Hundreds of people packed the Colorado Supreme Court Tuesday to hear an appeal in one of the most talked-about oil and gas cases in recent memory, for which analysis has previously turned on five words in the Colorado Oil and Gas Conservation Act: “In a manner consistent with.”
The question on appeal in Colorado Oil and Gas Conservation Commission v. Martinez is narrow, but the outcome has the potential to affect the commission’s method of granting oil and gas drilling permits in the state.
The commission has argued Colorado’s Oil and Gas Conservation Act requires a balancing test between resource development and any impacts it may have on safety, health or the environment. They argue the commission has always interpreted its responsibility under the act this way, and applied it accordingly. The American Petroleum Institute and Colorado Petroleum Association joined the case on appeal as intervenors.
On the other side, the respondents say the commission should not issue permits for oil and gas drilling unless science shows, verified by a third party, that the drilling will not have negative impacts on the environment, health or safety.
The Court of Appeals decision at issue focused its analysis on part of the statute that declares natural resource development must be regulated “in a manner consistent with” protection of public health, safety and welfare. The central question to analyze: Does that phrase require the commission to apply a balancing test, or is avoiding negative impact on public health, safety and welfare a condition to meet before considering resource development?
Specific interpretation of “in a manner consistent with” did not form the crux of Tuesday’s arguments. But the spirit of the questions now before the Supreme Court are the same: What regulatory standard is the commission required to apply, and does it have authority to interpret that standard itself?
A group of people petitioned the commission in 2013 to consider a new rule requiring that the commission always put public welfare ahead of oil and gas development interests when considering whether to grant permits. The commission held a comment period and hearing but ultimately denied the petition in 2014.
The petitioners appealed in district court. The court concluded the Oil and Gas Conservation Act has clear, unambiguous language requiring a balance between resource development and protection of public health, safety and welfare. The commission did not act arbitrarily when it relied on advice from the attorney general’s office, the court found, and the petition denial was rational based on stakeholder input from both sides.
The Court of Appeals reversed the district court’s findings. The court agreed the statute language is unambiguous, but contrary to the district court, ruled the phrase “in a manner consistent with” indicates a condition to be met, not a balancing test. The decision took cues from other contexts that use the phrase, including one familiar to anyone who’s read an appeals court decision: “The case is remanded for proceedings in a manner consistent with this opinion.”
“The intention of the phrase ‘in a manner consistent with’ in these settings is not to instruct a court on remand to take action in a manner ‘balanced with’ the opinion from the appellate court, but instead instructs that the court on remand must take action subject to the appellate opinion,” wrote Judge Terry Fox in the opinion.
A Quibble Over Commission Authority
Fred Yarger, Colorado’s solicitor general who argued on behalf of the commission, called a requirement for zero cumulative impact from oil and gas drilling a request that “no human activity could satisfy.”
He argued the commission was within its discretion when it decided the act does not support the specific request put to it by the plaintiffs’ rule making petition. Yarger pointed to provision 106(2)(d) of the act, which specifies the commission’s regulatory authority and factors it has to consider when regulating wildlife, the environment, and public health and safety. The factors include the significance of adverse impacts from oil and gas drilling, whether the impacts can be mitigated or prevented, and whether the prevention and mitigation measures are feasible from both cost-effectiveness and technological perspectives.
“All of those elements of that particular statutory provision strongly indicate that the commission can’t adopt the zero-cumulative impact standard that the rule making request asked the commission to adopt,” Yarger said. “And that’s one of the central reasons why the commission decided it couldn’t pursue this particular request.”
Justice Richard Gabriel asked him to clarify whether he was referring to the commission’s authority as the power to decide the rule making request is inconsistent with the statute’s language, rather than authority as subject matter jurisdiction. Yarger said while he believes the authority to review the entire drilling supply chain down to the end energy consumer falls more appropriately under the jurisdiction of the Department of Public Health and Environment, he was indeed referring to the commission’s authority as the power to look at the regulatory standards given to the commission by the act and determine whether they match with the petitioned rule request.
Julia Olson, an Oregon-based attorney who argued on the respondents’ behalf, argued the commission does not have discretion to interpret the regulatory standards delegated to it by the act. She said she believes the threshold legal analysis it did in this case will also affect the commission’s future actions, because in denying the rule making petition, the commission decided it should balance oil and gas development with public health.
Gabriel pressed Olson on why she believes it should not be reasonable for the commission to decide it can’t adopt the requested standard of zero cumulative impact from oil and gas drilling and instead interpret the statutory standard as minimizing significant adverse impacts from it.
Olson argued the language in different sections of the statute require different standards for looking at the impacts of oil and gas operations. The section requiring the commission to protect public health and safety does not contain any language about a balancing test, she said. But a different section that mentions environmental and wildlife impacts requires the commission to mitigate significant impacts of that sort.
In response to a question from Gabriel, Yarger acknowledged his belief the Supreme Court could rule the commission’s decision to deny the rulemaking request was appropriate without having to make a broad-sweeping rule about what the required regulatory standard for the commission is — a balancing test between resource development and public health, or always putting public health first.
“I don’t necessarily think you need to decide for all time every interpretive issue that could possibly arise before the commission when it approaches public health and safety,” Yarger said. “I think you can look at this petition and affirm the commission’s order on the basis that it decided in this particular case it couldn’t grant what the respondents were requesting.”
— Julia Cardi