United States: Colorado Supreme Court Determines Cities' Fracking Bans Preempted By State Law

City of Longmont v. Colo. Oil and Gas Ass'n, 369 P.3d 573 (Colo. 2016), 2016 Colo. LEXIS 442; City of Fort Collins v. Colo. Oil and Gas Ass'n, 369 P.3d 586 (Colo. 2016), 2016 Colo. LEXIS 443. In two concurrent opinions, the Colorado Supreme Court invalidated two cities' bans on fracking and the storage of fracking wastes within the cities' limits. The city of Longmont (Longmont) completely banned the fracking process within the city's limits; whereas, the city of Fort Collins (Fort Collins) enacted a five-year moratorium on the fracking process. The Colorado Supreme Court held that both bans conflicted with state law in their operational effect and, thus, were preempted by state law.

In 2012, the citizens of Longmont voted to amend Longmont's charter to prohibit fracking and the storage or disposal of fracking wastes within city limits. One year later, the citizens of Fort Collins voted in favor of a citizen-proposed ordinance that placed a five-year moratorium on the fracking process. Both Longmont and Fort Collins are home-rule cities, meaning that the Colorado Constitution guarantees them the right to draft and amend their own charters and to regulate purely local matters without interference from the state legislature. The Colorado Oil and Gas Association (Association) sued both cities in separate actions. The Association sought declaratory judgment that Colorado's Oil and Gas Conservation Act preempts both cities' ordinances and a permanent injunction. The trial courts granted summary judgment in the Association's favor. The cities separately appealed, and the court of appeals requested that the cases be transferred to the Colorado Supreme Court for decision. The Colorado Supreme Court accepted both cases In City of Longmont, the Colorado Supreme Court began its analysis by acknowledging that Colorado has consistently found that, in matters of local concern, a home-rule ordinance supersedes a conflicting state law. However, where a home-rule ordinance conflicts with state law in a matter of either statewide or mixed state and local concern, state law supersedes the local ordinance. 2016 Colo. LEXIS 442 at *16–18. Thus, in order to resolve the preemption issue, the court had to first determine whether the local ordinance involved a matter of statewide, local, or mixed state and local concern. Because prior law had created some confusion about the proper analysis to determine whether state law preempts local regulation, the court clarified that "the question of whether a matter is one of statewide, local, or mixed state and local concern is separate and distinct from the question of whether a conflict between state and local law exists." Id. at *15. The court further made clear that "in virtually all cases, this analysis will involve a facial evaluation of the respective regulatory schemes, not a factual inquiry as to the effect of those schemes 'on the ground.'" Id.

To determine whether a regulatory matter is one of statewide, local, or mixed state and local concern, the court examined four factors:

  1. the need for statewide uniformity of regulation;
  2. the extraterritorial impact of the local regulation;
  3. whether the state or local governments have traditionally regulated the matter; and
  4. whether the Colorado Constitution specifically commits the matter to either state or local regulation.

Id. at *20. Assessing Longmont's ban, the court found that the first factor weighed in favor of preemption because the fracking ban could impede the state's interest in fair and efficient development of gas and oil resources by potentially exaggerating production in other areas while depressing production within the city and could result in the uneven and potentially wasteful production of oil and gas from pools that extend beyond the city's limits. Id. at *23–26. The court found that the second factor also weighed in favor of preemption because the ban could create a ripple effect of citywide bans across the state, resulting in a de facto statewide ban on fracking. Id. at *27–28. The court found the third and fourth factors to be inconclusive because fracking touches on both the state's oil and gas regulation and Longmont's regulation of land use. Further, the Colorado Constitution does not suggest that the issue lies squarely within the purview of either state or local regulation. Id. at 29–30. For these reasons, the court determined that Longmont's fracking ban was a mixed state and local concern. Id. at *31.

The court then turned to whether the Longmont ordinance conflicts with state law. The court observed that there are three forms of preemption: express, implied, and operational conflict. Id. at *33. Finding that neither express nor implied preemption applied, the court focused its analysis on whether the operational effect of the ordinance conflicts with the application of state law. Id. at *44–48. In analyzing this form of preemption, the court looked at whether the effectuation of the local interest would materially impede the state's interest. Id. at *42. The court noted that the state has evinced an interest in both fracking and the disposal and storage of fracking waste through the promulgation of extensive regulations on both issues. Id. at *50–53. The Longmont ordinance, however, does not simply regulate, but wholly prohibits the fracking process, even if it complies with the state laws and regulations. Therefore, the court found that the Longmont ordinance conflicts with state law in its operational effect. Id. at *54.

In City of Fort Collins, the Colorado Supreme Court addressed a slightly different fracking ordinance, which did not altogether ban the fracking process, but instead placed a five-year moratorium on it within the city's limits. Citing its decision in Longmont, the court determined that the moratorium involved a matter of mixed state and local concern. 2016 Colo. LEXIS 443, at *16. The court then looked at whether the moratorium conflicted with state law. Just as it did in Longmont, the court focused on operational effect preemption. Id. at *26. The court determined that Fort Collins's moratorium, like the Longmont ban, rendered the state's statutory and regulatory scheme "superfluous, at least for a lengthy period of time." Id. at *30. Thus, the court found that the moratorium "materially impedes the effectuation of the state's interest in the efficient and responsible development of oil and gas resources." Id. The court further found that, while the Fort Collins ordinance only temporarily banned fracking, this fact did not fundamentally change the outcome because it nevertheless completely banned fracking, at least during that time. Id. at *31–34. The court referenced prior case law invalidating even a one-year prohibition for the same reason. Therefore, the Colorado Supreme Court affirmed the trial court's ruling that granted summary judgment and invalidated the Fort Collins moratorium.

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