Co-author Niloufar Hafizi

The Colorado oil and gas industry breathed a collective sigh of relief when the state Supreme Court announced its unanimous decision in Colorado Oil and Gas Conservation Commission v. Martinez. The court sided with the Commission in rejecting a proposed rule by a group of teenage plaintiffs that would have precluded the Commission from issuing oil and gas drilling permits “unless the best available science demonstrates, and an independent, third-party conforms, that drilling can occur in a manner that does not cumulatively … impair Colorado’s atmosphere, water, wildlife, and water resources, does not adversely impact human health, and does not contribute to climate change” (Notice the skillful use of “and” and not “or”).

After denying the request the Commission prevailed at the district court. The plaintiffs won a split court of appeals decision in which the majority concluded that the enabling statute – the Colorado Oil and Gas Conservation Act – authorized the Commission to condition a drilling permit on a finding of no adverse cumulative impacts to public health and the environment, and that the Commission had improperly refused to make a rule that was within its power.

The Supreme Court

The Supreme Court upheld the Commission’s ruling, focusing on the Commission’s primary reason for refusing the proposal: It did not have the statutory authority to impose the condition of “no cumulative adverse impacts” on a drilling permit application. The enabling statute identified multiple policy goals for the agency and contained a declaration of purpose stating how it was “in the public interest to…[f]oster the responsible, balanced development, production, and utilization of the natural resources of oil and gas in the state of Colorado in a manner consistent with protection of public health, safety, and welfare, including protection of the environment and wildlife resources.” [emphasis added] The Commission interpreted that language as a requirement to balance oil and gas production with the other concerns. The plaintiffs argued that “in a manner consistent with” is the equivalent of “subject to”.

The Court looked at legislative history, legislators’ comments, and the entire statute to conclude that the Commission “is required…to foster the development of oil and gas resources, protecting and enforcing the rights of owners and producers” while taking steps to, as the statue puts it, “ … to prevent and mitigate significant adverse environmental impacts to the extent necessary to protect public health, safety, and welfare, but only after taking into consideration cost-effectiveness and technical feasibility.”

After analyzing the Act, the court found that the Commission had been correct in determining that the proposed rule was outside its statutory authority.

Takeaways

  • In light of this suit and Proposition 112, one can conclude that a large and dedicated group of environmentalists is out to put an end to the Colorado oil and gas industry.
  • This was a statutory construction case, not a referendum on what the Supreme Court thinks about oil and gas drilling.
  • The battle at the Commission isn’t over. One reason for denying the proposed rule was that the commission is working with the Colorado Department of Health to address the plaintiffs’ concerns.
  • The youthful antagonists were represented by the same group of actors who are behind Juliana v. U. S., now on an appeal by the government in the Ninth Circuit Court of Appeals. That’s the case asserting that the federal government’s failure to reduce carbon emissions violates plaintiffs’ constitutional rights and the government’s obligations as a public trustee.

We will have a more in-depth report on Martinez soon.

In the meantime, let us despair over the Debacle in the Dome.

At least some landmen are once again free to be landmen in Ohio. You will recall that in Dundics v. Eric Petroleum the Ohio Supreme Court declared that the Ohio Real Estate Broker statute prohibited land professionals from practicing their trade in that state unless they were licensed as real estate brokers. As predicted, the Industry appealed to the Legislature, which last month in Senate Bill 263 (here is the part pertaining to land professionals) revised statutes governing the activities of oil and gas land professionals. The fix isn’t perfect but is better than the Dundics situation.  Continue Reading Ohio Land Professionals Saved by the Legislature … Kind Of

I report herein on 2018’s parade of reprobates, rapscallions and others generally lacking in moral hygiene.  We reflect on a mother’s love, corruption in Venezuela, a disloyal employee, stealing from friends, a disgraced politician, and the wisdom of Forrest Gump.

Perp: Carol Faulkner

Violation: Not a crime but worthy of your consideration for its shamelessness. A “mendacious filing” in a an SEC civil enforcement action against Chris Faulkner, and she “repeatedly and willfully abused the judicial system” in connection with his fraud case.

Sentence: Sanctioned $5,205.50. This was after she was held in civil contempt and fled to Lebanon.

Titillating fact: This is the Frack Master’s OWN MOTHER. Merle was right; Mama failed … in so many ways.

_________

Perps: In “Operation Money Flight“, seven defendants (six Venezuelians and a Swiss banker), nine co-conspirators, and three unnamed “government officials”. Continue Reading 2018’s Bad Guys in Energy

Did Texas law or New Mexico law apply to knock-for-knock indemnity provisions in a Master Work and Services Agreement?  When a contract explicitly calls for Texas law, that is likely to be the outcome, as it was in North American Tubular Services LLC v. BOPCO, LP.

Takeaways

  • Decide before something bad happens what law you want to apply to a transaction.
  • Think about it. You’ll have to live with the choice.
  • Providing a safe work place is a moral imperative; financial risk goes a long way toward assuring the imperative is satisfied.
  • (Better left for another post: Does that also apply to leaking methane?)
  • The parties’ choice of law was was bolstered because under the contract the indemnity and insurance requirements would be liberally construed in order to effectuate their enforceability.
  • It would have helped the choice of law if the contract had also said that the choice was without regard for the chosen state’s conflict of law provisions.

Continue Reading Choice of Law Matters in an Oilfield Indemnity Suit

The pitches in your arsenal are your fastball and your curveball; it’s the late innings; third time around the batting order; they’re sitting on the fastball. Once they catch up to it (and they will unless you’re Justin Verlander which, face it, you are not), goodbye game. Why not go to the bender to keep ’em uncomfortable and give you options? In Lackey v. Templetonplaintiffs stayed with the heater. Goodbye game.

The lesson to be learned Continue Reading Texas Court Tells Plaintiffs How to Recover Title to Property

Co-author Brittany Blakey*

Louisiana practitioners and their clients tend to know this particular point of Louisiana law, but it could surprise out-of-staters (known in their native habitat as “Texans”), so it’s worth a reminder:

Under Louisiana Mineral Code art. 122 and art. 129, a lessee in a mineral lease is not relieved of its statutory duty to perform the lease as a reasonably prudent operator unless the lessor has expressly discharged the lessee in writing. The original lessee, along with all assignees and sublessees, are solidarily liable to the lessor for the whole performance of the obligations imposed by the lease. Continue Reading Original Louisiana Lessee Can’t Escape Liability

Co-author Chance Decker

You’ve secured the right leases.  You’ve drilled nice wells in the right locations.  Now, who will pay the royalty owners?  Follow Devon Energy Production Company, L.P. v. Apache Corporation, to be sure.

The takeaways

Co-author Chance Decker

Recall the Battle of the Bastards: The heroic Lady Sansa and the duplicitous Lord Baelish gallop over the hill to save the foolish Jon Snow from the heinous Ramsey Bolton. In similar fashion, but without the malnourished canines, the Texas Supreme Court in Conoco Phillips Company v. Koopmann saved the Koopmanns and you, the document drafters and title examiners, from brutal application of the Rule Against Perpetuities. Continue Reading NPRI Reservation Survives Rule Against Perpetuities