Town of Frederick v. North American Resources Co.

60 P.3d 758, 157 Oil & Gas Rep. 716, 2002 Colo. App. LEXIS 1305, 2002 WL 1766027
CourtColorado Court of Appeals
DecidedAugust 1, 2002
Docket01CA0893
StatusPublished
Cited by16 cases

This text of 60 P.3d 758 (Town of Frederick v. North American Resources Co.) is published on Counsel Stack Legal Research, covering Colorado Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Town of Frederick v. North American Resources Co., 60 P.3d 758, 157 Oil & Gas Rep. 716, 2002 Colo. App. LEXIS 1305, 2002 WL 1766027 (Colo. Ct. App. 2002).

Opinion

Opinion by

Judge VOGT.

The issue in this case is whether, and if so, to what extent, a local government may regulate the drilling of oil and gas wells within its boundaries. Plaintiff, the Town of Frederick, appeals the trial court’s summary judgment invalidating certain provisions of its ordinance that required oil and gas operators, including defendant, North American Resources Company (NARCO), to obtain a permit before drilling a well in the Town. NARCO cross-appeals the trial court’s determination on summary judgment that the balance of the ordinance was enforceable and that the Town was entitled to injunctive relief and attorney fees. We affirm.

In 1994, the Town enacted an ordinance, codified at art. V, ch. 16 of the Frederick Municipal Code, prohibiting the drilling of oil and gas wells within the town limits unless a special use permit was first obtained.

The ordinance prescribed procedures for applying for a permit, required payment of a $1,000 application fee, and provided that the Town’s board of trustees had to approve the application if it conformed to the requirements set forth in the ordinance. These requirements included specific provisions for well location and setbacks, noise mitigation, visual impact and aesthetics regulation, and the like.

The ordinance also prescribed penalties for constructing an oil and gas facility without complying with its terms, authorized the town attorney to institute an action to enjoin or remove such unlawful facility, and provided that the Town was entitled to its costs and attorney fees if it prevailed in any such action.

In 1999, NARCO drilled a well in the Town after having been granted a drilling permit by the Colorado Oil and Gas Conservation Commission (COGCC), but without having applied for a special use permit from the Town. The Town filed suit to enjoin NARCO from operating its well and require it to remove the well and pay all fines associated with its violation of the ordinance. NARCO counterclaimed, seeking a declaratory judgment that the ordinance was unenforceable because it was preempted by state law. Both parties moved for summary judgment.

In a detailed written opinion, the trial court granted each party’s motion in part. It concluded that several provisions of the ordinance were invalid because they were in operational conflict with rules promulgated by COGCC, and thus enjoined the Town from enforcing those provisions. However, the court concluded, state law did not preempt the Town’s regulatory scheme in its entirety. Because NARCO had not complied with the valid portions of the ordinance, the Town was entitled to an injunction precluding NARCO from operating its well. The *761 court also awarded the Town its attorney fees and costs pursuant to the terms of the ordinance.

I. Background

A. Applicable statutes, Bowen/Edivards, and Voss

Resolution of the issue presented in this case requires review of the statutes and case law addressing the relationship between local governments’ authority over land use issues within their boundaries and the state’s authority to regulate oil and gas production throughout Colorado.

As a statutory town, Frederick has the power to enact ordinances not inconsistent with state law that are necessary and proper to provide for the health, safety, prosperity, order, comfort, and convenience of the municipality. See § 31-15-103, C.R.S.2001; Minch v. Town of Mead, 957 P.2d 1054 (Colo.App.1998). In addition, the Local Government Land Use Control Enabling Act, § 29-20-101, et seq., C.R.S.2001, grants local governments broad authority to plan for and regulate the use of land within their respective jurisdictions.

The state’s interest in oil and gas development and operations is expressed in the Oil and Gas Conservation Act, § 34-60-101, et seq., C.R.S.2001, whose declared purposes include promoting the development, production, and utilization of oil and gas resources in the state. The COGCC is charged with enforcing that act and promulgating rules necessary to carry out its provisions.

In 1992, the Colorado Supreme Court addressed the effect of these statutes on local governments’ ability to regulate oil and gas operations in two cases, Board of County Commissioners v. Bowen/Edwards Associates, Inc., 830 P.2d 1045 (Colo.1992), and Voss v. Lundvall Brothers, Inc., 830 P.2d 1061 (Colo.1992). In Boiven/Edtuards, the court held that the Oil and Gas Conservation Act did not totally preempt a county’s land use authority over oil and gas operations. In Voss, the court held that a home rule city could regulate various aspects of oil and gas operations within the city, but could not totally ban all drilling.

The Town and NARCO agree that the preemption analysis delineated in those two cases controls resolution of the issue presented here.

Where, as here, the issue is one in which both state and local concerns are present, a three-part analysis is applied to determine whether the local ordinance or regulation is preempted by state law. First, the express language of the state statute may indicate state preemption of all local authority over the subject matter. Second, preemption may be inferred if the state statute impliedly evinces a legislative intent completely to occupy a given field by reason of a dominant state interest. Third, a local law may be partially preempted where its operational effect would conflict with the application of the state statute.

Applying those preemption principles, the supreme court concluded in Bowen/Edwards that the Oil and Gas Conservation Act neither expressly nor impliedly preempted all aspects of a local government’s land use authority over land that might be subject to oil and gas development or operations. Regarding the third, or “operational conflict,” type of preemption, the court articulated the inquiry as follows: “State preemption by reason of operational conflict can arise where the effectuation of a local interest would materially impede or destroy the state interest. Under such circumstances, local regulations may be partially or totally preempted to the extent that they conflict with the achievement of the state interest.” Bowen/Edwards, supra, 830 P.2d at 1059 (citation omitted). Concluding that the operational conflicts question must be resolved on an ad hoc basis under a fully developed evidentiary record, the court remanded the case to the trial court for determination of the issue.

In Voss, the court applied the Bowen/Edwards analysis and further clarified the extent to which a local government may regulate oil and gas drilling. A complete ban was impermissible because it would conflict with the state’s interest in efficient production and development of oil and gas resources in a manner preventing waste and protecting the *762 rights of producers. However, that fact did not foreclose all local regulation:

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Bluebook (online)
60 P.3d 758, 157 Oil & Gas Rep. 716, 2002 Colo. App. LEXIS 1305, 2002 WL 1766027, Counsel Stack Legal Research, https://law.counselstack.com/opinion/town-of-frederick-v-north-american-resources-co-coloctapp-2002.