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Colo. Supreme Court overturns ruling on expanded oversight of oil, gas drilling

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Colo. Supreme Court overturns ruling on expanded oversight of oil, gas drilling

The oil and gas industry in Colorado won its second big victory in three months as the state's Supreme Court threw out a lower court's decision that would have required the state's oil and gas regulator to consider environmental and health matters before issuing a permit.

In its 7-0 ruling, the Supreme Court said the Colorado Oil and Gas Conservation Commission, or COGCC, acted legally when it rejected a demand made in 2013 that it not issue any oil and gas permits "unless the best available science demonstrates, and an independent, third-party organization confirms, that drilling can occur in a manner that does not cumulatively, with other actions, impair Colorado's atmosphere, water, wildlife, and land resources, does not adversely impact human health, and does not contribute to climate change."

A lower court agreed that the COGCC should take those issues under consideration, but the Supreme Court said in its decision that such requirements were beyond the commission's purview, which calls only for it to act "in a manner consistent with protection of public health, safety and welfare."

According to the COGCC's mandate, the Supreme Court said, the commission is required to protect the rights of mineral owners and producers involved in developing oil and gas resources and, in doing so, prevent and mitigate adverse environmental impacts. It is not required to take any other measures, including climate change, into consideration when issuing permits, the justices ruled. "The pertinent provisions do not allow [the COGCC] to condition all new oil and gas development on a finding of no cumulative adverse impacts to public health and the environment," the high court said.

Industry advocates praised the court's decision, calling it positive outcome for the state's residents. "The court was right to deny a single out-of-state interest group — one that advocates for ending all energy development across the country — the ability to rewrite our state's laws," Colorado Petroleum Council Executive Director Tracee Bentley said. The case, COGCC v. Martinez, was brought by several individuals, in part with legal assistance from Oregon-based group Wild Earth Advocates. (No. 17SC297)

The Supreme Court's decision comes after the state's voters in November 2018 soundly rejected Proposition 112, which would have required setbacks of 2,500 feet from virtually any occupied dwelling, for future oil and gas production. The win for the industry brought favorable commentary from analysts, who said the result helped Wattenberg Basin operators such as PDC Energy Inc., SRC Energy Inc., Extraction Oil & Gas Inc., Bonanza Creek Energy Inc., Anadarko Petroleum Corp. and Noble Energy Inc.

"This is a mild positive for all involved in the basin," Suntrust Robinson Humphrey analyst Welles Fitzpatrick said in a note. "We continue to believe that the Wattenberg is one of the most undervalued basins in the [Lower 48]."