United States District Court Judge James Browning issued a lengthy opinion on January 19, 2015 invalidating Mora County’s “Community Rights and Local Self-Government Ordinance”, enacted by the County in 2013, that prohibited oil and gas development by corporations in the county. See SWEPI, LP v. Mora County, 2015 U.S. Dist. LEXIS 13496 (D.N.M. Jan. 19, 2015). The Community Environmental Legal Defense Fund (CELDF), a Pennsylvania nonprofit that advocates for community self-governance, developed the Ordinance. Under the Ordinance, it was declared unlawful for “any corporation to engage in the extraction of oil, natural gas, or other hydrocarbons within Mora County.” Additionally, the Ordinance declared illegal the extraction of water from any surface or subsurface source within Mora County for use in oil and gas development by a corporation or its directors, officers, owners or managers. The Ordinance further outlawed the use of water for fracturing. Corporations which violated the Ordinance were deprived of the rights of “persons” afforded by the United States and New Mexico Constitutions, and were deemed to have forfeited their rights under the First and Fifth Amendment and the Commerce and Contract Clauses of the United States Constitution and corresponding sections of the New Mexico Constitution.
Initially, Judge Browning held that the provisions of the Ordinance which purported to strip corporations of their constitutional rights were preempted by federal law, rejecting Mora County’s contention that county residents’ right to self-government recognized by the Declaration of Independence and the Treaty of Guadalupe Hidalgo establish, or at least recognize, such rights. The court ruled that “corporations have constitutional rights that inferior law cannot infringe, regardless of the Defendants’ interpretation of the Declaration of Independence and the Treaty of Guadalupe Hidalgo.” 2015 U.S. Dist. LEXIS 13496, slip op. at 222.
Despite what most observers viewed as the obvious constitutional infirmity of the Ordinance, the Court gave equal consideration to every argument advanced in support of the Ordinance, ultimately ruling that the County’s ban on oil and gas developed was preempted by State law, stating:
By banning hydrocarbon exploration-and-extraction activities, the Ordinance is antagonistic to state law, because it prohibits activities that New Mexico state law permits. ***
State law is not silent on the exploration and extraction of hydrocarbons. The State has created an extensive statutory and regulatory scheme to regulate oil-and-gas production. By extensively regulating oil-and-gas production in a manner that is intended to prevent waste, see N.M. Stat. Ann. § 70-2-2, the State has indicated that oil-and-gas extraction is permitted.… If a complete ban on all hydrocarbon extraction activities does not constitute a county ordinance that conflicts “with state law when state law . . . is of such a character that local prohibitions on those activities would be inconsistent with or antagonistic to that state law or policy,” then no county ordinance will ever fall within this standard. Consequently, the Ordinance’s hydrocarbon-extraction ban conflicts with state law.***
Moreover, the Ordinance’s ban conflicts with state law by creating waste and not recognizing correlative property rights, which the Oil and Gas Act prohibits.
2015 U.S. Dist. LEXIS 13496, slip op. 293-302. (citations omitted).
The United State District’s Court’s opinion leaves the door open for some local regulation of oil and gas development, based on the court’s initial conclusion that under the Oil and Gas Act, the New Mexico Oil Conservation Division’s (NMOCD) authority over oil and gas development was not exclusive. Applying an earlier New Mexico Court of Appeals decision interpreting the Mining Act, the court noted that the Oil and Gas Act did not address issues such as traffic, noise limitations near residential areas or potential nuisance issues from sound, dust, or chemical run-off. According to the court’s analysis, the absence of specific state regulation on these issues left room for concurrent regulation by Mora County. However, the opinion fails to consider that under its statutory charge to protect the environment, NMOCD has enacted special regulations for oil and gas development in Santa Fe and select areas of Otero and Doña Ana counties.
Where counties seek to regulate oil and gas development activities such as hydraulic fracturing based on a desire to protect groundwater resources, the argument for field preemption under the Oil and Gas Act is greater because in New Mexico “all water within the state, whether above or beneath the surface of the ground belongs to the state, which authorizes its use…” State ex rel. Erickson v. McLean, 1957–NMSC–012, ¶23, 62 N.M. 264, 271. The EPA has further delegated authority to the State of New Mexico to enforce most aspects of the federal Safe Drinking Water Act and Clean Water Act. The Oil Conservation Commission in turn is the state agency which has been granted authority to enforce the federal water pollution statutes under New Mexico’s Water Quality Act. The Water Quality Act prohibits the Water Quality Control Commission from taking any action which would “interfere with the exclusive authority of the Oil Conservation Commission over all persons and things necessary to prevent water pollution as a result of oil or gas operations….” NMSA 1978, §74-6-12(G).
To remove any doubt concerning field preemption, a bill was under consideration by the Legislature in the 2015 legislative session, which would have recognized the exclusive authority of the New Mexico Oil Conservation Division to regulate oil and gas development. See NM House Bill 366.1 This bill was passed by the House but failed in the Senate on March 13, 2015. The Mora County Commission, following Judge Browning’s opinion, unanimously repealed the Ordinance on March 29, 2015. The Commission recognized Judge Browning’s finding that the Ordinance was unconstitutional, and that it was not the correct way to limit oil and gas activities in the County.
By Stuart R. Butzier of Modrall Sperling
1 The bill would have modified the Oil and Gas Act by declaring that “the state has exclusive jurisdiction and authority over all matters relating to oil and gas conservation, extraction, production, processing, storage and transportation.” The exclusive jurisdiction of the State would then be vested by HB 366 in the NMOCD and Oil and Gas Conservation Commission and would have specifically included “the siting of oil or gas wells and ancillary facilities, the drilling and completion of oil or gas operations as well as producing, processing, storage and transportation of oil or gas.”