Colorado families scored a big win in federal court last week when a judge granted a motion to dismiss filed by the natural gas and oil industry, effectively ending a lawsuit that would have greatly inhibited energy production, the Denver Post reported.

The lawsuit, filed by Wildgrass Oil and Gas Committee, ostensibly comprised of members of a homeowners association in Broomfield but led by anti-energy activist group Colorado Rising, claimed that Colorado’s statutory pooling system violated their First Amendment rights to freedom of association and speech.  But in granting industry’s motion to dismiss, the Court said plaintiffs had failed to establish their case and that the state’s existing regulations adequately serves the public interest.

Additionally, the Court declined to get involved in a state matter, applying a legal abstention doctrine to avoid issuing a decision on “issues that involve complicated state regulatory schemes.”

The suit was filed last year and clearly intended to impede the state’s natural gas and oil industry and their ability to produce safe, reliable energy.

Statutory Pooling in Colorado

Wildgrass claimed that Colorado’s system of statutory pooling – which allows developers to “pool” mineral resources to minimize waste and maximize recovery of finite minerals — violates constitutional rights.  However, SB 181, which the state government passed last year to overhaul oil and natural gas regulations, actually strengthened the rights of property owners. The Denver Post reviewed the history:

“The practice allows a company to drill oil or gas in an area even if all the mineral rights owners don’t agree. Colorado used to let a company drill if just one of the owners consented.

“Under legislation passed in 2019 to revamp oil and gas rules, a company now must get the consent from the owners of least 45% of the mineral rights before it can move ahead.”

This means that a much greater share of residents – not just a single homeowner – must agree to oil and natural gas development in their area. But the homeowners association and Colorado Rising sought to go even further. Contrary to decades of longstanding public policy, plaintiffs sought to give a single property owner veto authority over energy production in their area, which would essentially ban production across vast swaths of the state — Colorado Rising’s ultimate goal, and one that runs contrary to the public policies of every energy producing state in the country.

Judge Underscores Importance of Energy Production

Wildgrass and Colorado Rising made a number of claims stating that statutory pooling violated their First Amendment rights, including association and speech, but the Court dismissed both.

Regarding association:

“That some drilling companies who apply to the COGCC for … pooling permission will later engage in political speech with which Wildgrass disagrees does not turn the statute into one compelling association for expressive purposes. Wildgrass has not raised a genuine dispute regarding whether they have been forced to associate for expressive purposes.” (emphasis added)

And regarding speech:

“Here, just as in the association claim, the connection between the statute and the alleged speech that Wildgrass claims it must subsidize is too attenuated. The [] pooling statute is not aimed at and does not fund speech. Though some [] pooling applicants may engage in speech the Wildgrass owners disapprove of, the statutory recoupment scheme does not serve to fund this.” (emphasis added)

In its decision, the Court underscored the importance of energy production and how it serves the public interest and powers the economy:

“The next question is whether the taking of the property interest serves a public purpose or merely conveys a private benefit. The Supreme Court has routinely found it within state police powers to regulate oil and gas in similar manners in order to serve the public interests in curbing waste, protecting correlative rights, and protecting the economy of the state.

“…Wildgrass has not provided any case law suggesting that these binding precedents should be ignored or should not apply to this statute. [P]ooling thus serves a public purpose. Accordingly, although Wildgrass has shown the existence of a property interest, it has not shown that the taking of such property interest does not serve a public purpose.” (emphasis added)

Power to the States

The Court also applied an abstention doctrine, known as Burford abstention, and declined to get involved in state matters:

“Not only would I have to consider whether the COGCC correctly applied the statute in this particular instance, but whether the COGCC has previously approved and can continue to approve forced pooling for non-migratory mineral extraction, a question of state statutory interpretation that is difficult and controversial. To me, this looks like a state law question in federal law clothing, one that would bring this court into an area of state political controversy and could easily create conflicts between state and federal interpretations.” (emphasis added)

He then cited SB 181 and Colorado’s existing regulatory system and the need to adhere to the political process:

“In Burford the Court concluded that the drilling permitting process was ‘of vital interest to the general public,’ and that the state administrative structure was created to reflect that importance. Colorado courts have frequently noted the importance of the state’s oil and gas regulatory scheme. As in Burford itself, the state of Colorado has established a comprehensive, though perhaps imperfect, regulatory scheme in order to address this issue of substantial public importance. Significantly, this is further supported by the recent updates to the regulatory scheme extensively debated by both the public, the Colorado General Assembly, and the parties.”

Conclusion

This is yet another defeat for Colorado Rising and other “Keep It In the Ground” activists aiming to shut down natural gas and oil production in Colorado. This time they attempted to use a flawed legal strategy with a variety of different claims, and all were thoroughly dismissed by a federal judge.

The decision once again shows that responsible energy production does “serve a public interest” and plays a key role in Colorado’s economy.