State, local control at odds over fracking

Voters in Longmont voted to ban hydraulic fracturing, or fracking. Voters in Fort Collins approved a five-year moratorium on the practice, which involves pumping water mixed with sand and chemicals into a drilled hole to retrieve oil and natural gas from shale deep underground. District courts overturned those bans, and both cities appealed, with much of the state watching earlier this month as the cities sparred with oil and gas industry officials in front of the Colorado Supreme Court. A ruling from the state’s high court is expected sometime in 2016. We checked in with Colorado Oil and Gas Association chief executive Dan Haley, Thomson visiting professor at the University of Colorado Law School Bruce Kramer, and Kaye Fissinger, president of Our Health, Our Future, Our Longmont, to get their insights on the debate.

What are the pros and cons of allowing cities to ban fracking?

• Dan Haley: Colorado’s constitution is very clear that oil and gas is of statewide concern and therefore must be regulated by the state, not local municipalities.  If we allowed the hundreds of municipalities and 64 counties to create their own rules concerning oil and gas, then it would be impossible for companies to do business here and the industry would cease to exist in our state. Plus, in Colorado, no oil and gas well can produce any resource without hydraulic fracturing, so this is truly a ban on the oil and gas industry.  That means the loss of the more than 110,000 industry jobs and the $30 billion in annual economic output. And that’s something Colorado families cannot afford to lose.

• Kaye Fissinger: Fracking, coupled with directional or horizontal drilling, is not over 60 years old, as claimed by the oil and gas industry. In fact, it is barely 10 years old — even less along the Front Range. The enormous volume of fresh water, pressurization orders of magnitude greater than earlier fracking, and a highly toxic and dangerous chemical cocktail with known carcinogens and endocrine disruptors make it virtually impossible to protect human health and safety. Local governments have the most immediate and pervasive obligation to protect residents. They are more likely to listen to their constituents and more likely to experience the dangerous impacts from the procedure.  For those who want to preserve and protect people’s health, safety and the environment upon which natural persons depend, there are no “cons” against allowing localities to ban fracking. It’s common sense.

• Bruce Kramer: The principal argument in favor of allowing local governments to ban hydraulic fracturing is the notion of local control and the historical devolution of land-use powers, including zoning to local governments. The lowest-level government is the one that is most responsive and educated on the issues that impact them. That notion, however, leads to NIMBYism as it applies to uses which are needed but which involve negative externalities. Group homes for the mentally disabled or halfway houses for prisoners about to be released are examples

Oil and gas conservation matters have, on the other hand, been historically regulated at the state, not the local, level. There may be important statewide interests, including employment, revenue and the protection of private property rights that might be frustrated should local governments have the power to prohibit hydraulic fracturing or any other kind of lawful activity.

Should mineral owners’ rights trump cities’ ability to ban fracking?

• Dan Haley: The question is whether or not local governments (or the state or federal government) should be able to undermine and take an individual private property right. One of the foundations of our democracy is property rights, and we will continue to stand up for the individuals and families who own mineral rights in our state. Fracking bans are illegal, which is why courts in both Boulder and Larimer counties have overturned bans and moratoriums in the past year. In communities where there are specific local needs. we have seen city and county governments successfully negotiate memorandums of understanding with operators that ensure local citizens, infrastructure and environment are protected.

• Kaye Fissinger: No. Financial investment inherently involves financial risk. It should never be axiomatic that investments are guaranteed a return, much less an investor-determined return. The Colorado Constitution expressly assigns inalienable rights to the people.  In fact, even the Oil and Gas Act, as amended in 2007, requires protection of the people’s health, safety, welfare and the environment that sustains life.  These are preeminent rights. In practice, neither constitutional nor statutory declarations have made any meaningful difference.  Our case law values the state above the people — and they are not one and the same.  Case law also favors industry, specifically the oil and gas industry. The oil and gas industry has been granted dispensation after dispensation (and not by the Pope) to frack, with all of the consequences that evolve from fracking. They are essentially guaranteed the ability to frack wherever, whenever and however they choose.

• Bruce Kramer: There is a difference between a ban on fracking and a ban on oil and gas production activities. With shale formations, a ban on hydraulic fracturing essentially is a ban on producing the oil and gas trapped in such formations because of the technological and economic realities relating to the production from shale formations. Both the United States and Colorado constitutions contain provisions that prevent any governmental entity from taking private property for a public use without the payment of just compensation.  A ban on hydraulic fracturing operations may have the effect of destroying most of the value of the mineral estate where the minerals are located in shale formations. A surface estate owner will often have multiple uses of the surface estate even where certain uses are prohibited. That is not the case for a mineral estate owner whose property interest is made up of the ability to explore for and produce the subsurface minerals where they are located.

A recent Colorado State University study stated that water-based contaminants due to oil and gas production in the Denver-Julesburg Basin were minimal. How should research like that and other environmental effects factor into the debate?

• Dan Haley: We welcome all scientifically sound research into the debate. Hydraulic fracturing is a safe process, and even President Obama’s Environmental Protection Agency admits that it has not had widespread impacts on our water supply.

• Kaye Fissinger: The Public Accountability Initiative’s “Frackademia in Depth” assesses the relative independence and quality of the studies listed on industry sites by identifying and classifying each study’s industry ties. The thorough investigative report of industry control of studies produced by the University of Colorado-Boulder’s Leeds School of Business should be an eye-opener for the public.  Physicians, Scientists & Engineers for Healthy Energy conducted an analysis of peer-reviewed studies on the impacts of fracking and shale gas development and found that 21 of 25 papers published on the health impacts show potential risks or actual adverse outcomes, that 33 of 48 focused on water quality find either the potential for, a positive association with, or direct evidence of water contamination, that 30 of 34 focused on air quality found elevated levels of air pollution, and that children are especially vulnerable to exposure to such pollution.

• Bruce Kramer: Understanding the nature of the negative externalities from the use of a particular technology is a critical component of an effective regulatory system.  Certainly since the 1970s, the federal government has developed regulatory programs designed to minimize environmental injury through various types of human-generated activities. The same kind of research and knowledge should be used when it comes to hydraulic fracturing or other oil and gas-related operations that might cause environmental damage, such as high-volume, high-pressure waste disposal wells. Hydraulic fracturing techniques have been used for 75 years. When done appropriately such techniques present minimal threats to the environment. Research and studies should be continued to determine what further technological steps should be taken to minimize such threats.

Why (or why not) are town-by-town agreements — such as that inked between Erie and Encana — a better way to go for cities seeking fracking limitations, rather than bans?

• Dan Haley: MOUs are a great way for local communities to make sure that oil and gas companies are being sensitive to local needs while still allowing them to operate there.  We have seen more than 30 of these around the state in the past few years, from one in Arapahoe County that addresses local concerns about road impacts to one in Adams County that addresses their specific needs concerning local water sources. All of these are done in a way that finds reasonable solutions while respecting state regulations.

• Kaye Fissinger: Some local governments have elected to enter into what are known as Memorandums of Understanding because it is the only option available to them. Statutory municipalities are governed by state laws and do not have the right to create laws different from those of the state. Counties are a statutory arm of the state government and are similarly constrained. Not only are their hands tied by law, but they are especially vulnerable to being sued by either the state or industry, or both.  Even home-rule communities, with relatively small budgets, may elect to go this route because of potential lawsuits. In my estimation, these statutory restrictions have translated into intimidation and an abuse of power, if not worse. All towns, cities and counties must be free to protect their residents in the best ways that they see fit. State regulations must be “the floor” and not “the ceiling.”

• Bruce Kramer: The enforceability of private, contractual agreements, between governmental entities and private entities is not clear. Furthermore, there may be a problem in that there may be multiple oil and gas operators who want to engage in hydraulic fracturing operations within a single local governmental unit. Should different provisions be allowed with the multiple agreements or should there be a legislative pronouncement that is generally applicable to all? Having said that, a zoning ordinance may through a discretionary permit system still allow for individual negotiation of permits or other agreements that may be individually tailored to a specific, proposed oil and gas operation.

What concessions and compromises still need to be made by each side for the state to establish oil and gas rules with which all sides can get onboard?

• Dan Haley: We believed the Governor’s Task Force had done just that. The governor did a great job of bringing all stakeholders to the table, and his task force on oil and gas included 21 members from such diverse backgrounds that the expectations they could achieve a consensus were low. Yet, of the nine recommendations that came out of the task force, seven of them were approved unanimously. So we know compromise and consensus are possible. If the state would focus on implementing the recommendations as written, we would be able to find common ground just like the diverse group of task-force members were able to do.

We remain committed to engaging in a dialogue with anyone who is impacted by oil and gas operations and has legitimate concerns. For some interest groups and their followers, however, they will never be satisfied with anything less than an outright ban on all oil and gas activity, the industry, and therefore its workers and families.  For that reason, it is very important to separate legitimate voices and concerns from those special-interest groups who just want to malign our industry.

• Kaye Fissinger: If the Colorado Oil and Gas Conservation Commission were to demonstrate integrity and adhere to the second and equal part of their mandate — “in a manner consistent with the protection of public health, safety and welfare, including the environment and wildlife resources” — it would come close to eliminating the perceived need for “concessions.” Instead, the COGCC treats that part of its mandate as if it were an ugly stepsister, holding their collective noses when giving so much as one-eighth of an inch. If our Legislature and governor took their oaths of office seriously, they would rein in the oil and gas industry. All other commercial and industrial interests are required to submit to local control. The argument the industry puts forth — a patchwork of regulations — is ludicrous on its face. Real estate developers, as an example, consistently deal with differing regulations in each community where they wish to build.

• Bruce Kramer: The state, in theory, holds all of the cards in the deck should it choose to exercise its police power authority to regulate oil and gas operations. Whether the Colorado Legislature will enact legislation as did the Oklahoma and Texas legislatures that prohibit local governments from “prohibiting” oil and gas operations while allowing local governments to regulate oil and gas operations is somewhat doubtful. More so than most states, Colorado already gives local governmental entities input into the permit issuing and regulatory authority of the Colorado Oil and Gas Conservation Commission.   Allowing local governments to prohibit activities that state statutes specifically authorize would defeat the objectives set forth in the Colorado Oil and Gas Act. Local governments should understand that a total prohibition ordinance runs contrary to very important statewide public policy objectives in addition to raising some significant constitutional issues.  Maintaining the authority to regulate oil and gas operations in general and hydraulic fracturing operations specifically, when not in conflict with state regulation, should be the objective. Just as with other NIMBYs, where the state has determined that it is in the interest of the state to allow, if not encourage, certain activities, be they group homes, halfway houses, oil and gas operations, mining operations etc., it is unlikely that the state will stand by and allow local governments to thwart such objectives.

Joshua Lindenstein compiled this report.

on Facebook on LinkedIn