COLORADO COURT OF APPEALS 2 East 14th Avenue Denver, CO 80203 ___________________________________________ Appeal from Boulder County District Court The Honorable D.D. Mallard Case No. 2013 CV 63 ________________________________________ Defendant/Appellant: THE CITY OF LONGMONT Plaintiffs/Appellees: COLORADO OIL AND GAS ASSOCIATION, COLORADO OIL AND GAS CONSERVATION COMMISSION, and TOP OPERATING COMPANY ___________________________________________ Eugene Mei, City Attorney Attorney Reg. No.: 33442 E-Mail: eugene.mei@ci.longmont.co.us Daniel E. Kramer, Assistant City Attorney Attorney Reg. No.: 43752 E-Mail: dan.kramer@ci.longmont.co.us City of Longmont Civic Center Complex 408 3rd Avenue Longmont, CO 80501 Telephone: 303-651-8616 Facsimile: 303-651-8914 Phillip D. Barber, Esq. 1675 Larimer Street, Ste. 620 Denver, Colorado 80202 Telephone: (303) 894-0880 Facsimile: (720) 904-5755 E-mail: Phillipbarber@aol.com Attorney Reg. No.: 9623

COURT USE ONLY _________________________ Case No.: 2014CA1759

OPENING BRIEF OF DEFENDANT-APPELLANT CITY OF LONGMONT

DATE FILED: January 15, 2015 5:16 PM

mailto:eugene.mei@ci.longmont.co.usmailto:dan.kramer@ci.longmont.co.usmailto:Phillipbarber@aol.com

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TABLE OF CONTENTS

ISSUES PRESENTED ............................................................................................... 1

STATEMENT OF THE CASE .................................................................................. 2

A. Nature of the Case ............................................................................................ 2

B. Proceedings Below ........................................................................................... 3

C. Disposition Below ............................................................................................ 5

D. Statement of Facts ............................................................................................ 6

1. Frackings Risks to the Community .............................................................. 8

2. Frackings Alternatives ...............................................................................10

SUMMARY OF ARGUMENT ...............................................................................12

ARGUMENT ...........................................................................................................15

I. The district court erred by disregarding local interests in holding Article XVI is not within the Citys home rule authority. .........................................15

A. The standard of review is de novo, and Article XVI is presumed valid. ...15

B. Discussion ...................................................................................................17

II. The district court applied an improper test for operational conflict. .............26

A. The standard of review is de novo. .............................................................26

B. Discussion....................................................................................................26

III. The City does not forbid what the State authorizes, because no state statute or regulation explicitly authorizes fracking. ..............................................31

A. The standard of review is de novo. .............................................................31

B. Discussion....................................................................................................32

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IV. The district court improperly resolved disputed issues of material fact at summary judgment, and did not base its decision on a fully developed evidentiary record as required by the Supreme Court. ..............................38

A. The standard of review is de novo, and Article XVI is presumed valid. ...38

B. Discussion....................................................................................................39

CONCLUSION ........................................................................................................51

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TABLE OF AUTHORITIES

Cases

Alabama Recycling Assn, Inc. v. City of Montgomery, 24 So. 3d 1085, 1090 (Ala. 2009) ............................................................... 33 AviComm, Inc. v. Colorado Pub. Utilities Commn, 955 P.2d 1023, 1031 (Colo. 1998) ......................................................... 48 Bauer v. Waste Mgmt. of Connecticut, Inc., 662 A.2d 1179, 1188 (Conn. 1995) ............................................................. 33 Baum v. City & Cnty. of Denver, 147 Colo. 104, 111, 363 P.2d 688, 691 (1961) ..................... 16, 25, 38, 50 Bd. of Cnty. Commrs of Gunnison Cnty. v. BDS Intl, LLC., 159 P.3d 773, 778 (Colo. App. 2006) ............................................. passim Bd. of Cnty. Commrs, La Plata Cnty. v. Bowen/Edwards Associates,

Inc., 830 P.2d 1045, 1056-59 (Colo. 1992) .................... passim/Exhibit 1 Bd. of Cnty. Commrs, LaPlata Cnty. v. Colorado Oil & Gas

Conservation Commn, 81 P.3d 1119, 1123 (Colo. App. 2003) ........................................... passim Churchey v. Adolph Coors Co., 759 P.2d 1336, 1345 (Colo. 1988) ......................................................... 22 City & Cnty. of Denver v. State, 788 P.2d 764, 767 (Colo. 1990) ..................................... passim/Exhibit 2 City of Claremont v. Kruse, 100 Cal. Rptr. 3d 1, 20-21 (Cal. Ct. App. 2009) ........................................... 33 City of Commerce City v. State, 40 P.3d 1273, 1280 (Colo. 2002) ..................................................... 18, 24 Colorado Min. Assn v. Bd. of Cnty. Commrs of Summit Cnty., 199 P.3d 718, 737 (Colo. 2009) ..................................................... passim Condo v. Conners, 266 P.3d 1110, 1114 (Colo. 2011) ......................................................... 23 Jancyn Mfg. Corp. v. Suffolk Cnty., 518 N.E.2d 903, 907-08 (N.Y. 1987) ..................................................... 33

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JJR 1, LLC v. Mt. Crested Butte, 160 P.3d 365, 372 (Colo. App. 2007) ..................................................... 16 Kingswood Oil Company v. Corporation Commission, 396 P.2d 1008, 1009-10 (OK 1964) ....................................................... 46 Moore v. City of Boulder, 29 Colo. App. 248, 252, 484 P.2d 134, 136 (1971) .......................... 16, 38 New Mexicans for Free Enter. v. City of Santa Fe, 126 P.3d 1149, 1165-66 (N.M. Ct. App. 2006) ............................................. 33 People ex rel. S.N. v. S.N., 2014 CO 64, 16 ............................................................................ 38, 43 Rancho Lobo, Ltd. v. Devargas, 303 F.3d 1195 (10th Cir. 2002) ................................................. 33, 35, 37 Ray v. City and County of Denver, 109 Colo. 74, 77, 121 P.2d 886, 888 (1942) ........................................... 28 Sant v. Stephens, 753 P.2d 752, 756 (Colo. 1988) ............................................................. 32 Shelter Mut. Ins. Co. v. Mid-Century Ins. Co., 246 P.3d 651, 657 (Colo. 2011) ....................................................... 15, 38 Terry v. City of Portland, 269 P.2d 544, 550-51 (Or. 1954) ................................................................ 33 Town of Frederick v. N. Am. Res. Co., 60 P.3d 758, 765 (Colo. App. 2002) ................................................. 28, 29 Vickery v. Vickery, 271 P.3d 516, 520 (Colo. App. 2010) revd on other grounds sub nom. Vickery v. Evans, 266 P.3d 390 (Colo. 2011) ............................................................... 26, 31 Voss v. Lundvall Bros., 830 P.2d 1061 (Colo. 1992) ....................................................... 23, 25, 39 Webb v. City of Black Hawk, 2013 CO 9, 19 .................................................................................... 18

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Weisbart v. Agri Tech, Inc., 22 P.3d 954, 956 (Colo. App. 2001) ........................................... 40, 43, 49 Statutes

34-60-102(1)(a)(I) ..................................................................................... 48 34-60-103(13) ........................................................................................... 44 34-60-103(13)(c) ......................................................................................... 46 34-60-103(4) ............................................................................................. 45 34-60-106(2)(b) ......................................................................................... 35 Other Authorities

John S. Lowe, Oil & Gas Law in a Nutshell (West 5th Ed. 2009) ...................... 46 Press Release, N.Y. State Dept of Envtl.Conservation, New York State

Department of Health Completes Review of High-volume Hydraulic Fracturing (Dec. 17, 2014) ........................................................................................ 20

Rules

C.R.C.P 56 ............................................................................. 14, 39, 47, 50 Regulations

Article XVI ....................................................................................... passim Colo. Code Regs. 404-1:201 ................................................................... 29 Colo. Code Regs. 404-1:205, :205A, :305.c, :316C, :805 ...................... 36 Constitutional Provisions

Colo. Const. art. XX, 6 .......................................................................... 17

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CERTIFICATE OF COMPLIANCE

I hereby certify that this brief complies with all requirements of

C.A.R. 32, including all formatting requirements set forth in these

Rules. Specifically, the undersigned certifies that:

The Brief complies with C.A.R. 28(g) in that it contains 9205

words.

The Brief complies with C.A.R. 28(k) because it contains under a

separate heading, a concise statement of the applicable standard of

appellate review with citation to authority; and a citation to the precise

location in the record (R.___, p. ___), not to an entire document, where

the issue was raised and ruled on.

I acknowledge that my brief may be stricken if it fails to comply

with any of the requirements of C.A.R. 28 and C.A.R. 32.

Respectfully submitted, PHILLIP D. BARBER, P.C.

s/Phillip D. Barber__________________ Phillip D. Barber

Attorney for the Plaintiffs-Appellees and Cross-Appellants

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ISSUES PRESENTED

1. A home rule citys law supersedes a state law if the local

interests at stake outweigh the States interests. The court below

disregarded the City of Longmonts evidence that the local interests in

this case are strong and outweigh the States interests. Should the

court have considered this evidence and, at summary judgment, viewed

it in the light most favorable to the City?

2. The test for whether state law preempts a local oil and gas

regulation is the operational conflict test, which asks whether the

local law materially impairs or destroys the States interests. The test

is not whether a local law forbids what the State authorizes. The

district court declared the Citys law was preempted because it said the

City forbids what the State authorizes. Did the court employ an

improper test for preemption?

3. No Colorado law expressly authorizes fracking. Was the

district court incorrect to hold that Article XVI prohibits what the State

authorizes?

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4. A court must perform the operational conflict test on an ad

hoc basis under a fully developed evidentiary record. Also, a court may

not resolve disputed issues of material fact at summary judgment. The

court below denied the Citys request for an evidentiary hearing. It

found operational conflict at summary judgment only by resolving

disputed issues of material fact against the City. Did the court

improperly apply the C.R.C.P. 56 summary judgment standard, and

should it instead have allowed the City to develop a full evidentiary

record at trial?

STATEMENT OF THE CASE

A. Nature of the Case

In a 2012 vote, the citizens of Longmont amended the Citys home

rule charter to prohibit an oil and gas operation known as hydraulic

fracturing (fracking) within the Citys boundaries. The Boulder

County District Court overturned the prohibition at summary

judgment, ruling it was preempted by state law. On appeal, the City

asserts that the court analyzed preemption incorrectly and improperly

disregarded material facts. Many of these facts involve intricacies of

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drilling technology, oil and gas economics, mineral geology, and risks

fracking poses to public health and the environment. But at its core,

this case is as much about the principles of preemption as it is about

minerals or public health.

B. Proceedings Below

This action began when the Colorado Oil and Gas Association

(Association), a trade association, sued Longmont to overturn Article

XVI of the Longmont Municipal Charter, the citizen-initiated fracking

prohibition. The Association alleged Article XVI is preempted by the

Colorado Oil and Gas Conservation Act (Act), and sought a declaration

to that effect and an injunction against its enforcement. TOP Operating

Company, a local oil and gas operator, intervened as a Plaintiff. The

Colorado Oil and Gas Conservation Commission (Commission), the

state agency charged with implementing the Act, consented to joinder

as a necessary party Plaintiff. Four parties intervened as Defendants:

Our Health, Our Safety, Our Longmont; the Sierra Club; Earthworks;

and Food and Water Watch.

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Plaintiffs claimed that Article XVI amounts to a de facto ban on oil

and gas operations, usurps the Commissions authority to regulate

fracking, and is superseded by the Act and the Commissions

regulations. CF, p. 2300, 35-36. The Commission also argued that

Article XVI is preempted by another statute, the Areas and Activities of

State Interest Act. Plaintiffs challenges are facial, based solely on the

language of Article XVI and not on its application to a specific operator

or well. CF, pp. 130 9, 314, 2294-95, 2366-67.

The City filed counterclaims for declaratory judgment, alleging

Article XVI is within the Citys authority, harmonizes with state law

and, in the alternative, supersedes state law as a matter of local

concern.

Originally, the Association filed suit in Weld County District

Court, but that court granted the Citys motion to transfer the case to

the Boulder County District Court.

The latter court set the case for a ten-day evidentiary hearing that

never came to pass. CF, p. 977. The three Plaintiffs quickly filed

motions for summary judgment, the last on April 2, 2014, three weeks

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before discovery could begin. They supported their motions with

affidavits proclaiming that Article XVI is a de facto ban on all oil and

gas drilling within the City. The City moved for additional time under

C.R.C.P. 56(f) to conduct discovery, to depose the Plaintiffs affiants,

and prepare its evidence and responses to the three motions. CF, pp.

758-68. The court granted the continuance, yet gave the City less time

than requested just five weeks total to complete its discovery before

its responses were due. CF, p. 964. The court also limited what the

City could ask in depositions, narrowing the focus to the Plaintiffs

affidavits. Id.

At oral argument the Plaintiffs reversed course and no longer

take the position that a ban on fracking is a de facto ban on drilling.

CF, p. 2052.

C. Disposition Below

After briefing and oral argument, the court granted the Plaintiffs

summary judgment motions and vacated the evidentiary hearing. CF,

p. 2054. Although Plaintiffs accepted that Article XVI is not a de facto

ban, the court agreed with their argument that [t]he Commission

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permits hydraulic fracturing and Longmont prohibits it. CF, p. 2051.

The court called this an obvious operational conflict between state and

local law, preempting Article XVI. Id.

The court rejected the Citys argument that Article XVI is

predominantly a matter of local concern which supersedes state law

under the Colorado Constitution. Finding that the State had at least

some interest in oil and gas production, the court declined to consider

the Citys evidence that Article XVI is predominantly a matter of local

concern. CF, p. 2050. Instead it held that Article XVI is a matter of

mixed state and local concern where state law supersedes a conflicting

local law. Id.

Finally, the court declared Article XVI invalid and enjoined

its enforcement, but stayed the injunction pending appeal. CF, p.

2054.

D. Statement of Facts

Fracking is a process that has been used in some oil and gas wells

in Colorado only since the 1970s. CF, pp. 1429 10, 1767 at 31-32. It is

a completion process, meaning it comes after drilling a wellbore but

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before the well produces marketable oil and gas. CF, p. 1765, at 19.

Fracking involves pumping water, sand, and (typically) hazardous

chemicals down a well, under pressure, to widen underground fissures

and purge oil and gas from the mineral formation. CF, pp. 1272-75,

1426-27, 5, 1579.

On November 6, 2012, the citizens of Longmont passed a ballot

measure amending Longmonts home rule charter. Codified as Article

XVI of the charter, the amendment aims to protect Longmonts

residents from harms associated with hydraulic fracturing, including

threats to public health and safety, property damage and diminished

property values, poor air quality, destruction of landscape, and pollution

of drinking and surface water. CF, p. 567. Article XVI prohibits

fracking in the City as well as openly storing or disposing of fracking

wastes. Id.

In response to the Plaintiffs summary judgment motions, the City

presented evidence, including expert testimony, bolstering two main

factual claims: fracking poses serious risks to the local community, and

there are alternatives to fracking.

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1. Frackings Risks to the Community

Fracking poses significant risks to the health, safety, and welfare

of the City and its people. See generally CF, pp. 1229-86, 1469-1646,

1655-1707, (over 200 pages of evidence on these risks). Scientific

literature reveals that fracking chemicals end up in the air over half a

mile from a well, causing headaches, dizziness, nausea, memory loss,

respiratory irritation, nosebleeds, and endocrine disruption. CF, pp.

1271-76. Many of these health problems are not expressed until later in

life, long after exposure occurs. CF, p. 1273, 21. Longer term effects

include cancer and exacerbation of chronic diseases including asthma,

chronic obstructive pulmonary disease, and cardiac disease. CF, pp.

1275, 32; see generally CF, pp. 1229-86. Fracking near maternal

homes correlates with babies having low birth weight, smaller skull

circumferences, slower cognitive development, and birth defects. CF,

pp. 1274, 25, 28, 1618-46. Air pollution from volatile organic

compounds near fracking operations is five times the level the U.S.

Environmental Protection Agency says can be harmful. CF. pp. 1534-

38.

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Fracking operations also cause surface and ground water

pollution, noise, dust, light pollution, an increased risk of hazardous

spills, and according to regulatory agencies in Ohio and Oklahoma

earthquakes. CF, pp. 15 4, 879 n.5, 911 at 56 ll. 18-25, 944 at 185,

946 at 196, 1309-11, 1427 6, 1506-09, 1537, 1578-88, 1655-73, 1800 at

141-42. Six of ten fracked well sites tested in the City have polluted the

surrounding surface and groundwater. CF, pp. 1670-72, 1680-86. One

well, contaminated with more than 100 times the lawful limit for

benzene, sits just a few hundred feet from a middle school. CF, pp.

1683-86. Another well leaked ethylbenzene adjacent to a public

reservoir. CF, pp. 925-26 at 112-13.

Traffic fatalities rise three- to fourfold in a densely fracked area,

as trucks deliver millions of gallons of water and fracking chemicals to

each well. CF, pp. 1284, 1469-84, 1501-04, 1579, 1751 at 67. Oil tanks

catch fire, posing public safety risks and straining a communitys ability

to mitigate those risks. CF, pp.1510-32. Quality of life declines as the

community encounters social disorder associated with the rapid

industrialization. CF, 1469-84. And fracking in an area slashes

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property values by five to fifteen percent. CF, pp. 1096 12-14; 1094-

1207, 1540-42, 1548-76.

Fracking has ushered in a sea change in oil and gas technology,

enlarging operations and multiplying wells impacts. See CF, p. 878,

1427, 6. Where a well pad once would encompass just one or two

wells, fracking sites now accommodate upwards of sixty wells and

resemble large industrial complexes. CF, pp. 1728-41. Instead of two to

three hundred thousand gallons of fluid, wells are now being fracked

with 7.8 million gallons per well. CF, pp. 1750 at 61-64, 1751 at 67.

Compared to the risks that fracking poses to the community, the

economic benefit of fracking in Longmont is insignificant to either the

City or the State. CF, p. 1214 (extraction taxes represent .06 percent of

Longmonts budget).

2. Frackings Alternatives

Colorado oil and gas wells prospered for over a century in

Colorado before fracking arrived. CF, p. 1429, 10. Even today,

fracking is unnecessary in the Longmont area. Many producing wells in

Longmont, near Longmont, and elsewhere in Colorado have never been

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fracked. CF, pp. 1213 9, 1414-23 (Commissions records of some of the

wells that have not been fracked), 1427-30, 7-14.

One process used as a substitute for fracking is underbalanced

drilling. Operators use drilling mud to bring the drill bits cuttings to

the surface. CF, p. 1790 at 34. Common methods of drilling force the

drilling mud into the mineral formation under pressure to prevent the

product from coming to the surface at that time. CF, 1426-27, 5, 1778

at 106, ll. 16-24. Then, operators frack these wells mainly to create

cracks through the drilling mud left in the wellbore. Id.

Underbalanced drilling, on the other hand, reduces or eliminates the

drilling mud and allows a wells natural pressure to produce oil and gas

as it is being drilled. CF, p. 1428, 8. With these reduced pressures,

the drilling mud never damages the wellbore in the first place. Id. In

this way, underbalanced drilling eliminates any need to frack, and also

results in the well producing more oil and gas overall. Id., CF, p. 1428-

29, 9. The operators who swore affidavits for the Plaintiffs admitted

in deposition that they had never tried underbalanced drilling. E.g.,

CF, pp. 1793 at 73, ll. 4-20.

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Because of these alternatives, the Citys evidence tends to show

there is little reason to believe that banning hydraulic fracturing will

limit the production of oil and gas in the city limits of Longmont. CF,

pp. 1214-15, 13.

SUMMARY OF ARGUMENT

The court below used the drastic remedy of summary judgment to

void a home rule charter amendment, even though the City presented

hundreds of pages of evidence raising disputes of material fact.

Home rule cities are not mere subordinates to the State. In

matters of local concern, home rule cities stand on equal footing with

the State and their laws supersede state law in a conflict. To tell if a

local law involves such a matter of local concern, a court must balance

the local interests at stake with the state interests and determine which

weigh more. If the Citys interests outweigh the States, state law

cannot preempt the local law.

Here, the City presented dozens of documents showing that local

interests in protecting the communitys health, safety, and welfare

from the risks of fracking are real, and strong. Yet the court refused

13

to consider any of this evidence. It declined to conduct the required test

of balancing the Citys and the States interests. Instead it assumed,

incorrectly, that any State interest in the matter was enough to

overcome the Citys home rule authority. This Court should correct this

misunderstanding.

The court then moved to the issue of whether Article XVI conflicts

with state law. Under Supreme Court case law, the only relevant kind

of conflict is operational conflict, which arises only where a local law

materially impedes or destroys the states interests. Instead, the courts

main concern was whether Article XVI forbids something the state

authorizes. This Court has specifically held this is an incorrect test for

preemption. It would invalidate far more local laws than the correct

test set forth by this Court and our Supreme Court.

But even under this incorrect test, Article XVI is still valid. The

full statement of the test is that the City may not prohibit what the

State explicitly authorizes. While Article XVI does prohibit fracking, no

state statute, regulation, or permit system authorizes fracking in any

explicit, express, or affirmative way.

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To apply the correct test, the operational conflict test, a trial court

must make findings of fact on an ad hoc basis. To do this, it must allow

the parties to develop a full evidentiary record. As always, if material

facts are in dispute, summary judgment may not issue. Here, the City

raised several issues of material fact with competent evidence. Expert

affidavits and public records show that fracking is unnecessary to

extract oil and gas efficiently, that alternative extraction methods do

not waste resources or unfairly reduce the profits of neighboring

landowners, and that Article XVI actually furthers state interests by

ensuring that oil and gas operations proceed responsibly. In other

words, facts before the district court showed that Article XVI does not

impede the States interests that it passes the operational conflict

test. In these circumstances, under both C.R.C.P. 56 and Supreme

Court case law specific to oil and gas, the district court should have

denied summary judgment and moved to the factfinding stage. It did

not, and was in error.

This Court should correct the district courts misunderstandings of

the controlling law and remand for the necessary factfinding.

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ARGUMENT

The City presented facts precluding summary judgment for the

Plaintiffs. Every issue presented to this Court falls under a de novo

standard of review, and Plaintiffs must prove Article XVI invalid

beyond a reasonable doubt.

I. The district court erred by disregarding local interests in holding Article XVI is not within the Citys home rule authority.

A. The standard of review is de novo, and Article XVI is presumed valid.

Whether Article XVI is a matter of local concern, and therefore

supersedes state law, is a legal issue, requiring a court to consider the

totality of the circumstances in reaching its conclusion. Webb v. City of

Black Hawk, 2013 CO 9, 16. Review is de novo. Id. The City raised

the issue at summary judgment. CF, pp. 1346-71.

Appellate courts review grants of summary judgment de novo as

well. Shelter Mut. Ins. Co. v. Mid-Century Ins. Co., 246 P.3d 651, 657

(Colo. 2011). Summary judgment may issue only if no material facts

16

are genuinely in dispute and the moving party is entitled to judgment

as a matter of law. Id.

Preemption based on a state statute, in this case the Act, is a

specialized rule of statutory construction and is reviewed de novo.

Colorado Min. Assn v. Bd. of Cnty. Commrs of Summit Cnty., 199 P.3d

718, 737 (Colo. 2009) (Summit County).

A citys legislative enactment is, like a state statute, presumed to

be valid, and the one assailing it bears the burden of overcoming that

presumption, and courts indulge every intendment in favor of its

validity. Baum v. City & Cnty. of Denver, 147 Colo. 104, 111, 363 P.2d

688, 691 (1961). [I]t has repeatedly been stated that the invalidity of

an ordinance must be established beyond a reasonable doubt. Id. at

111, 692; accord JJR 1, LLC v. Mt. Crested Butte, 160 P.3d 365, 372

(Colo. App. 2007). The presumption applies not only to a local

enactments unconstitutionality but to its validity in a preemption

challenge. See Moore v. City of Boulder, 29 Colo. App. 248, 252, 484

P.2d 134, 136 (1971).

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B. Discussion

The Colorado Constitution gives home rule cities authority over

matters of local concern. Colo. Const. art. XX, 6. In these matters,

home rule cities have plenary authority and a local law trumps a

conflicting state law. City & Cnty. of Denver v. State, 788 P.2d 764, 767

(Colo. 1990) (Denver) (attached as Exhibit 2). By contrast, in matters

of state concern, state law controls. Id. In matters of mixed state and

local concern, state and local laws can coexist, but state laws control

when the two conflict. Id. Sections II-IV infra describe the type of

conflict Plaintiffs must prove in this case. This Section addresses the

more fundamental question of whether Article XVI is fully within the

Citys home rule authority as a matter of local concern.

The test for whether a matter is of local concern, and not of state

or mixed concern, is whether the local interests in the matter outweigh

the states interests. Webb, 2013 CO 9, 19. Just because the state has

an interest in an issue important to a home rule city does not make it a

matter of state or mixed state and local concern. Denver, 788 P.2d at

767. If the states interests are relatively minor compared to the citys

18

based on the totality of the circumstances, the local interests outweigh

the states, and the matter is declared to be of local concern. Id. at 771.

Four factors have assisted the courts in assessing whether state or

local interests are weightier in any given case, but the courts have

stated plainly that these factors are non-exclusive and are not

themselves the statement of the home rule assessment. City of

Commerce City v. State, 40 P.3d 1273, 1280 (Colo. 2002); CF, p. 739.

That said, the four named factors are (1) the states interest in uniform

regulation, (2) extraterritorial effects of the local law, (3) whether the

state or the city has traditionally regulated the issue, and (4) whether

the text of the Colorado Constitution answers the question. Webb, 2013

CO 9, 19. The assessment must also include any other relevant

factors, including the local interests in the local law being challenged.

Webb, 2013 CO 9, 19; Denver, 788 P.2d at 767-68, 770-72.

One case where local interests outweighed state interests was City

and County of Denver v. State. There, a state statute expressly forbid

municipalities from restricting their employees place of residence, but

Denver required its employees to live in the city. 788 P.2d 765. The

19

State claimed a need for uniform regulation (the first factor), and

objected to the extraterritorial effects of the ordinance (the second

factor). Id. at 768-69. The Supreme Court, however, held that the local

interests in reinvesting money in the community, making employees

more available in an emergency, and making them overall more

attentive, compassionate, and diligent in their work were stronger

than the States interests. Id. at 771. Therefore, the matter was one of

local concern, and the local law applied despite a contrary state law. Id.

In the instant case, the City presented extensive, unrebutted

evidence that fracking is not necessary to produce oil and gas, and

harms local health, local safety, the local environment, local property

values, the local social fabric, and the resources of the local government.

See supra Statement of Facts. The evidence on the risks of fracking is

credible and well-developed, leading the State of New York to prohibit

20

the practice statewide because the risks substantially outweigh any

potential economic benefits. 1

But the district court did not consider this evidence nor give the

City a chance to present it in court, saying instead it was not in a

position to agree or disagree with any of these exhibits. CF, p. 2050.

Rather than conduct an evidentiary hearing and weigh these strong

local concerns against the relevant state interests, the court simply

found the risks of fracking insufficient to completely devalue the

States interest. Id. Therefore the court concluded that Article XVI is

a matter of mixed state and local concern. To decide otherwise, the

court said, would be a public policy rather than a legal decision, one

that favors protection from health, safety, and environmental risks

over the development of mineral resources. Id. Ultimately, the court

called this question above [its] pay grade and left it for the legislature

or a different court to decide. R. Tr. (July 9, 2014), p. 69, l. 19; CF, p.

2050.

1 Press Release, N.Y. State Dept of Envtl.Conservation, New York State Department of Health Completes Review of High-volume Hydraulic Fracturing (Dec. 17, 2014), http://www.dec.ny.gov/press/100055.html (emphasis added).

http://www.dec.ny.gov/press/100055.html

21

These statements demonstrate two basic misunderstandings of

the home rule analysis. First, the court thought that deciding a home

rule question in favor of a municipality would be an impermissible

public policy action, rather than a constitutional function. Contra

Webb, 2013 CO 9, 17-18. But because this test emanates from the

Constitution, it is for the courts to apply. It cannot be passed off to the

General Assembly, the executive branch, or a state agency. When

considering a citys home rule authority, a court is not selecting its

favored public policy, but maintaining constitutional balance among the

political divisions and subdivisions of the State. Webb, 2013 CO 9, 17

(in local matters, a home-rule city is not inferior to the General

Assembly).

Second, the court thought that for Article XVI to be a matter of

local concern, the State must have no interest whatsoever in the matter

or that its interest must be completely devalue[d]. Contra Denver, 788

P.2d at 771. The Denver Court, in contrast, did not find it necessary to

completely devalue the States interests. 788 P.2d at 771. The States

22

interests must be minor or outweighed relative to the Citys for a matter

to be of local concern not completely nonexistent.

To be sure, state interests influence the home rule assessment.

But the City presented evidence concerning those state interests as

well, including undisputed evidence that Article XVI has an

insignificant impact on the states economic interests. CF, pp. 1211-14.

Other alleged state interests are in dispute, including the first three of

the four factors described above. First, as the court below hinted,

fracking regulations need not be uniform statewide. CF, pp. 1356-60,

2041 n.3. Second, Article XVI has no extraterritorial effect, as

demonstrated when one operator fracked right up to the City limits.

CF, pp. 1724 at 123, 1934 at 74-76. Third, the State has not

traditionally placed any substantive restrictions on fracking. CF, pp.

1748-49, 1775 at 70-71, 1780 at 113-15. At summary judgment, the

Citys competent evidence on these matters raised issues of disputed

material fact and should have been taken as true. Churchey v. Adolph

Coors Co., 759 P.2d 1336, 1345 (Colo. 1988). On the fourth factor, the

23

Constitution does not say whether the State or the City is responsible

for governing fracking.

This Court could hold that Article XVI is a matter of local concern

based on the undisputed facts, but it need not make such a holding to

decide this appeal in the Citys favor. Instead, this Court need only

acknowledge that, because the court below disregarded the Citys

interests, the proper weighing analysis has not yet been performed.

Because the analysis must be fact-intensive, ad hoc, and based on the

totality of the circumstances, it requires factual findings based on a full

evidentiary record developed at trial. Webb, 2013 CO 9, 19. At

summary judgment, the court below should have accepted the Citys

evidence as true and viewed it in the light most favorable to the City.

Condo v. Conners, 266 P.3d 1110, 1114 (Colo. 2011). Had it done this,

the court could only have concluded that the local interests are very

strong and the state interests very weak.

Further, this Court can remand this case for the necessary

factfinding without overruling Voss v. Lundvall Bros., 830 P.2d 1061

(Colo. 1992) as the lower court suggests. See CF, p. 2052 n.11. Voss

24

held in 1992 that a total ban on oil and gas operations involved

weightier state interests than local interests. 830 P.2d at 1068; see

generally Voss (describing the ban as total 23 times). But Voss left

open the possibility that a home rule city could enact something less

than a total ban. Id. at 1068-69. As the Plaintiffs conceded at oral

argument, they no longer argue that Article XVI acts as a total ban,

because it allows operators to drill and extract oil and gas. CF, p. 2052.

Instead, what is in dispute is whether prohibiting one relatively new

and controversial activity is as impermissible under the Constitution as

a total ban.

Many material facts have changed dramatically since Voss came

down in 1992, among them the technology available, the economics of

employing various engineering methods, and the sheer magnitude of

todays fracking operations. See Commerce City, 40 P.3d at 1282

([W]hat is of local versus state interest depends on the time,

circumstances, technology, and economics. . . . The danger to be avoided

is a temptation to consider something state or local because it was so

denominated fifty years ago. (citations and alterations omitted)). The

25

district court here found, for example, that well location and spacing

are no longer as important as they were in 1992, although they were

central concerns in Voss. CF, p. 2041 n.3. The Citys evidence on the

risks of fracking is also new since Voss. The district courts analysis

must be ad hoc, based on the facts of the instant case, not the outdated

facts forming the Courts premises in Voss. Webb, 2013 CO 9, 38.

By refusing to consider the Citys evidence that Article XVI is a

matter of local concern, the district court improperly circumvented the

ad hoc analysis required by Colorado home rule jurisprudence and

resolved disputed factual issues at summary judgment. The Citys

arguments raise at least a reasonable doubt as to whether Article XVI

should be overturned. See Baum, 147 Colo. at 111. Accordingly, this

Court should remand this case to the district court to perform the

requisite factfinding and interest-weighing analysis.

26

II. The district court applied an improper test for operational conflict.

A. The standard of review is de novo.

This Court reviews de novo whether the district court used the

correct legal standards. Vickery v. Vickery, 271 P.3d 516, 520 (Colo.

App. 2010) revd on other grounds sub nom. Vickery v. Evans, 266 P.3d

390 (Colo. 2011).

The City raised this issue at summary judgment. CF, pp. 1327,

1371-72.

B. Discussion

State law can preempt a local law in only three ways: express

preemption, implied preemption, and conflict preemption. The first two

are primarily matters of statutory interpretation. Summit County,

199 P.3d at 723. The Supreme Court has performed that interpretation

and held that the Act does not expressly (by clear declaration) nor

impliedly (by occupying the field) preempt all local regulations of oil and

gas operations. Bd. of Cnty. Commrs, La Plata Cnty. v.

Bowen/Edwards Associates, Inc., 830 P.2d 1045, 1056-59 (Colo. 1992)

27

(Bowen/Edwards) (attached as Exhibit 1). Unlike in Summit County,

which involved hard rock mining, the Act does not grant a state agency

sole authority to regulate oil and gas nor contain a declaration

describing state concerns as predominant. Cf. Summit County, 830

P.2d at 727, 731 (holding a local ban impliedly preempted for these

reasons).

The remaining type of preemption in the oil and gas realm occurs

when an operational conflict exists, which is where the operation of a

local law would materially impede or destroy the state interest behind

the Act. Bowen/Edwards, 830 P.2d at 1059; accord Bd. of Cnty.

Commrs, LaPlata Cnty. v. Colorado Oil & Gas Conservation Commn,

81 P.3d 1119, 1123 (Colo. App. 2003) (LaPlata County v. Commission).

Every case on preemption under the Act since Bowen/Edwards

has confirmed this test. E.g., LaPlata County v. Commission, 81 P.3d at

1123; Bd. of Cnty. Commrs of Gunnison Cnty. v. BDS Intl, LLC., 159

P.3d 773, 778 (Colo. App. 2006) (BDS). Yet the district court based

the bulk of its analysis on a different test:

The test to determine whether a conflict exists is whether the home-rule citys ordinance authorizes what state statute

28

forbids, or forbids what state statute authorizes. Here, Longmonts Article XVI forbids hydraulic fracturing which is authorized by the state. . . . [Longmont] does not have the authority to prohibit what the state authorizes and permits.

CF, p. 2054 (emphasis added) (citation and quotation marks omitted)

(quoting Webb, which is not an oil and gas case).

This re-casting of the operational conflict test as a forbid/authorize

test has never been adopted by our Supreme Court and was rejected by

this Court in Town of Frederick. In that case, the town defending its oil

and gas ordinance cited National Advertising for the proposition that

there is no operational conflict here because its ordinance does not

authorize any act that the state prohibits. Town of Frederick v. N. Am.

Res. Co., 60 P.3d 758, 765 (Colo. App. 2002). The town also cited Ray v.

City and County of Denver, 109 Colo. 74, 77, 121 P.2d 886, 888 (1942)

(another case that did not involve oil and gas issues), which describes

this test more fully: In determining whether an ordinance is in

conflict with general laws, the test is whether the ordinance permits or

licenses that which the statute forbids and prohibits, and vice versa.

But this Court declined to apply that test to oil and gas cases, holding:

29

The Towns reliance on Ray and National Advertising for these propositions is misplaced. The operational conflicts test announced in Bowen/Edwards and Voss controls here.

Frederick, 60 P.3d at 765.

Similarly, this Court has held squarely that the Commissions

rules and the Act do not preempt every conflicting local regulation, only

those which materially impede or destroy the state interest. LaPlata

County v. Commission, 81 P.3d at 1123. And even the Commissions

own regulations specify that the proper test for preemption is the

operational conflict test as set forth in Bowen/Edwards, not the

forbid/authorize test. Colo. Code Regs. 404-1:201. (Commission Rules

do not affect local authority so long as such local regulation is not in

operational conflict with the Act or regulations promulgated

thereunder).

The Bowen/Edwards test reflects a careful balance between state

and local interests in regulating oil and gas activities, even for local

governments without home rule. The balance is crucial because the

states interest is not so patently dominant over local interests as to

30

preclude local governments from regulating in the area.

Bowen/Edwards, 830 P.2d at 1058.

Indeed, it is precisely the Bowen/Edwards test that allows local

regulation of oil and gas to exist at all. Local regulation necessarily

means that a local government will place restrictions on oil and gas

activities that the State does not. If a local government cannot do this,

it cannot regulate. Were this Court to allow the forbid/authorize test to

supplant the operational conflict test, it would effectively erode[] the

delicate balance struck by the Supreme Court in Bowen/Edwards.

LaPlata County v. Commission, 81 P.3d at 1125.

In the instant case, the district court acknowledged that

Bowen/Edwards applies. CF, p. 2053. Nevertheless, the court

employed an extraneous test rather than the test actually laid out in

Bowen/Edwards. By using the incorrect test, the district court short-

circuited the operational conflict analysis and neglected facts showing

Article XVI does not materially impede the state interest. The

particular facts are discussed infra in Section IV.

31

The district court did base some of its judgment on the actual

operational conflict test. Yet, even those portions rest on premature

determinations of disputed fact and so were improperly decided, as

described in Section IV. The court based the majority of its decision,

however, on an inappropriate test for preemption. Accordingly, this

Court should reverse and remand to the district court to apply the

correct test.

III. The City does not forbid what the State authorizes, because no state statute or regulation explicitly authorizes fracking.

A. The standard of review is de novo.

This Court reviews de novo whether the district court used the

correct legal standards. Vickery, 271 P.3d at 520. The district court

held Article XVI was preempted for forbidding what the State

authorizes. Here, the City argues that besides using an incorrect test,

see supra Section II, the district court misunderstood the meaning of the

word authorize in the test that it did use, and misapplied the

32

forbid/authorize test on that basis. This is a matter of law to be

reviewed de novo.

The City raised this issue at summary judgment. CF, pp. 1328-53.

B. Discussion

Article XVI is valid, even when analyzed under the incorrect test

of whether the City forbids what the State authorizes, described above

in Section II, because no state law explicitly authorizes fracking.

The Supreme Court has set out an important part of the

forbid/authorize test that the district court did not discuss: local

governments generally may not forbid that which the state has

explicitly authorized. Summit County, 199 P.3d 718, 725 (emphasis

added) (internal quotation marks removed) (quoting Johnson v.

Jefferson County Bd. of Health, 662 P.2d 463, 471 (Colo.1983)); Sant v.

Stephens, 753 P.2d 752, 756 (Colo. 1988) (city may not forbid[] what

the state has expressly authorized (emphasis added) (quoting Aurora v.

Martin, 507 P.2d 868, 86970 (1973)). The word explicitly is

important. It prevents courts from looking through state law to infer

that an activity is authorized. Presumably, a court would base the

33

inference on the lack of a state prohibition and the comprehensive

nature of the state regulations. But the courts already have a term for

that type of analysis: implied preemption. Bowen/Edwards, 830 P.2d

at 1056; BDS, 159 P.3d at 778 (implied preemption exists when the

legislature intends to completely occupy a given field). And there is no

implied preemption under the Act. Bowen/Edwards, 830 P.2d at 1059-

60.

The Supreme Courts use of the word explicitly is consistent with

a mounting consensus across jurisdictions that a states authorization

must indeed be explicit to preempt local regulations under the

forbid/authorize test.2

For example, the Tenth Circuit illustrated this principle clearly in

Rancho Lobo, Ltd. v. Devargas, 303 F.3d 1195 (10th Cir. 2002) a case

2 Alabama Recycling Assn, Inc. v. City of Montgomery, 24 So. 3d 1085, 1090 (Ala. 2009) (expressly); Bauer v. Waste Mgmt. of Connecticut, Inc., 662 A.2d 1179, 1188 (Conn. 1995) (expressly); Jancyn Mfg. Corp. v. Suffolk Cnty., 518 N.E.2d 903, 907-08 (N.Y. 1987) (specifically); Terry v. City of Portland, 269 P.2d 544, 550-51 (Or. 1954) (expressly); City of Claremont v. Kruse, 100 Cal. Rptr. 3d 1, 20 (Cal. Ct. App. 2009) (expressly); New Mexicans for Free Enter. v. City of Santa Fe, 126 P.3d 1149, 1165-66 (N.M. Ct. App. 2006) (affirmatively or specifically).

34

similar to this one in many respects. In that case, the question was

whether a local government in New Mexico prohibited something the

states Timber Harvesting Act authorized. The state act empowered a

state agency to regulate timber cutting and grant timber-cutting

permits. Id. at 1198-99. The act specifically stated it was not intended

to prevent the conversion of forested land to other uses i.e.

clearcutting. Id. at 1198, 1205. One New Mexico county, however,

passed an ordinance requiring a local permit to harvest timber, and

specifically prohibited clearcutting unless the applicant received a

variance. Id. at 1199, 1205. A timber company sued on preemption

grounds rather than seek the local variance. Id. at 1199-1200.

Sitting in diversity, the Tenth Circuit explained that under New

Mexico law, the test is whether the ordinance permits an act the

general law prohibits, or prohibits an act the general law permits. Id.

at 1200, 1205. Applying this test, the court held that the state act does

not state that landowners shall have the right to clear-cut or that

clear-cutting is permitted. Id. at 1205. Therefore, the state act does

not establish an affirmative right to clear-cut, and does not conflict

35

with the local ordinance prohibiting clearcutting without a local

variance. Id. (emphasis added).

This goes to the heart of what authorize means. In Rancho

Lobo, the legislature arguably implied that it intended to allow

clearcutting, because the state act provided that clearcutting was not

meant to be forbidden. Nevertheless, the state act did not expressly

authorize or permit clearcutting, so the county could prohibit it without

forbidding what the state authorized. Id. State authorization must be

affirmative, to use the Tenth Circuits word, not tacit or inferred. Id.

Perhaps contrary to popular understanding, no state statute or

regulation specifically provides that fracking is authorized in Colorado.

The closest the Act touches on the issue is that it grants the

Commission authority to regulate the shooting and chemical

treatment of wells. 34-60-106(2)(b). This does not amount to

authorizing fracking, for two reasons. First, the section merely

empowers the Commission to regulate operations. It does not authorize

any particular operation such as fracking. The Commission could, in

theory, attempt to specifically authorize fracking through its rules and

36

regulations, but it has not. Second, by the Commissions own

definitions, fracking is neither shooting (which is the use of

explosives) nor chemical treatment (since fracking is defined as the

use of pressurized fluid to fracture, and chemical use is not an integral

part of its definition). See CF, pp. 269-70, 713-14, 904 at 28, ll. 3-12,

1332-1334, 1765 at 17, ll. 8-15, 1775 at 70-71.

As for the Commissions regulations under the Act, the Citys

summary judgment response brief discussed each rule that even

mentions hydraulic fracturing. CF, pp. 1336-39. These rules require

operators to notify surrounding landowners before fracking, and later to

publicly disclose some of the chemicals used. Colo. Code Regs. 404-

1:205, :205A, :305.c, :316C, :805. But the Commission does not issue

permits to frack. CF, pp. 1716 at 54-55, 1775 at 70 (deposition of

Commissions engineering manager). And no Commission rule

expressly authorizes fracking.

So, neither the Act nor the Commissions regulations authorize

fracking in any clear or explicit way. The district court did not point to

any provision of the Act or regulations as specifically authorizing

37

fracking but said, simply, The Commission permits hydraulic

fracturing and Longmont prohibits it. CF, p. 2121. The court drew an

impermissible inference that fracking is allowed, rather than identify

the necessary affirmative right in state law to frack. Rancho Lobo,

303 F.3d at 1205. In this way, the court improperly used the

forbid/authorize test as a backdoor to implied preemption. The problem

with this is that the actual implied preemption test is more protective of

local authority, because it applies only when a state act completely

occupies a given field and the Act here does not. Bowen/Edwards,

830 P.2d at 1056, 1058-59.

The State does not affirmatively or expressly authorize fracking.

Because Article XVI does not prohibit anything state law affirmatively

authorizes, it does not conflict with state law. Even under the incorrect

forbid/authorize test, Article XVI is not preempted.

38

IV. The district court improperly resolved disputed issues of material fact at summary judgment, and did not base its decision on a fully developed evidentiary record as required by the Supreme Court.

A. The standard of review is de novo, and Article XVI is presumed valid.

Appellate courts review grants of summary judgment de novo.

Shelter, 246 P.3d at 657. Summary judgment is a drastic remedy

which is proper only if no genuine issue of material fact is in dispute

and the moving party is entitled to judgment as a matter of law. Id. At

summary judgment, the nonmoving party is entitled to all favorable

inferences that may reasonably be drawn from the facts. People ex rel.

S.N. v. S.N., 2014 CO 64, 16. Where the City argues that the district

court overlooked material disputes of fact, this court should review the

question de novo.

A determination of preemption is also reviewed de novo. Summit

County, 199 P.3d at 737. A citys legislative enactment is presumed

valid, and invalidity must be established by the moving party beyond a

reasonable doubt. Baum, 363 P.2d at 691-92; Moore, 484 P.2d 134 at

136; see supra Section I.A.

39

The City raised the issue at summary judgment. CF, pp. 1371-82.

B. Discussion

Operational conflict has been recognized as obvious at summary

judgment in some circumstances, as when a county imposed a total ban

on oil and gas operations. See Voss, 830 P.2d 1061. In other

circumstances, summary judgment has issued because express

provisions of the Act preempted specific local regulations. See BDS, 159

P.3d at 779-80. But for all other circumstances, where a party raises a

genuine factual question about whether an operational conflict exists, a

district court may not make a finding of operational conflict without an

evidentiary record fully developed at trial, followed by findings of fact.

Bowen/Edwards, 830 P.2d at 1060.

This is for two reasons. These reasons are doctrinally distinct, but

are grouped into this Section because they are conceptually similar and

both involve the same factual questions presented to the district court.

First, as with any type of case, summary judgment may be granted only

if no material facts are in dispute. C.R.C.P. 56. The court may not take

competing facts into account and resolve them in favor of one party.

40

Instead, the court must assume that the nonmoving partys the

Citys evidence is correct. Weisbart v. Agri Tech, Inc., 22 P.3d 954,

956 (Colo. App. 2001). As with any other factual question at summary

judgment, a court may not resolve disputed facts material to

operational conflict.

Second, where local oil and gas regulations are alleged to be in

operational conflict with state law, the issue will turn on the factual

question of whether the local regulations actually impede the state

interests. This can be complicated to discern, and cannot always be

perceived solely from the text of the regulations. See, e.g., BDS, 159

P.3d at 780-82. Therefore, in Bowen/Edwards, the Supreme Court held

that any determination of operational conflict must be resolved on an

ad-hoc basis under a fully developed evidentiary record.

Bowen/Edwards, at 830 P.2d at 1060; LaPlata County v. Commission,

81 P.3d at 1123. The district court must allow both parties to develop

this record, and must make its ultimate conclusions of law regarding

operational conflict based on appropriate findings of fact.

Bowen/Edwards, at 830 P.2d at 1060.

41

Here, the district court improperly made several findings of fact in

favor of the Plaintiffs at summary judgment and without an evidentiary

hearing despite the Citys contrary evidence. These findings include: (1)

Article XVI destroys the states interest in production, (2) Article XVI

causes waste, (3) Article XVI impairs correlative rights, and (4) Article

XVI impairs or destroys the full range of the States interests taken as a

whole, including its obligation to balance oil and gas production with

the health and welfare of Longmonts citizens and the environment. In

some places the court commingled these factual decisions with legal

errors, which this court reviews de novo.

1. The City disputed Plaintiffs factual claim that Article XVI prevents production of oil and gas.

First and most importantly, the court improperly concluded that

Article XVI has virtually destroyed the state interest in production.

The fracking ban has ended production in Longmont. CF, p. 2122. The

court seemed to agree with the Plaintiffs that most hydrocarbon

bearing formations in Colorado would not produce economic quantities

of hydrocarbons without hydraulic fracturing, as if this alleged fact

were not in dispute. CF, p. 2109. Article XVI, the court said, prevents

42

the efficient development and production of oil and gas resources. CF,

p. 2122. The court accepted as if they were uncontested fact

Plaintiffs affidavits saying fracking is necessary for a well to be

economical. CF, p. 2085.

These factual conclusions run counter to the Citys evidence that

efficient alternatives to fracking are available. Wells were drilled in

Colorado for a century before fracking arrived, and are still being

drilled and produced near Longmont, targeting the same mineral

formations underlying Longmont, without fracking. CF, pp. 1213-14,

9-10, 13, 1314-15; 1414-23 (reports from producing wells that were

not fracked); 1427-29, 7, 10; 1747 at 39, 1774 at 67. Further, the

City presented the affidavit of a published petroleum geologist, who

describes the process of underbalanced drilling as a viable, more

economical alternative to hydraulic fracturing, one which the industry

itself accepts and employs, and one which can be employed in

Longmont. Id. And as for Plaintiffs affidavits on which the court

relied, the affiants admitted in depositions that they had never tried

43

this alternative to fracking. E.g., CF, pp. 1774-75 at 68-69, 1793 at 73

ll. 4-20.

This evidence shows that, because fracking is not necessary to

produce oil and gas, Article XVI does not materially impair or destroy

the state interest in production. See Weisbart, 22 P.3d at 956 (resolving

all doubts as to the existence of a material fact against the movant for

summary judgment). At the very least, the evidence raises a

permissible inference that Article XVI does not prevent oil and gas

production, and courts must give the City the benefit of this inference at

summary judgment. S.N., 2014 CO 64, 16.

The court did not consider this evidence. Instead it deflected the

evidence by finding it uncontested that fracking is efficient but that

misses the point. CF, p. 2052. If other methods are available to

produce oil and gas, Article XVI does not destroy the States interest in

production. See S.N., 2014 CO 64, 16. By focusing on the efficiency

of fracking, the court overlooked material facts on alternative methods

and improperly resolved this factual dispute in favor of the Plaintiffs at

summary judgment.

44

2. The City disputed Plaintiffs factual claim that Article XVI causes waste.

The court determined that Article XVI causes mineral waste

abhorrent to state interests. CF, p. 2122. Waste occurs when an

operation reduces the quantity of oil and gas ultimately recoverable

from a pool. C.R.S. 34-60-103(13) (emphasis added).

In reaching this conclusion, the court relied on Plaintiffs evidence

that fracking brings more oil and gas out of the ground than would

otherwise come. CF, pp. 2039, 2052. But the court ignored the Citys

evidence to the contrary, which shows that while fracking leaves 90-

95% of oil and gas in the ground, other extraction methods such as

underbalanced drilling leave only 60-70% and extract the rest. CF, pp.

1428-30, 8-13. In other words, fracking is more wasteful than its

alternative.

Furthermore, waste is the reduction of oil and gas ultimately

recoverable from a reservoir. It is normal practice in the oil and gas

industry not waste to leave most of the oil and gas in the ground

until it can be more efficiently extracted. CF, p. 1716 at 53. In the

1980s, for example, a well would recover only around 3.5% of the oil and

45

gas from the Codell formation. CF, p. 1715. Operators are regularly

drilling new wells to capture the oil and gas previously left behind, and

new processes are continually developed which allow the remaining oil

and gas to be extracted. CF, pp. 1711, 1714, 1716, 1723-24. Until

recent years the normal practice was to drill wells without fracking. So,

while un-fracked wells do not recover all available oil and gas in a

formation, this does not demonstrate waste. And if it did, fracking itself

would be considered wasteful.

The City was entitled at summary judgment to the inference that

Article XVI does not cause waste.

3. The City disputed Plaintiffs factual claim that Article XVI impairs correlative rights.

Each mineral right holder in a common pool of oil and gas has a

correlative right to pursue a just and equitable share of the pooled

resource. 34-60-103(4). The court held that Article XVI impairs

correlative rights of mineral interest owners, contrary to state interests.

CF, pp. 2052-53.

Correlative rights are a concept closely related to waste. They are

a sideboard to the common-law rule of capture, designed to prevent

46

neighboring mineral rights holders from operating in self-enriching but

wasteful ways.3

The court reasoned that mineral owners outside of Longmont

sometimes have their mineral royalty interests pooled with royalties

from mineral development within Longmont. Because royalties are

based primarily on the quantity and value of the oil and gas extracted,

the court reasoned that these outside mineral owners receive less

revenue when wells in Longmont are not fracked and less oil and gas is

extracted. Therefore, the court concluded, Article XVI impairs these

outside mineral owners correlative rights. Id.

This reasoning is unsound for three reasons. First, the courts

reasoning depends on the premise that fracking is the only or the most

efficient or economical way to operate a well. As discussed above in the

section on waste, this is an assumption the City has disputed with

3 John S. Lowe, Oil & Gas Law in a Nutshell (West 5th Ed. 2009) (defining Correlative-Rights Doctrine as, A corollary to the rule of capture, that the right to capture oil and gas from potentially producing formations under ones property is subject to the concomitant duty to exercise the right without negligence or waste.); see also 34-60-103(13)(c) (waste includes [a]buse of correlative rights); Kingswood Oil Company v. Corporation Commission, 396 P.2d 1008, 1009-10 (OK 1964).

47

competent facts. The courts conclusion was therefore inappropriate at

summary judgment. See C.R.C.P. 56.

Second, the court misinterpreted the meaning of correlative

rights. The royalty that a mineral owner receives from pooled minerals

depends on the proportion of the pool the owner contributes, regardless

of whether the owner is within or without the City. Plaintiffs presented

no evidence that any royalty owner received a greater or lesser share of

production profits than their proper proportion. Because no owner took

an undue share, Article XVI does not impair correlative rights.

Third, the courts reasoning does not distinguish between Article

XVI and a simple choice not to frack. Put another way, the reasoning

would lead to the absurd conclusion that any time a mineral owner

chooses not to frack a well or chooses another production method that

might yield less-than-optimal results for a royalty interest holder that

choice impairs correlative rights. After all, those decisions have the

same effect on the correlative rights holder as Article XVI. But since

the Commission has always let operators decide whether and how to

frack, there is no support for the proposition that drilling a well without

48

fracking impairs correlative rights. Such a holding would outlaw what

have been considered normal operations. AviComm, Inc. v. Colorado

Pub. Utilities Commn, 955 P.2d 1023, 1031 (Colo. 1998) (against

adopting a statutory interpretation that leads to an absurd result).

4. The City disputed Plaintiffs factual claim that Article XVI destroys the state interest as a whole.

The production of oil and gas is not a full description of the state

interest at issue. The Commissions dual mandate is to foster

production only if it is consistent with protection of public health,

safety, and welfare, including protection of the environment and wildlife

resources. 34-60-102(1)(a)(I), C.R.S. (2014). A local regulation is only

in operational conflict with state law if it materially impairs or destroys

the state interest, taken as a whole. Bowen/Edwards at 1059. Where a

local regulation might affect the state interest in production, but

supports the state interest in public health and the environment, an

evidentiary hearing is necessary to determine whether an operational

conflict exists. BDS, 159 P.3d at 781 (Because the Countys drainage

and erosion regulations attempt to promote the states interest in

protecting the land and topsoil without imposing conflicting

49

requirements, they are not, on their face, contrary to state law, and a

hearing is required to determine any operational conflicts.).

The City presented reams of evidence that fracking is hazardous

to the public health (risks of various acute and chronic illnesses), safety

(risks of spills and fires), welfare (risks to local property values and

community character), and the environment (risks to air, water, and

soil quality). See supra Statement of Facts, 1. The district court

declined to take this evidence into account in deciding whether there

was an operational conflict. In other words, the court acted as if the

states only interest were in production of oil and gas. The court should

have afforded the City an opportunity to present a full evidentiary

record showing that Article XVI is consistent with the state interest in

responsible oil and gas development.

Instead, what the district court did amounted to drawing an

inference in favor of Plaintiffs that fracking is consistent with

protection of the public health, safety, welfare, and the environment,

despite considerable evidence to the contrary. This was improper at

summary judgment. Weisbart, 22 P.3d at 956.

50

All four of these issues are central to whether there is an

operational conflict which may preempt Article XVI. Yet the district

court did not allow the City to develop a record on any of these issues.

CF, p. 2054. It did not consider the evidence in an ad hoc manner.

Contra Bowen/Edwards, 830 P.2d at 1060; LaPlata County v.

Commission, 81 P.3d at 1123. And it did not make findings of fact

based on a fully developed evidentiary record. Id. To the contrary,

the court curtailed the Citys time to develop factual evidence, restricted

the topics the City could probe in its depositions, and cancelled the ten-

day hearing the parties had scheduled. CF, pp. 964, 2054.

Because the Plaintiffs never properly proved an operational

conflict, they did not establish beyond a reasonable doubt that Article

XVI is invalid. Contra Baum, 147 Colo. at 111. The courts process

contradicted the Supreme Courts direction in Bowen/Edwards and

Rule 56, and this case should be remanded for a full evidentiary hearing

at trial.

51

CONCLUSION

This Court should reverse and remand the district courts

summary judgment order with instructions to develop a full evidentiary

record at trial, to use that record to make findings of fact, and then to

apply the correct tests for home rule authority and operational conflict

to those factual findings to determine whether state law preempts

Article XVI.

52

DATED this 15th day of January, 2015.

Respectfully submitted,

CITY OF LONGMONT, COLORADO

s/Eugene Mei______________________ Eugene Mei City Attorney s/Daniel E. Kramer_________________ Daniel E. Kramer Assistant City Attorney PHILLIP D. BARBER, P.C.

s/Phillip D. Barber_________________ Phillip D. Barber

ATTORNEYS FOR THE APPELLANT

This document was filed electronically pursuant to C.R.C.P. 1-26. The original signed document is on file at the offices of Phillip D. Barber, P.C.

53

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the above and foregoing OPENING BRIEF OF DEFENDANT-APPELLANT CITY OF LONGMONT, was served this 15th day of January, 2015, by ICCES File and Serve on the following:

Karen L. Spaulding, Esq. Beatty & Wozniak, P.C. 216 - 16th Street, Ste. 1100 Denver, CO 80202

Devorah Ancel, Esq. Sierra Club Environmental Law Program 85 Second Street, 2nd Floor San Francisco, CA 94105

Thomas J. Kimmell, Esq. Zarlengo & Kimmell, PC 700 North Colorado Blvd., Ste. 598 Denver, CO 80206

John E. Jake Matter, Esq. Julie M. Murphy, Esq. Asst Attorney Generals 1300 Broadway, 10th Floor Denver, CO 80203

Eric Huber, Esq. 1650 38th Street, Ste. 102W Boulder, CO 80301

Kevin J. Lynch, Esq. Environmental Law Clinic Sturm College of Law 2255 East Evans Avenue Denver, CO 80210

Mark Mathews, Esq. Wayne F. Forman, Esq. Michael D. Hoke, Esq. Brownstein Hyatt Farber Schreck, LLP 410 17th Street, Ste. 2200 Denver, CO 80202 s/Shelley Peister

STATEMENT OF THE CASEA. Nature of the CaseB. Proceedings BelowC. Disposition BelowD. Statement of Facts1. Frackings Risks to the Community2. Frackings Alternatives

ARGUMENTI. The district court erred by disregarding local interests in holding Article XVI is not within the Citys home rule authority.A. The standard of review is de novo, and Article XVI is presumed valid.

B. DiscussionII. The district court applied an improper test for operational conflict.A. The standard of review is de novo.B. Discussion

III. The City does not forbid what the State authorizes, because no state statute or regulation explicitly authorizes fracking.A. The standard of review is de novo.B. Discussion

IV. The district court improperly resolved disputed issues of material fact at summary judgment, and did not base its decision on a fully developed evidentiary record as required by the Supreme Court.A. The standard of review is de novo, and Article XVI is presumed valid.B. Discussion1. The City disputed Plaintiffs factual claim that Article XVI prevents production of oil and gas.2. The City disputed Plaintiffs factual claim that Article XVI causes waste.3. The City disputed Plaintiffs factual claim that Article XVI impairs correlative rights.4. The City disputed Plaintiffs factual claim that Article XVI destroys the state interest as a whole.

CONCLUSION