On March 23, the Colorado Court of Appeals issued a ruling reversing the trial court and the Colorado Oil and Gas Conservation Commission which had denied the petitioners’ request that the Commission, when promulgating rules affecting oil and gas production operations and activities in Colorado, be required to consider public health and environmental conditions to be determinative. The case is Martinez, et al., v. Colorado Oil and Gas Conservation Commission. The American Petroleum Institute and the Colorado Petroleum Association were intervenors, and a large number of environmental groups supported the petitioners.

The petitioners proposed a rule whereby the Commission would

not issue any drilling permits unless an impact review was first conducted which determined that the “best available evidence 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…and does not contribute to climate change.

The Commission, after conducting a hearing and receiving comments, basically decided that the requested rule mandated action that was at variance with the limited statutory authority delegated to the Commission. Moreover, it concluded that any interpretation of the statutory authorizations as advocated by the petitioners would upset the balancing of interests mandated by law.

The lower court held that the law requires that there be a balance between developing oil and gas resources and public health and safety. The Court of Appeals reversed in a 2 to 1 decision, holding that the Commission must proceed, as the law provides, “in a manner consistent with public health and safety,” and any balanced development must be subject to these predominant values. Consequently, the “balancing test” employed by the Commission was based on an erroneous interpretation of the Commission’s legal authority. Rather, “[t]he plain meaning of the statutory language indicates that fostering balanced, nonwasteful development is in the public interest when that development is completed subject to the protection of public health, safety, and welfare.”

Because the record indicated that the Commission based its denial of the petitioner’s petition for rulemaking “primarily on its determination that it lacked authority to implement Petitioners’ proposed rule,” the Court of Appeals concluded that the administrative record did not contain sufficient findings of fact for it to affirm the Commission’s decision on alternative grounds

— such as the Commission’s statement that ‘there are other Commission priorities that must take precedence over the proposed rulemaking at this time,’ or the Commission’s reference to the proposed rule’s impermissible delegation of Commission duties to a third party (an issue not addressed by the district court or briefed on appeal to this court).

The Court of Appeals reversed the Commission’s order denying petitioners’ petition for rulemaking and the lower court’s order on appeal, and the case was remanded to the lower court to return it to the Commission for further proceedings consistent with the Court of Appeals’ opinion.