What do bikes and hydraulic fracturing have in common? Prior to this week, the answer was probably very little. On February 4, 2013, however, the Colorado Supreme Court unanimously issued an opinion striking down the City of Black Hawk’s ban prohibiting bicycle traffic on certain local streets. The Court found that even though Colorado law and Black Hawk’s home rule status granted the City some authority to regulate bicycle traffic, that authority is not without limits. The decision in Webb v. Black Hawk poses important implications for the ongoing efforts by certain Colorado municipalities to ban hydraulic fracturing, and it provides the oil and gas industry with new authority for contesting such efforts.
At issue in the case was Black Hawk's municipal ordinance banning bicycling within certain city streets. In enacting the ban, Black Hawk relied on its home rule authority. Thus, the central issue was whether the bicycle ban was a matter of "purely local concern" subject to Black Hawk's plenary power, or whether it was an issue of "mixed state and local concern," subject to state preemption. The Court held that the bicycle ban was a matter of mixed state and local concern, and struck it down because it conflicted with, and was preempted by, state law.
The Law of Home Rule, Conflict, and Preemption
As the Court noted, "[Colorado] case law pertaining to a home-rule municipality's authority is well-settled." That case law essentially requires a two-pronged analysis: (1) is the regulatory matter one of purely local concern or of mixed local and state concern?; and (2) if the regulatory matter is one of mixed local and state concern, does the local law conflict with existing state law?
The first-prong typically requires the most legal heavy-lifting. In addressing it, courts look to four primary factors: (1) the need for statewide uniformity of regulation; (2) the extraterritorial impact of local regulation; (3) whether the matter has traditionally been regulated at the state or local level; and (4) whether the Colorado Constitution specifically commits the matter to state or local regulation. Applying these factors, the Court found the regulation of bicycles to be of statewide or mixed concern, and held that the Black Hawk ordinance conflicted with state law.
Significant Implications for Municipal Hydraulic Fracturing Bans
Much of the Court's reasoning is applicable to the regulation of oil and gas and recent attempts to ban hydraulic fracturing by certain municipalities:
Uniformity - As the Court noted, the Colorado traffic code establishes a "broad regulatory framework," to, among other things, ensure "consistency for its residents," prevent "a significant variety of conflicting local legislation," and protect the "state's interest in uniform traffic ordinances." Within this broad framework, "the [traffic] code relinquishes a degree of authority with respect to home rule cities, [but] aims to provide uniform traffic regulations that vary only slightly in limited circumstances."
The same statewide uniformity concerns exist under Colorado law with respect to oil and gas development. Indeed, the Court has stated previously that "[t]here is no question that the Oil and Gas Conservation Act evidences a significant interest on the part of the state." Voss v. Lundvall Bros., Inc., 830 P.2d 1061, 1065 (1992).
In explaining the need for uniformity with respect to bicycle regulation, the Court noted the "lengthy history" of bicycling in Colorado and explained that the state "clearly has an interest in uniform bicycle regulation as it continues to develop its bicycle infrastructure and promote bicycling within the state." The same is true of oil and gas development, which arguably has a longer history, greater infrastructure requirements, and broader statutory support. Ultimately, the Oil and Gas Conservation Act (the Act) makes clear through numerous provisions that the state has many important interests in oil and gas development warranting regulatory uniformity.
Extraterritorial Impact - The Webb Court defined extraterritorial impacts as "those involving the expectations of state residents, as well as those that create a ripple effect impacting state residents outside the municipality." The Court reasoned that the bicycle ban would have such impacts because it would prohibit nonresidents from bicycling within the town, and this prohibition, in turn, could diminish tourism to nearby communities. It also noted that the ordinance has "generated strong public criticism and attention, both locally and afar" and that it "may lead to other municipal bicycle bans by local communities" which could "dramatically affect recreational bicycling, creating a patchwork of local and state rules." The same reasoning and observations apply to hydraulic fracturing bans. Such prohibitions affect nonresidents by effectively prohibiting them from exercising their leasehold rights and producing oil and gas as contemplated by the Act, and this prohibition, in turn, could diminish employment, tax revenues, and other economic activity in nearby communities. Like the bicycle ban, hydraulic fracturing bans have generated criticism and concern, may lead to similar ordinances in other communities, and could dramatically affect energy production and create a patchwork of local restrictions.
Traditional Regulation - The Court in Webb found that the state "has traditionally regulated bicycle transportation," noting that state statutes retain authority to regulate bicycles and other traffic and that the traffic code treats them as vehicles. Similarly, the Act is strong evidence that oil and gas development in Colorado is, and has been, traditionally regulated by the state government, with only limited authority granted to local municipalities. See Voss, 830 P.2d at 1068 ("[T]he regulation of oil and gas development and production has traditionally been a matter of state rather than local control.").
Constitution - The relevant constitutional analysis is whether the Colorado Constitution specifically commits the regulatory activity to either the city or the state. Here, the Webb Court stated "[t]he home-rule amendment empowers a city to legislate on issues of local concern, but, where state interests are implicated, the city's authority is constrained." The Voss Court has already held the Colorado Constitution "neither commits the development and production of oil and gas resources to state regulation nor relegates land use control exclusively to local governments." 830 P.2d at 1068. Thus, as in Webb, there is no constitutional support for allowing home rule municipalities to ban hydraulic fracturing.
Conflict - Once a court determines the regulatory issue is of mixed state and local concern, the court must still determine whether the ordinance conflicts with state law. The conflict test is whether the home rule city's ordinance "authorizes what state statute forbids, or forbids what state statute authorizes." The Webb court found that Black Hawk's ban conflicted with the Colorado statute that allows bicycle prohibitions only where alternative paths are also established. The Court noted this was "the General Assembly's long-standing recognition of bicycling as a protected mode of transportation within Colorado . . . ." Similarly, local bans on hydraulic fracturing conflict with the state's long-standing protection against the waste of oil and gas resources by effectively precluding the development of such resources and "diminish[ing] the quantity of oil or gas that ultimately may be produced." C.R.S. 34-60-103(11) (defining "waste" under the Act).
Colorado law arguably creates a statewide regulatory framework governing the equipping, operation, and producing of oil and gas wells that is strikingly similar to the statewide statutory framework with respect to bicycle regulation that the Webb Court relied on to strike down the Black Hawk ban. Just as the City of Black Hawk could not prohibit bicycling, local municipalities in Colorado should not be able to prohibit hydraulic fracturing. As the court battles are heating up over local hydraulic fracturing bans, the Webb decision lends further support to the argument that such bans are unlawful.