Voss v. Lundvall Bros., Inc.

• Decision Date: 08 June 1992
• Docket Number: No. 91SC169,91SC169
• Parties: Gayle VOSS, City Clerk of the City of Greeley, a municipal corporation, Vitus Einsphar, Fire Chief, City of Greeley Fire Department, the Election Board of the City of Greeley, a municipal corporation, the City Council of the City of Greeley, a body politic, and the City of Greeley, a municipal corporation, Petitioners, v. LUNDVALL BROTHERS, INC., a Colorado corporation, d/b/a Lundvall Oil and Gas, Inc., Bellwether Exploration Company, Hertzke Brothers, a partnership, Conquest Oil Company, Colorado Oil and Gas Conservation Commission, and Langford Resources, a Colorado general partnership, Respondents.
• Court: Colorado Supreme Court

Page 1061

830 P.2d 1061

Gayle VOSS, City Clerk of the City of Greeley, a municipal corporation, Vitus Einsphar, Fire Chief, City of Greeley Fire Department, the Election Board of the City of Greeley a municipal corporation, the City Council of the City of Greeley, a body politic, and the City of Greeley, a municipal corporation, Petitioners, v. LUNDVALL BROTHERS, INC., a Colorado corporation, d/b/a Lundvall Oil and Gas, Inc., Bellwether Exploration Company Hertzke Brothers, a partnership, Conquest Oil Company Colorado Oil and Gas Conservation Commission, and Langford Resources, a Colorado general partnership, Respondents.

No. 91SC169.

Supreme Court of Colorado En Banc.

June 8, 1992.

Richard P. Brady, George N. Monsson, Greeley, for petitioners.

James J. Peyton, Lind, Lawrence & Ottenhoff, George H. Ottenhoff, Kenneth F. Lind, Greeley, for respondents Lundvall Bros., Inc., a Colorado corp., d/b/a Lundvall Oil and Gas, Inc.; Bellwether Exploration Co., Hertzke Bros., and Conquest Oil Co.

Gale A. Norton, Atty. Gen., Raymond T. Slaughter, Chief Deputy Atty. Gen., Timothy M. Tymkovich, Sol. Gen., Patricia S. Bangert, Deputy Atty. Gen., Jerry W. Goad, First Asst. Atty. Gen., Timothy J. Monahan, Asst. Atty. Gen., Denver, for respondent Colorado Oil and Gas Conservation Com'n.

Randolph W. Starr, P.C., Randolph W. Starr, Loveland, for respondent Langford Resources.

Charles H. Richardson, Robert M. Rogers, Aurora, for amicus curiae City of Aurora, Colo.

Gorsuch, Kirgis, Campbell, Walker and Grover, William A. Keefe, Hugh V. Schaefer, Kenneth A. Wonstolen, Denver, for amicus curiae Colorado Petroleum Ass'n.

Geoffrey T. Wilson, Denver, for amicus curiae Colorado Mun. League.

Lohf, Shalman & Ross, P.C., J. Michael Morgan, David G. Ebner, Denver, for amici curiae Colorado Oil and Gas Ass'n and Independent Petroleum Ass'n of the Mountain States.

Justice QUINN delivered the Opinion of the Court.

The questions in this case are whether the Oil and Gas Conservation Act, §§ 34-60-101 to -126, 14 C.R.S. (1984 & 1991 Supp.), preempts a home-rule city from enacting a land-use ordinance that imposes a total ban on the drilling of any oil, gas, or hydrocarbon wells within the city and whether any such preemption would violate article V, section 35 of the Colorado Constitution, which prohibits the delegation of a municipal function to a special commission. In Lundvall Bros., Inc. v. Voss, 812 P.2d 693 (Colo.App.1990), the court of appeals addressed only the preemption issue and held that, because the development of oil and gas resources is a matter of statewide concern, the Oil and Gas Conservation Act preempts a home-rule city from regulating any aspect of oil and gas development or operations within the city. We affirm the judgment of the court of appeals, but we do so for reasons different from those relied on by the court in its opinion. We hold that while the Oil and Gas Conservation Act does not totally preempt a home-rule city's exercise of land-use authority over oil and gas development and operations within the territorial limits of the city, the statewide interest in the efficient development and production of oil and gas resources in a manner calculated to prevent waste, as well as in protecting the correlative rights of owners and producers in a common pool or source to a just and equitable share of the profits of production, prevents a home-rule city from exercising its land-use authority so as to totally ban the drilling of oil, gas, or hydrocarbon wells within the city. We also conclude that the state preemption of a home-rule city's total ban on drilling does not violate article V, section 35 of the Colorado Constitution.

I.

The City of Greeley is a home-rule city. On August 6, 1985, Lundvall Brothers, Inc., a Colorado corporation engaged in oil and gas development, obtained a permit from the city to drill four gas wells on property located in a multi-family residential zone. Lundvall Brothers also obtained a permit from the Oil and Gas Conservation Commission to drill for oil and gas on the same property. Before Lundvall Brothers commenced drilling operations, a petition was submitted to the Greeley City Council to refer to the electorate an ordinance prohibiting "[t]he drilling of any well for the purpose of exploration or production of any oil or gas or other hydrocarbons within the corporate limits of the [c]ity" and that "[a]ny ordinance or any part of any ordinance in conflict [herewith] is hereby repealed." Greeley Ordinance No. 89, §§ 1 & 2 (1985). The ordinance provided that each day a violation occurs shall constitute a separate offense, which is punishable by a fine of up to one-thousand dollars and a jail sentence of up to ninety days. Greeley Ordinance No. 89, § 3 (1985). The ordinance was to become effective after its adoption and approval by the electorate at a regular municipal election on November 5, 1985, and its publication according to law. Greeley Ordinance No. 89, § 4 (1985). On September 17, 1985, the city clerk determined that the petition contained sufficient signatures for referring the measure to the electorate, and the city council accepted the referendum petition on that same date. Ordinance No. 89 was subsequently approved by the electorate at the regular municipal election.

The Greeley City Council enacted a separate ordinance, Greeley Ordinance No. 90, which also prohibited "the drilling of any well for the purpose of exploration or production of any oil or gas or other hydrocarbons within the corporate limits of the [c]ity" and repealed any conflicting ordinance. Greeley Ordinance No. 90, §§ 1 & 2 (1985). ¹ Ordinance No. 90 was adopted on September 17, 1985, and became effective five days after its publication. Greeley Ordinance No. 90, § 4 (1985). Because Ordinance No. 90 created an immediate ban on the drilling of any oil or gas well within the city, it had the effect of nullifying the permit previously granted to Lundvall Brothers on August 6, 1985.

Lundvall Brothers filed an action for declaratory relief which was subsequently consolidated with similar actions filed by oil and gas developers and various owners of oil and gas leases. As pertinent here, Lundvall Brothers and the other plaintiffs sought a declaration that Greeley Ordinance Nos. 89 & 90 were null and void and did not divest them of their respective rights under the Oil and Gas Conservation Act and the permits issued by the Oil and Gas Conservation Commission. The trial court granted summary judgment in favor of Lundvall Brothers and the other plaintiffs, ruling that Greeley Ordinance Nos. 89 & 90 were facially void because "the entire area of oil and gas exploration regulation, including the location of sites within municipalities [has] been preempted by the State of Colorado and [has been] delegated to the Oil and Gas Conservation Commission" and that, consequently, "there is no area of regulation of oil and gas exploration left to the City of Greeley." ²

The City of Greeley appealed to the court of appeals, which affirmed the judgment. The court of appeals acknowledged that a home-rule city derives its power from the Home-Rule Amendment of the Colorado Constitution, Colo. Const. art. XX, § 6, and in that respect has greater authority over local matters than a county, which is a political subdivision of the state. Lundvall Brothers, 812 P.2d at 694. Notwithstanding that distinction, the court concluded that the state's interest in oil and gas development and production, as manifested in the Oil and Gas Conservation Act, is a matter of statewide concern which requires uniformity of regulation and leaves no room for local regulation and that, therefore, the regulation of oil and gas development within a home-rule city, including the use of land required for those activities, is within the exclusive regulatory authority of the Oil and Gas Conservation Commission. Id. at 694-95. We granted Greeley's petition for certiorari to review the decision of the court of appeals.

II.

In Bowen/Edwards Assocs. Inc. v. Board of County Commissioners of La Plata County, 830 P.2d 1045 (Colo.1992), issued today, we held that the Oil and Gas Conservation Act, §§ 34-60-101 to -126, 14 C.R.S. (1984 & 1991 Supp.), does not totally preempt a county from exercising its land-use authority over any and all aspects of oil and gas development and operations in unincorporated areas of the county. In the instant case we must determine whether the scope of Greeley's authority as a home-rule city to regulate land use within its municipal borders extends to a total ban on the drilling of an oil, gas, or hydrocarbon well within the city limits. The answer to that question depends on whether Greeley's authority to impose a total ban has been preempted by the Oil and Gas Conservation Act. As a backdrop to our preemption analysis, we briefly review the land-use authority of a home-rule city and those provisions of the Oil and Gas Conservation Act which delineate the nature and scope of the state's interest in oil and gas development and operations.

A.

The Home-Rule Amendment, Colo. Const. art. XX, § 6, grants home-rule cities "the full right of self-government in both local and municipal matters." This constitutional provision further provides that a home-rule city's ordinances pertaining to local and municipal matters "shall supersede within the territorial limits ... any law of the state in conflict therewith." In addition, the Home-Rule Amendment expressly states that "the enumeration herein of certain powers shall not be construed to deny cities and towns, and to the people thereof, any right or power essential or proper to the full exercise of such right." The effect of the Home-Rule Amendment is to grant to a home-rule city "every power possessed by the General Assembly as to local and municipal matters, unless restricted by the terms of the city's charter." VFW Post 4264 v. City of Steamboat Springs, 195 Colo. 44, 50, 575...