Following a general trend toward state preemption of local control over oil and gas development, the Colorado Supreme Court issued two opinions today finding that Colorado law preempts local hydraulic fracturing (“fracking”) bans and moratoria in Longmont and Fort Collins. The state constitution of Colorado gives local governments home rule authority, with article XX, section 6 providing that local law shall “supersede” any conflicting law of the state. This suggests that local governments in Colorado have relatively strong local powers. But the Colorado Supreme Court has long held that local laws may supersede state law only when the laws relate to “matters of local concern,” such as a local sales tax. When local laws involve matters of statewide concern, or matters of mixed state and local concern, state law supersedes the local laws if the local laws “conflict” with state law or are otherwise preempted.
Following its earlier Voss decision, the Colorado Supreme Court determined in its two cases today that hydraulic fracturing is a matter of mixed state and local concern, applying a four-factor test: 1) the importance of statewide uniformity of regulations, 2) extraterritorial impact of the local regulation, 3) whether the area has been traditionally regulated by state or local governments, and 4) whether the Colorado constitution specifically indicates that the regulatory area should be governed by state or local governments. With respect to the importance of statewide uniformity, the court noted that oil and gas sits in shared reservoirs underground, and that a local ban could impact the many rights of individuals who have an ownership interest in that pool of oil and gas—including rights in other local jurisdictions. Furthermore, a patchwork of local bans could make fracturing less productive and could cause “waste” of oil and gas, meaning that the maximum potential amount of oil and gas would not be extracted when fracturing occurred. The court also found that local fracturing bans impact other jurisdictions—possibly making it more expensive to produce oil and gas by forcing a company to drill outside of jurisdictional limits to access underground reserves—and possibly causing a “ripple effect” that encouraged other local governments to implement similar bans. For the third factor, the court noted a conflict. The State of Colorado has traditionally regulated oil and gas development, but local governments have traditionally regulated the types of uses allowed on land within their jurisdiction (including oil and gas uses). Thus, the court found that there is mixed state and local interest for this factor. Finally, the Colorado constitution does not make clear whether fracturing control should be within state hands or whether local governments should have exclusive land use authority.
The court then went on to determine whether state law preempted local control, using a conflict preemption analysis. In the Longmont case the court noted the importance of local land use control over oil and gas, pointing to the General Assembly’s having “recognized the propriety of local land use ordinances that relate to oil and gas development.” And the court emphasized that the State of Colorado lacks exclusive control over regulating the technical aspects of oil and gas development. However, the court noted that the Colorado Oil and Gas Conservation Commission regulates certain aspects of fracturing—indeed, the court perhaps exaggerated the extent to which the state regulates fracturing. For example, in the Longmont case the court characterized Colorado’s requirements for disclosing fracturing chemicals as requirements that “regulate the fracturing process.” This is perhaps a reach because the requirements are merely informational and do nothing to substantively limit the fracturing process. However, the court also pointed to Colorado’s regulation of the disposal of waste from fractured wells. It then went on to find that local bans on fracturing and the storage and disposal of fracturing wastes “materially impede” state law, which allows fracturing and regulates it. It thus determined that state law preempts local moratoria and bans relating to fracturing.
These opinions follow similar preemption of local regulation and bans on fracturing in Louisiana (Energy Management Corp. v. City of Shreveport, 397 F.3d 297 (5th Cir. 2005)), New Mexico (Swepi v. New Mexico, 81 F.Supp. 3d 1075 (D.N.M. 2015)), Ohio, Oklahoma, Texas, and West Virginia. The exceptions to the trend are New York and Pennsylvania.
Many of these cases, including those decided today, have not yet fully grappled with the challenge of reconciling strong home rule authority over land use matters with a state's interests in regulating oil and gas development. Instead, the courts tend to promptly find preemption, concluding that a state's interests win out over local control despite the state's having previously granted extensive home rule authority to its local "arms."