On January 23, 2019, Wildgrass Oil and Gas Committee (reportedly an anti-fracking group but also an organization that includes mineral owners in the Wildgrass subdivision in Broomfield, Colorado), filed suit in federal court in Denver challenging, on federal constitutional grounds, that portion of the Colorado Oil and Gas Conservation Act (C.R.S. 34-60-116) (the “Act”) that allows the Commission to “force pool” the development of oil and gas resources.
Dan Haley, president of the Colorado Oil and Gas Association, commented on the lawsuit saying, “This lawsuit exposes the charade of Colorado Rising’s failed 2,500-foot setback measure, as they repeatedly claimed during the campaign that horizontal drilling would overcome that extreme distance. Yet technical experts and regulators saw it for what it was — an attempt to ban industry. Turning their argument on its head, now they are going after horizontal drilling itself, as pooling is essential for modern-day horizontal drilling. Make no mistake, Colorado Rising is all about shutting down energy production.” See, https://www.gjsentinel.com/news/western_colorado/lawsuit-targets-mineral-rights-pooling/article_cbf533ce-21f8-11e9-bdc6-10604b9ffe60.html
More appropriately referred to as “statutory pooling,” the process has been held as a constitutional exercise of a state’s sovereign power to manage oil and gas resources. As an example, in Anderson v. Corporation Commission of Oklahoma, the Supreme Court of Oklahoma upheld the state’s pooling and unitization statutes and rejected challenges based on both the federal and state constitutions.. 327 P.2d 699, 702 (Okla. 1957). See also, Ward v. Corporation Commission, 501 P.2d 503 (Okla. 1972), and Superior Oil Co. v. Foote, where the Supreme Court of Mississippi held that Mississippi’s compulsory pooling statute was within the police power of the state to prevent waste, to conserve natural resources, and to protect correlative rights of the owners in a common source of supply. 59 So. 2d 85, 93 (Miss. 1952), error overruled, 59 So. 2d 844 (Miss. 1952).
Pooling (which may be voluntary or involuntary) occurs when parcels of property or mineral interests are combined to allow the extraction of oil and gas with costs and revenues apportioned among the interest holders. The suit asks the federal court to decide that involuntary, forced pooling is unconstitutional.
Challenging the Act as a violation of the U.S. Constitution, Wildgrass names the newly elected Governor, Jared S. Polis, the Colorado Oil and Gas Conservation Commission (COGCC), and COGCC Acting Director Jeffrey Robbins as defendants, claiming that the statute::
- Allows the COGCC to not only access the non-consenting owners’ minerals, but does so for the benefit of a private corporation, and without protection of the mineral owners’ substantive and procedural due process rights;
- Interferes with Wildgrass Owners’ right to freedom of association, and allows unlawful trespass;
- Interferes with Plaintiff members’ right to freedom of association; and
- Impairs the right to contract.
The complaint alleges that the continued implementation and enforcement of the Act constitutes an imminent and ongoing threat by the State of Colorado, acting through Mr. Robbins. The group asks for declaratory and injunctive relief holding that the Act is unconstitutional and for injunctive relief to stop defendants from enforcing the Act.
Here is a link to a pdf of the Complaint.
This post was drafted by John Watson, an attorney in the Denver, CO office of Spencer Fane LLP. For more information, visit spencerfane.com.