CHAPTER 3 LOCAL LAND USE REGULATION OF OIL AND GAS DEVELOPMENT

• Jurisdiction: United States

Development Issues and Conflicts in Modern Gas and Oil Plays
(Nov 2004)
CHAPTER 3
LOCAL LAND USE REGULATION OF OIL AND GAS DEVELOPMENT
Alison E. Barry ¹
Duke Energy Fields Service, L.P.
Denver, Colorado

Alison E. Barry has been Senior Counsel in the Denver headquarters of Duke Energy Field Services, L.P. since July 2003. Ms. Barry's practice at DEFS focuses on pipeline safety and operations, environmental remediation and related land use issues.

Prior to her position with DEFS, she spent three years in private practice with Akin Gump Strauss Hauer & Feld in Denver, specializing in environmental, natural resources and land use law, and before moving to Denver in 2000, served as an attorney-advisor at the U.S. Department of the Interior in Washington D.C.

Ms. Barry received her J.D. in 1996 from the University of Colorado in Boulder, where she was the Editor-in-Chief of the Colorado Journal of International Environmental Law and Policy, and her B.S. in Geology and Geophysics from Yale University in 1985. Before attending law school, she worked as an environmental scientist for the U.S. Environmental Protection Agency in New York and Washington D.C., and as a groundwater geologist for the New Jersey Department of Environmental Protection.

1. INTRODUCTION

Although the natural gas industry faces continuing regulatory oversight at the federal and state level, new challenges to production, gathering/processing and transmission companies are increasingly coming from local governments and individual landowners. In some Western states, city and county governments are attempting to control or impose conditions on oil and gas operations through exercise of their land use powers. These local and individual efforts are motivated by community concerns about the environment or protection of other natural resources, loss of landowners' control over the surface estate, and classic "not-in-my-backyard" attitudes--issues that have escalated as demographic changes in the West have brought more people into areas of traditional oil and gas development. This paper outlines some of the ways that local governments are attempting to control energy infrastructure development, with particular attention to the impact on natural gas pipelines, and explores the legal context in two Western states--Colorado and New Mexico--that may allow such control. Finally, this paper proposes that the oil and gas industry develop best practices or standards governing facility siting that take into account local land use issues.

2. CHANGING DEMOGRAPHICS

The major natural gas fields in the continental United States include the Rocky Mountains, the Gulf Coast, and Oklahoma. These regions necessarily have the largest concentrations of natural gas transmission and gathering pipelines, as well as production and processing facilities. Many such pipelines and processing facilities were originally constructed in rural or undeveloped areas. In the last 20 years, however, rapid population growth in areas like the Front Range of Colorado ² have encouraged the growth of new towns and larger cities with extensive suburbs, which have gradually surrounded the existing gas plants, wellheads and pipelines. It is now much more likely that a homeowner or utility worker will encounter a buried pipeline in the course of ordinary activities, more likely that subdivisions will exist in close proximity to a gas processing plant, and consequently more likely that a municipal or county government will perceive energy infrastructure as incompatible with desirable commercial and residential development or other local objectives.

Weld County, Colorado, illustrates this pattern. Still extensively agricultural, with almost 900,000 acres of cultivated cropland out of 2.5 million acres land, Weld County's population has grown from approximately 72,000 in 1960 to approximately 180,000 in 2000; the County itself estimates that its 2004 population is 217,000. ³ The City of Greeley, Weld County's governmental seat, has gone from a population of 26,000 in 1960 to almost 84,000 in 2004. Smaller towns such as Frederick have increased their population even more dramatically: the 1990 census results for Frederick identified a population of less than a thousand people, but Weld County estimates Frederick's 2004 population to be 4,461. ⁴ Most of the increase in population has been non-agricultural, with towns along the Front Range I-25 highway corridor experiencing explosive growth while small agricultural towns further to the east have experienced little or no growth.

At the same time, Weld County is dotted with oil and gas wells and honeycombed with gathering and transmission pipelines. According to the Colorado Oil and Gas Conservation Commission, there are more than 10,000 oil and gas wells in Weld County, representing 40% of all wells in Colorado. ⁵ Duke Energy Field Services, L.P., only one of several major natural gas companies with midstream operations in Weld County, has approximately 4900 miles of gathering pipelines and 7 gas processing plants in Weld County.

In southern and southwestern Colorado, different issues are at stake. Las Animas County, which encompasses over 3 million acres, 2.5 million of which are privately owned, is home to slightly more than 15,000 people. ⁶ Although that number represents more than a 10% growth rate over the past ten years, growth in this area of the state lags behind the population increases experienced along the Front Range. Most people are employed in retail or service jobs, rather than agriculture, despite the lack of major suburban or urban development, although the oil and gas industry is becoming more significant as an employer. The county per capita income is approximately half what it is in Weld County. ⁷ As highlighted in the Las Animas Master Plan, many residents are concerned about the negative impacts of oil and gas development, regardless of the economic benefits, and have expressed the desire to regulate the location of oil and gas facilities. ⁸

Coal bed methane (CBM) development is the source of particular environmental concerns among residents of southwestern Colorado, including Las Animas, Huerfano, La Plata and Archuleta Counties. Because in most cases the mineral and surface estates have been severed, residents cannot directly control the possibility of CBM development activities on their property and fear the environmental and economic impacts on their communities. Nonprofit environmental and citizens' organizations have encouraged resistance to CBM exploration and development, ⁹ and the County governments have responded to such concerns by enacting land use controls aimed at oil and gas activities.

The most recent surge in energy development has been in northwestern Colorado, where natural gas exploration and production activity in the Piceance Basin has caused Garfield County to surpass Weld County in the number of drilling rigs in operation and in the number of new well permits issued during the past two years. ¹⁰ Garfield County has traditionally been dominated by ranching, although the area has experienced energy development attention in the past, during the boom in oil-shale development in the late 1970s. Current land use trends include outdoor recreational uses like hunting and fishing, and an increase in second-home and retirement home development. Local and regional concerns about environmental impacts, including damage to fish and wildlife habitat, ¹¹ as well as noise and odors associated with natural gas exploration and production activities on the Roan Plateau have spurred establishment of an Energy Advisory Board, creation of a County Oil and Gas Auditor position, and proposed regulations requiring development plan review for new pipelines. In the 2004 county elections, the county's ability to control gas leasing and drilling has become a major issue among the candidates. ¹²

a. State law issues

Most states have adopted statutes which allow local governments, whether municipal or county, to zone land for specific uses. However, states with significant oil and gas resources may also retain jurisdiction over oil and gas development and operations. ¹³ In these states, conflicts may arise between the interests of the state in oil and gas resources and the interests of local governments in regulating land use.

Unlike other western states, there has been significant recent litigation in Colorado concerning conflicts between oil and gas interests and local land use control. Colorado has adopted both a Local Government Land Use Control Enabling Act, ¹⁴ which authorizes counties, home rule and statutory cities to engage in land use planning and regulation, and an Oil and Gas Conservation Act, ¹⁵ which created an Oil and Gas Conservation Commission with extensive authority over the development, production and transportation of oil and gas within the state. Although the COGCC has authority to regulate well spacing and pooling arrangements within an oil or gas field for conservation purposes, the Commission does not have express authority to regulate the location of oil and gas wells nor does the Act provide for preemption of local government land use powers. ¹⁶ The Commission has promulgated rules governing aesthetic and noise issues associated with oil and gas operations, including gas plants, but the rules specifically provide that Colorado cities and counties may obtain a determination that that any or all of such rules are inapplicable by showing that the particular noise and aesthetic requirements are unnecessary to protect public health, safety and welfare within the boundaries of that city or county. ¹⁷ The judicial interpretation of the relationship between the Commission's jurisdiction and particular city and county land use ordinances is discussed in the following section.

In Wyoming, although the Oil and Gas Conservation Commission also does not have express authority over the location...