an increased focus on redefining the purpose of the COGCC.  Notably, there are some proposals, though in the early stages, which would eliminate the COGCC’s mission of fostering energy extraction and development and would add an increased focus on public health and safety.  Additionally, there has been some talk about providing for increased local control over oil and gas operations.

Discussions concerning the future of oil and gas development in Colorado are ongoing at the state capitol and no bills concerning oil and gas operations are up for debate.  Coloradoans are sure, however, to see action from the state legislature before the end of the legislative session this spring.