Colorado Concern, Et Al amici brief with exhibits

COLORADO COURT OF APPEALS2 East 14th Ave., Denver, CO 80203

COURT USE ONLY

District Court Boulder County, ColoradoCase Number: 2013CV63The Honorable D.D. Mallard

Appellant: City of Longmont, Colorado

Intervenors: Our Health, Our Future, Our Longmont; Sierra Club; Food and Water Watch;and Earthworks

v.

Appellees: Colorado Oil & Gas Association,Colorado Oil and Gas Conversation Commission,

Appellee-Intervenor: TOP Operating Company

Attorneys for Colorado Concern, Denver Metro Chamber of Commerce, Colorado Competitive Council, Colorado Motor Carriers Association, and Colorado Farm Bureau:

BROWNSTEIN HYATT FARBER SCHRECK, LLPJason R. Dunn, #33011410 Seventeenth Street, Suite 2200Denver, CO 80202-4432Phone: 303.223.1100Emails: [email protected]

Case No.: 2014CA1759

AMICI CURIE BRIEF OF COLORADO CONCERN, ET AL. IN SUPPORT OF APPELLEE COLORADO OIL AND GAS

ASSOCIATION

DATE FILED: March 5, 2015 4:32 PM

iCERTIFICATE OF COMPLIANCE

I hereby certify that this brief complies with all requirements of C.A.R. 28

and 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).

Choose one: It contains 3400 words (excluding the caption, table of contents, table of authorities, this certificate of compliance, certificate of service, signature block and any addendum). It does not exceed 30 pages.

The brief complies with C.A.R. 28(k).

For the party raising the issue:

It contains under a separate heading (1) a concise statement of the applicable standard of appellate review with citation to authority; and (2) a citation to the precise location in the record (R. , p.), not to an entire document, where the issue was raised and ruled on.

For the party responding to the issue:

It contains, under a separate heading, a statement of whether Appellee Colorado Oil & Gas Association agrees with the statements of Appellants concerning the applicable standard of review and preservation for appeal, and if not, why not.

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.

/s/ Jason R. Dunn

Table of Contents

Page

ii

I. The City inaccurately describes the local concern test, both as a matter of law and as applied by the trial court.......................3

II. The City incorrectly describes the Supreme Courts test of local concern ....................................................................................6

III. The State has a substantial interest in fracking operations, and the trial court properly considered that interest.....................7

A. The trial court correctly recognized the States interest found in the COGCC and fracking rules................................7

B. The States interests also lie in the economic impacts of the oil and gas industry and protecting against the negative consequences of fracking bans ..............................10

C. The trial court properly analyzed both the Citys and the States interests, and properly found state preemption............................................................................14

iii

TABLE OF AUTHORITIES

Page(s)

Cases

Bd. of Cnty. Commrs v. Bowen/Edwards,830 P.2d 1045 (Colo. 1992)..........................................................8, 9, 16

Colo. Mining Assn v. Bd. of Cnty. Commrs,199 P.3d 718 (Colo. 1999)....................................................................13

Four-Cnty. Metro. Cap.Improvement Dist. v. Bd. of Cnty. Commrs,369 P.2d 67 (Colo. 1962)......................................................................10

People v. Novotny,2014 CO 18 ............................................................................................8

Prestige Homes, Inc. v. Legouffe,658 P.2d 850 (Colo. 1983)....................................................................10

Town of Frederick v. N. Am. Res. Co.,60 P.3d 758 (Colo. App. 2002) .............................................................16

Voss v. Lundvall Bros., Inc.,830 P.2d 1061 (Colo. 1992).......................................................... passim

Webb v. City of Black Hawk,2013 CO 9............................................................................................16

Statutes

C.R.S. 34-60-102(1) ...............................................................................8

Oil and Gas Conservation Act ...................................................................8

iv

Other Authorities

2 Colo. Code Regs. 4041:100 ...............................................................9

Brian Lewandowski & Richard Wobbekind, Assessment of Oil and Gas Industry 2012 Industry Economic and Fiscal Contributions in Colorado (July 2013) ....................................11

Brian Lewandowski & Richard Wobbekind, Hydraulic Fracturing The Economic Impact of a Statewide Fracking Ban in Colorado (Mar. 2014) ..............................................12

C.A.R. 29 ................................................................................................1, 4

1Pursuant to C.A.R. 29, the entities listed below, through their

undersigned counsel, conditionally file this amici curiae brief in support

of the Plaintiff/Appellees, and state as follows:

THE AMICI CURIAE

The following five organizations (collectively, the Amici Curiae)

seek leave to participate as amici curiae:

(i) Colorado Concern is an alliance of top executives with a common interest in enhancing and protecting Colorados business climate. Founded in 1986 by a dozen committed business leaders, membership now includes more than 120 CEOs from for-profit, non-profit and higher education organizations across Colorado.

(ii) Colorado Competitive Council is a leading business voice for dozens of companies and trade associations, organized for the purpose of directly advocating for sound business policies in Colorado that encourage growth of key industry clusters and attract high-quality jobs to Colorado.

(iii) Denver Metro Chamber of Commerce is a leading voice for over 3,000 Denver-area businesses and their 300,000 employees, providing advocacy for nearly 150 years at the federal, state and local levels and helping shape Colorados economic and public policy landscape.

(iv) Colorado Motor Carriers Association represents over 650 companies and over 60,000 employees that are directly involved or affiliated with trucking within Colorado. CMCA supports the interests of these trucking-related companies on a state, national, and local basis.

2(v) Colorado Farm Bureau is a 24,000 member organization dedicated to helping family farmers and ranchers stay on their land and continue to produce food for Colorado, the nation, and the world. CFB provides its members with continuous representation at the local, state and federal level to improve Colorados economy, natural resources, environment, and social institutions.

INTRODUCTION

The Amici Curiae are five Colorado organizations representing a

range of business, trade, and non-profit associations, as well as

chambers of commerce, and family-owned farms. Each is committed to

advancing sound public policy and a strong economy at the state and

local level. Individually and collectively, they dedicate significant

financial and human resources toward developing state law and policy

that ensures a favorable economic climate for not only their individual

members and their employees, but for the State of Colorado as a whole.

Among the Amici Curiaes shared values is the belief that our

natural resources, including oil and gas, are a critical component of our

States economy. Amici believe that our natural gas and oil resources

must be protected and regulated in such a way as to allow their efficient

development while also guarding the environment and ensuring public

3safety. Given the ubiquitous nature of oil and gas resources across

governmental boundaries, however, it is critical that such development

be regulated uniformly so as to promote efficient, economical, and safe

production.

The Amici therefore submit this brief in support of the Plaintiffs

and for the narrow purpose of addressing that portion of the City of

Longmonts Opening Brief (the Opening Brief) setting forth an

erroneous test for determining when a local government interest

preempts a statewide interest in the same field, to provide the Court

with a brief overview of the oil and gas industrys role in Colorados

economy, and to respond to the Citys statements regarding the extent

and nature of the States interest in supporting and regulating

hydraulic fracturing.

ARGUMENT

I. The City inaccurately describes the local concern test, both as a matter of law and as applied by the trial court.

In attacking the trial courts preemption analysis, the City

contends that the court applied an erroneous test for determining

whether a matter is of purely local concern. First, the City

4characterizes the test applied by the court as one in which any State

interest in the matter [is] enough to overcome the Citys home rule

authority and thus deem the matter one of statewide or mixed concern.

Opening Br. at 13 (emphasis in original). The City goes on to contend

that 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]. Id. at 21 (citing City

& Cnty. of Denver v. State, 788 P.2d 764, 771 (Colo. 1990)).

The City misreads the trial courts order and the test it applied.

Stated correctly, the court described the test outlined by the Supreme

Court in Voss v. Lundvall Bros., Inc., 830 P.2d 1061 (Colo. 1992) for

determining whether the matter is one of local, statewide, or mixed

concern:

The threshold consideration in this case, as it was in Voss, is whether Longmonts total ban of hydraulic fracturing and ban on storage and disposal of hydraulic fracturing waste within the City derives from a purely local concern. It is a well-established principle of Colorado preemption doctrine that in a matter of a purely local concern an ordinance of a home-rule city supersedes a conflicting state statute, while in a matter of purely statewide concern a state statute or regulation supersedes a conflicting ordinance of a home-rule city.

5R. CF, p.2049 (emphasis added) (citing Voss, 830 P.2d at 1066) (internal

quotation marks omitted). After detailing the evidence submitted by

the City and Intervenors demonstrating local interests, the court went

on to state that [w]hile the Court appreciates the Longmont citizens

sincerely-held beliefs about risks to their health and safety, the Court

does not find this is sufficient to completely devalue the States interest,

thereby making the matter one of purely local interest. R. CF, p.2050.

In other words, the court was indicating that while there may very well

be legitimate local interests that rise to a cognizable concern for

purposes of applying a preemption analysis, the extent of those interests

is simply not relevant because the State also has significant interests in

the regulation of fracking that cannot be devalued by local interests,

regardless of how substantial those local interests may be. Thus, the

court was implicitly rejecting a weighing of interests, and instead

properly evaluating whether the matter is one of pure local or statewide

interest, or whether it is one of mixed concern such that the operational

conflicts test was necessary. Finding the latter, the court correctly went

on to apply that test.

6II. The City incorrectly describes the Supreme Courts test of local concern.

In addition to misreading the test as applied by the trial court, the

City compounds its mistake by arguing that the correct test is actually

one in which any local interest preempts any state interest of equal or

lesser weight: 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. Opening

Br. at 12 (emphasis added); see also id. at 1 (A home rule citys law

supersedes a state law if the local interests at stake outweigh the

States interests). 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. Opening Br. at 17 (citing Denver, 788

P.2d at 767). The City then applies its erroneous test, contending that

its interests are strong while the States are weak, and concludes

that Article XVI is a matter of local concern based on the undisputed

7facts that preempts the States implicit if not explicit authorization

of fracking.1 Opening Br. at 2223.

While Amici acknowledge, as the trial court did, that the City does

indeed have a legitimate interest in fracking operations, Amici strongly

disagree that the States interest is weak or insignificant. To the

contrary, Amici write to call attention to the States substantial interest

in the uniform regulation of oil and gas operations and hydraulic

fracturing.

III. The State has a substantial interest in fracking operations, and the trial court properly considered that interest.

A. The trial court correctly recognized the States interest found in the COGCC and fracking rules.

While the City attempts to dismiss the States interest by claiming

that the undisputed evidence shows Article XVI has an insignificant

impact on the states economic interests, those statements are wildly

incorrect. Opening Br. at 22 (citing R. CF, pp.121114). As the trial

court correctly noted, Colorado courts have long recognized the States

1 Oddly, however, rather than asking this court to rule that Article XVI preempts state law as matter of purely local concern, the City instead asks the court to remand the case for further evidentiary proceedings. Opening Br. at 25.

8interests in oil and gas development, and more particularly, in the

process of hydraulic fracturing. See R. CF, pp.2042, 2051. There is no

question that the Oil and Gas Conservation Act evidences a significant

interest on the part of the state in the efficient and fair development,

production and utilization of oil and gas resources . . . . Voss, 830 P.2d

at 106566 (emphasis added); see also Bd. of Cnty. Commrs v.

Bowen/Edwards, 830 P.2d 1045, 104849, 1058 (Colo. 1992). The

Colorado Supreme Courts finding of a significant state interest is

binding upon this Court as a matter of law, and to find otherwise would

implicitly overrule the high courts decision in Voss, which lower courts

may not do. See People v. Novotny, 2014 CO 18, 26.

As the trial court correctly noted, the interests discussed in Voss

and its progeny derive from the statutory framework found in the

Colorado Oil and Gas Conservation Act (the Act), wherein the General

Assembly expressed the will of the people to foster the responsible,

balanced development, production, and utilization of oil and gas in the

state, protect against waste, and to safeguard coequal and correlative

9rights of owners and producers. See R. CF, p.2051; see also C.R.S.

34-60-102(1).

Likewise, the trial court also correctly acknowledged that those

decisions apply to the technical aspects of the oil and gas production

process, including hydraulic fracturing. R. CF, p.2048; see also

Bowen/Edwards, 830 P.2d at 1058 (stating that the Act created a

unitary source of regulatory authority at the state level of government

over the technical aspects of oil and gas development and production

[that] serves to prevent waste and protect the correlative rights of

common-source owners and producers to a fair share of production

profits). The State effectuates and protects that interest through its

delegation of authority to the Oil and Gas Conservation Commission

(the COGCC or Commission), where a multitude of fracking-related

rules have been adopted. See, e.g., 2 Colo. Code Regs. 4041:100

(defining hydraulic fracturing additive, hydraulic fracturing fluid,

and hydraulic fracturing treatment), 205 (access to chemical inventory

records), 205A (hydraulic fracturing chemical disclosure), 305 (oil and

gas location assessment notice must include the COGCCs information

10

sheet on hydraulic fracturing treatments except where hydraulic

fracturing treatments are not going to be applied to the well in

question), 317B (public water protection system includes during

completion), 805 (requiring operators to control dust caused by their

operations, including specific controls when handling sand used in

hydraulic fracturing operations).

B. The States interests also lie in the economic impacts of the oil and gas industry and protecting against the negative consequences of fracking bans.

Beyond the interests outlined in the Act and the COGCCs

regulations, the State has a more fundamental interest in protecting

and adequately regulating the oil and gas industry and the fracking

process that stems from the industrys central role in Colorados

economy. Accordingly, any examination of whether a matter is local,

statewide, or of mixed concern should consider these economic interests.

Two recent academic studies provide further insight.2

2 While Amici is not aware of either report being submitted at the hearing below, appellate courts may take judicial notice of publically available information. See Prestige Homes, Inc. v. Legouffe, 658 P.2d 850, 853 (Colo. 1983) (citing C.R.E. 201(f) and cases); Four-Cnty. Metro.

11

First, in 2013, the Business Research Division of the Leeds School

of Business at the University of Colorado studied the scope and impact

of the oil and gas industry in Colorado (attached as Exhibit A).3 The

report demonstrates that the oil and gas industry and now fracking

specifically drives a significant portion of the States economy,

employs the largest private sector workforce in the State, generates

significant tax revenue for local governments, and provides significant

funding of public education through property taxes. Some of the

reports key findings about the industry include:

29,300 direct drilling, extraction and support jobs;

22,000 additional supply chain jobs;

$3.8 billion in employee income;

Average annual wages of over $100,000 (approximately double state average);

$614 million in royalty payments to private land owners; and

Cap. Improvement Dist. v. Bd. of Cnty. Commrs, 369 P.2d 67, 73 (Colo. 1962).

3 Brian Lewandowski & Richard Wobbekind, Assessment of Oil and Gas Industry 2012 Industry Economic and Fiscal Contributions in Colorado (July 2013), available at: http://www.coga.org/pdf_studies/ UniversityofColorado_LeedsSchoolofBusiness_Oil&NaturalGasIndustry_EconomicStudy2012.pdf.

12

$1 billion in severance and property taxes, public royalties, and public leases.

Notably, the study concludes with this insightful paragraph:

While our study illustrated the market contributions of the oil and gas industry, there are many potentially positive and potentially negative nonmarket economic impacts related to the oil and gas industry (e.g., locally sourced energy, air quality, substitution, water usage, etc.). While environmental and societal impacts of this extraction industry are currently being fiercely debated, the economic contributions of the industry should be present in the discussions calling for drilling moratoriums, understanding that in Colorado, the industry impacts thousands of jobs and billions in wages, funds state and local government (including schools), and makes purchases from every industry.

Ex. A, p. 22 (emphasis added).

Second, in 2014, the Leeds School conducted a follow-up study,

examining the potential impact of a statewide fracking ban (attached as

Exhibit B).4 Notably, the report assumes a 95% reduction in new and

existing production from a fracking ban, resulting in:

a loss of over 68,000 jobs in first five years following ban;

4 Brian Lewandowski & Richard Wobbekind, Hydraulic Fracturing The Economic Impact of a Statewide Fracking Ban in Colorado (Mar. 2014), available at: http://www.coga.org/pdf_studies/EconomicImpact ofFrackingMoratorium_UniversityColoradoLeedsSchool_March2014.pdf.

13

long term job losses of 93,000;

annual average drop in state GDP of $8 billion;

$567 million drop in government revenue over first five years, declining $985 million by 2040;

reduced household spending that impacts everything from construction to retail spending; and

significant negative impacts to virtually all job sectors.

The 2014 study unequivocally demonstrates that a ban on

fracking would have a profound impact on Colorado, its economy, its

public resources, and its citizens. Thus, the interest of the State -

and Amici as business groups dedicated to a sound economy - is

perhaps at its zenith in this case. The City, however, attempts to

downplay that interest, calling it insignificant. See Opening Br. at 10.

As the studies demonstrate, the Court should reject that

characterization as simply nonsensical and disingenuous.

Moreover, while the ban at issue here is municipal rather than

statewide, the lessons of the 2014 study remain applicable here:

allowing municipalities to create a patchwork of bans, moratoriums,

and individualized regulations across the State would surely wreak

havoc on the industry, drive inefficiency and waste, reduce investment

from producers, and ultimately have a negative impact on the State as a

14

whole. See Colo. Mining Assn v. Bd. of Cnty. Commrs, 199 P.3d 718,

731 (Colo. 1999) (A patchwork of county-level bans on certain mining

extraction methods would inhibit what the General Assembly has

recognized as a necessary activity and would impede the orderly

development of Colorados mineral resources.); see also R. CF, p.2048

(Patchwork regulation can result in uneven production and waste.)

C. The trial court properly analyzed both the Citys and the States interests, and properly found state preemption.

While the City contends that the trial court erred by applying the

Colorado Supreme Courts analysis in Voss (Opening Br. at 2325), that

case is dispositive and is binding on this Court. In Voss, the City of

Greeley adopted an ordinance banning the drilling of any oil and gas

well within the city limits. Voss, 830 P.2d. at 1063. In determining

whether Greeleys ban was of local, state, or mixed interest, the court

analyzed four factors: (1) whether there is a need for statewide

uniformity of regulation; (2) whether the municipal regulation has an

extraterritorial impact; (3) whether the subject matter is one

traditionally governed by state or local government; and (4) whether the

15

Colorado Constitution specifically commits the particular matter to

state or local regulation. Id. at 1067. After examining those factors, the

court determined that state law preempted Greeleys ban on oil and gas

drilling:

We conclude that the states interest in efficient oil and gas development and production throughout the state, as manifested in the Oil and Gas Conservation Act, is sufficiently dominant to override a home-rule citys imposition of a total ban on the drilling of any oil, gas, or hydrocarbon wells within the city limits.

Id. at 1068.

Here, relying on Voss, the trial court properly characterized both

the interests of the City and the State, properly applied the Voss four-

factor test, and, after recognizing the obvious and legitimate interests of

both the City and the State, properly ruled that the issue is one of

mixed local and state concern. R. CF, pp.204850. Nonetheless, the

City complains that it was not afforded an opportunity to present

further evidence at a full trial and that, if it had been allowed to do so,

the court would have come to a different result. Opening Br. at 25. But

the court correctly found that the interests of both the City and the

State were obvious, having generally accepted as true the

16

environmental concerns raised by the City (at least for purposes of the

motion) and adhering to the Supreme Courts findings regarding the

States interests in oil and gas development. R. CF, p.2050.

The City also contends that the trial court applied the improper

conflict test. Opening Br. at 26. Again, however, the trial court

properly relied on Colorado Supreme Court precedent in determining

that Article XVI conflicts with State law. As set forth in Webb v. City of

Black Hawk, which was decided only two years ago, whether a home-

rule ordinance conflicts with State law depends on whether the home-

rule citys ordinance authorizes what state statute forbids, or forbids

what state statute authorizes. Webb v. City of Black Hawk, 2013 CO 9,

43 (citing Commerce City v. State, 40 P.3d 1273, 1284 (Colo. 2002)).5

5 The Citys argument that the Bowen/Edwards conflict test applies is misplaced. Opening Br. at 27. The Bowen/Edwards operational conflict test is only applicable in cases involving a specific regulationas opposed to a complete ban like in this case. Compare Town of Frederick v. N. Am. Res. Co., 60 P.3d 758, 760 (Colo. App. 2002) (trial court did not err in applying the Bowen/Edwards test to invalidate town ordinances imposing setbacks, noise mitigation, visual impact and aesthetics regulation), with Webb, 44 (ordinance forbidding bicycling without providing a suitable alternate route failed the conflict test because the state statute authorizes such a prohibition only when an alternate route is established).

17

The trial court in this case applied that test and concluded: The

operational conflict in this case is obvious. The Commission permits

hydraulic fracturing and Longmont prohibits it. The Commission

permits storage and disposal of hydraulic fracturing waste and

Longmont prohibits it. R.CF, p.205051. Accordingly, the trial court

properly found that Article XVI and the Act are mutually exclusive

because the Citys ban forbids what State law allows. R. CF, p.2051.

Thus, absent this Court finding that the State lacks any concrete

interest in oil and gas development or the regulation of hydraulic

fracturing, the trial courts finding that no further factual development

was necessary and that the State law preempts the Citys ban could

only be correct. This Court should make a similar ruling under its de

novo review.

CONCLUSION

The Citys Opening Brief misstates the test for local concern both

as applied by the trial court and as dictated by the Colorado Supreme

Court, and advocates for a unprecedented test that would allow any

local concern in a matter to preempt all statewide interests in the same

18

field. Likewise, the City fails to acknowledge the obvious and

substantial interests that the State has in uniform regulation of

hydraulic fracturing and the economic impact that it has on Colorados

economy and well-being. This court should therefore reject the Citys

arguments and affirm the decision of the trial court.

Dated this 5th day of March, 2015

BROWNSTEIN HYATT FARBER SCHRECK, LLP

By: s/Jason R. DunnJason R. Dunn, #33011

ATTORNEYS FOR AMICI CURIE COLORADO CONCERN, ET AL.

19

CERTIFICATE OF SERVICE

I certify that on March 5, 2015, I electronically filed a true and correct copy of the foregoing AMICUS CURIE BRIEF OF COLORADO CONCERN, ET AL. with the Clerk of Court via the Colorado ICCES program which will send notification of such filing and service upon the following counsel of record:

Devorah AncelSierra Club Environmental Law Program85 Second Street, 2ndFloorSan Francisco, CA 94105

John E. MatterJulie M. MurphyAsst Attorney Generals1300 Broadway, 10th Fl.Denver, CO 80203

Thomas J. KimmellZarlengo & Kimmell, PC700 N. Colorado Blvd. Suite 598Denver, CO 80206

Eric Huber1650 38th Street, Suite 102WBoulder, CO 80301

Kevin J. LynchEnvironmental Law ClinicSturm College of Law2255 East Evans Ave., Ste 33Denver, CO 80208

Eugene MeiDaniel E. KramerCity of LongmontCivic Center Complex408 3rd AvenueLongmont, CO 80501

Phillip D. Barber1675 Larimer Street, Suite 620Denver, CO 80202

Mark MathewsWayne FormanMichael HokeBrownstein Hyatt Farber Schreck, LLP410 Seventeenth Street, Ste 2200Denver, CO 80202

/s/ Paulette M. ChessonPaulette M. Chesson, Paralegal

013585\0009\11971001.3