Weld Air & Water, Sierra Club v. Colorado Oil and Gas Conservation Commission

          City and County of Denver District Court No. 17CV31315 Honorable Kenneth M. Laff, Judge.

          Kevin Lynch, Wyatt Sassman, Sarah Matsumoto, Denver, Colorado, for Plaintiffs-Appellants and Cross-Appellees.

          Philip J. Weiser, Attorney General, Kyle W. Davenport, Senior Assistant Attorney General, David A. Beckstrom, Assistant Attorney General, Denver, Colorado, for Defendant-Appellee and Cross-Appellant.

          Brownstein Hyatt Farber Schreck, LLP, Mark J. Mathews, Julia E. Rhine, Denver, Colorado, for Defendant-Appellee and Intervenor.

          OPINION

          FOX JUDGE.

         ¶ 1 Appellants, Weld Air & Water, Sierra Club, NAACP Colorado State Conference, and Wall of Women (Petitioners) and cross-appellee, the Colorado Oil and Gas Conservation Commission (the Commission), appeal the district court's judgment dismissing Petitioners' claim and affirming the Commission's approval of two permits Extraction Oil and Gas, Inc. (Extraction) requested within Weld County. Petitioners appeal the permit approvals, and the Commission cross-appeals the district court's judgment that Petitioners had standing to seek judicial review. We affirm.

         I. Background

         ¶ 2 This appeal arises from the Commission's approval of Extraction's Form 2A permit applications.

         ¶ 3 In May 2016, Extraction filed two Form 2A applications with the Commission seeking approval to conduct oil and gas operations in Greeley, Colorado at an existing drilling site.^[1] The proposed site- called the Vetting well pads - was approximately 1360 feet from the Bella Romero Academy Middle School buildings.

         (Image Omitted.)

         ¶ 4 In June 2016, the Commission accepted public comments on Extraction's applications, including comments from parents of the Bella Romero students, from neighboring property owners, and from community and environmental groups. Three concerns raised in the public comments, and relevant to this appeal, were (1) the health risk to Bella Romero students playing outdoors where the proposed development was less than 1000 feet from the school's playgrounds and fields; (2) Extraction's emergency response plan given the proposed development's proximity to the school; and (3) consideration of alternative locations farther from the school. Petitioners asked the Commission to deny the permit applications.

         ¶ 5 On March 10, 2017, the Commission, through its Director, approved Extraction's Form 2A applications for the Vetting well pads. Petitioners then sued in district court, arguing that the Commission acted arbitrarily and capriciously in granting the permits - because it failed to consider public comments - and that its decision to grant the permits violated the Commission's setback rules.

         ¶ 6 On June 20, 2018, after finding that Petitioners had standing to seek judicial review of the Commission's permit approvals, the district court affirmed the Commission's decision granting the permits.

         ¶ 7 Because standing is a threshold issue, we address the cross-appeal before addressing Petitioners' appeal.

         II. Cross-Appeal

         ¶ 8 The Commission asserts that the district court erred when it held that Petitioners had standing to seek judicial review of the Commission's authorization of Extraction's Form 2A permit applications. We disagree.

         A. Preservation, Standard of Review, and Applicable Law

         ¶ 9 Petitioners contend that the Commission cannot argue for the first time on appeal that they lack standing to seek judicial review of Form 2A permit approvals. Because questions of standing may be raised at any time, we disagree. See Hickenlooper v. Freedom from Religion Found., Inc., 2014 CO 77, ¶ 7 ("Standing is a jurisdictional prerequisite that can be raised any time during the proceedings.").

         ¶ 10 Because "standing involves a consideration of whether a plaintiff has asserted a legal basis on which a claim for relief can be predicated, the question of standing must be determined prior to a decision on the merits." Id. (citation omitted). In other words, standing concerns a court's subject matter jurisdiction; thus, it is a question we review de novo. Friends of the Black Forest Reg'l Park, Inc. v. Bd. of Cty. Comm'rs, 80 P.3d 871, 876 (Colo.App. 2003).

         ¶ 11 Colorado's Administrative Procedure Act (APA) provides judicial review for parties that are "adversely affected or aggrieved" by "[f]inal agency action." § 24-4-106(1)-(2), C.R.S. 2018. To have standing, a party must suffer an injury-in-fact to a legally protected interest; an "interest is legally protected if the constitution, common law, or a statute, rule, or regulation provides the plaintiff with a claim for relief." Reeves v. City of Fort Collins, 170 P.3d 850, 851 (Colo.App. 2007). And while the injury-in-fact cannot be overly indirect, incidental, or a remote, future possibility, the injury may be intangible, such as an aesthetic injury. Ainscough v. Owens, 90 P.3d 851, 856 (Colo. 2004).

         ¶ 12 The Oil and Gas Conservation Act (the Act) provides that "[a]ny rule, regulation, or final order of the commission shall be subject to judicial review in accordance with [the APA]." § 34-60-111, C.R.S. 2018 (citing § 24-4-106). And Commission Rule 305.e. (3) states that if the approval of a Form 2A "is not suspended . . . the issuance of the approved Form 2 or Form 2A by the Director shall be deemed a final decision of the Commission, subject to judicial appeal." Dep't of Nat. Res. Rule 305.e. (3), 2 Code Colo. Regs. 404-1.

         B. Analysis

         ¶ 13 The Commission argues that the APA - as a procedural act - and the Act do not grant Petitioners a legally protected interest; therefore, they cannot seek judicial review of the Commission's Form 2A permit authorizations. The Commission contends that permits are not "final orders" under section 34-60-111, and thus are not subject to the Act's judicial review provision. In making this argument, it relies on Colo. Oil & Gas Conservation Comm'n v. Grand Valley Citizens' All., 2012 CO 52, ¶ 3 (GVC), which held that because permits are separately governed by section 34-60-106(1)(f), C.R.S. 2018, section 34-60-108(2), C.R.S. 2018, which provides that "[n]o rule, regulation, or order . . . shall be made by the commission without a hearing," does not apply to permits; thus, a citizens group was not entitled to request a hearing on a permit-to-drill application.

         ¶ 14 The Commission argues that because the APA treats permits as "licenses," section 24-4-104, C.R.S. 2018, applies instead, which only contemplates judicial review for permit applicants.^[2]Additionally, the Commission contends that Rule 503.b. has expanded the class of persons who may request a hearing on a Form 2A application to include (1) the permit applicant, (2) the owners of the surface rights, and (3) the local government with land use authority over the proposed development. Dep't of Nat. Res. Rule 503.b., 2 Code Colo. Regs. 404-1. However, the Commission reasons that because citizen groups like Petitioners are not included in the three classes of persons entitled to request a hearing, neither the APA, the Act, nor the Commission rules give Petitioners a legally protected interest to seek judicial review of permit approvals. The Commission's brief ignores Rule 305.e. (3) - designating an approved Form 2A a final Commission decision subject to judicial review - altogether.

         ¶ 15 We agree with the Commission that the APA alone does not provide a substantive claim for relief.^[3] See Romer v. Bd. of Cty. Comm'rs, 956 P.2d 566, 576 (Colo. 1998) ("[T]he APA does not create substantive legal rights on which a claim for relief can be based."). However, the Act provides that any "final order of the commission shall be subject to judicial review in accordance with section 24-4-106" where the relevant APA provision states that parties "adversely affected or aggrieved by agency actions" may seek judicial review. § 34-60-111 (citing § 24-4-106). Commission Rule 305.e. (3) likewise recognizes, without limitation, that when the Commission's Director approves a Form 2A application, his decision is deemed to be a final Commission decision subject to judicial review. Because Petitioners established injuries-in-fact to legally protected interests under the APA and section 34-60-111 of the Act, the district court did not err in holding that Petitioners had standing to seek judicial review of the Commission's permit approvals.^[4]

         ¶ 16 To the extent that the Commission relies on Rule 503.b. and GVC, both are inapplicable here because Petitioners did not request a hearing. GVC held that non-permit applicants may not seek a hearing under section 34-60-108 because the term "order" in that provision does not encompass permits. GVC, ¶ 18. This is a separate issue from whether section 34-60-111's judicial review authorization of "final orders" encompasses permits. GVC also did not foreclose the possibility that, for APA purposes, a permit can be an order. See GVC, ¶ 13.

         ¶ 17 Petitioners are members of organizations that have aesthetic, recreational, health, and environmental interests in the proposed development location, and they offered numerous declarations from members - including nearby residents with children attending Bella Romero - on how the expected air and noise pollution from Extraction's proposed development would negatively impact their interests. Thus, Petitioners established that the Commission's approval of Extraction's Form 2A applications would create an injury-in-fact. See Ainscough, 90 P.3d at 856; Nat'l Wildlife Fed'n v. Cotter Corp., 665 P.2d 598, 604 (Colo. 1983) (holding that unlike members of an organization with a mere "interest in a problem" that do not have standing, organization members who face threat of injury have standing because their "alleged injuries are to personal health, and are sufficient to establish that [they] are adversely affected or aggrieved"). This is so especially where Petitioners effectively challenged the Commission's compliance with the governing regulatory framework.^[5] See Nat'l Courier Ass'n v. Bd. of Governors of Fed. Reserve Sys., 516 F.2d 1229, 1241 (D.C. Cir. 1975) ("Private parties and reviewing courts alike have a strong interest in fully knowing the basis and circumstances of an agency's decision."); see also Geer v. Stathopulos, 135 Colo. 146, 154, 309 P.2d 606, 611 (1957) (recognizing that a court reviewing agency action should have the same information available to the agency to allow the reviewing court to "be in the same position as the agency" in considering "the problem successively confronting agency and court").

         ¶ 18 The Commission's argument that the Act does not offer Petitioners a legally protected interest - specifically that section 34-60-111, which authorizes judicial review of "final orders," does not encompass permits - is unsupported by Colorado law. Cf. Dep't of Nat. Res. Rule 305.e. (3), 2 Code Colo. Regs. 404-1. We are not, of course, bound by an agency's interpretation that is contrary to the plain meaning of the governing statute. See People v. Rockwell, 125 P.3d 410, 420 (Colo. 2005). And, section 34-60-111 authorizes judicial review of final orders "in accordance with" the APA, and the APA defines an agency "order" as "the whole or any part of the final disposition (whether affirmative, negative, injunctive, or declaratory in form) by any agency in any matter other than rule-making." § 24-4-102(10), C.R.S. 2018; see also Dep't of Nat. Res. Rule 305.e. (3), 2 Code Colo. Regs. 404-1; Marks v. Gessler, 2013 COA 115, ¶ 29 ("[T]he APA serves as a gap-filler, and its provisions apply to agency actions unless they conflict with a specific provision of the agency's statute or another statutory provision preempts the provisions of the APA.") (citation omitted) (cert. granted June 23, 2014); Roosevelt Tunnel, LLC v. Norton, 89 P.3d 427, 430 (Colo.App. 2003) (holding that because the relevant ...