Wildgrass Oil and Gas Committee v. State of Colorado

UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
_________________________________
WILDGRASS OIL AND GAS
COMMITTEE,
Plaintiff - Appellant
v.
STATE OF COLORADO; JARED S.
POLIS, in his official capacity as Governor
of the State of Colorado; COLORADO
OIL AND GAS CONSERVATION
COMMISSION; JEFFREY ROBBINS, in
his official capacity as Director of the
Colorado Oil and Gas Conservation
Commission,
Defendants - Appellees,
and
AMERICAN PETROLEUM INSTITUTE;
COLORADO OIL AND GAS
ASSOCIATION,
Intervenors - Appellees.
No. 20-1151
(D.C. No. 1:19-CV-00190-RBJ-NYW)
(D. Colo.)
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before LUCERO, McHUGH, and CARSON, Circuit Judges.
_________________________________
* This order and judgment is not binding precedent except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
FILED
United States Court of Appeals
Tenth Circuit
February 1, 2021
Christopher M. Wolpert
Clerk of Court
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The Wildgrass Oil and Gas Committee (“Wildgrass”) appeals the district
court’s dismissal of its federal procedural due process claim under the Burford
abstention doctrine. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.
I
This appeal arises from Wildgrass’ challenge to the Colorado Oil and Gas
Conservation Commission’s (the “Commission”) proceeding granting Extraction Oil
& Gas, Inc.’s (“Extraction”) application to pool mineral interests owned by
Wildgrass members for the purpose of extraction. Wildgrass is a committee formed
by residents of the Wildgrass residential subdivision of Broomfield, Colorado. In
July 2018, Wildgrass members received lease offers from Extraction for access to
minerals on their property. When Wildgrass members did not consent to the lease,
Extraction filed an application with the Commission asking for a pooling order,
which requires individuals to lease their mineral interests if the Commission
determines that the leasing offer is “reasonable” based on the following criteria: “(A)
Date of lease and primary term or offer with acreage in lease; (B) Annual rental per
acre; (C) Bonus payment or evidence of its non-availability; (D) Mineral interest
royalty; and (E) Such other lease terms as may be relevant.” Rule 506(c)(3), 2
C.C.R. § 404-1.1 Wildgrass objected, and the Commission set a hearing on the
pooling application.
1 During the events at issue, the Rule was numbered 530(c)(2), but it was
recently amended to Rule 506(c)(3). The criteria provided in the rule were not
changed by the amendment.
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Before the hearing, Wildgrass filed a complaint for a temporary restraining
order and injunction in federal district court, arguing that C.R.S. § 34-60-116, which
authorizes forced pooling, violates the Privileges and Immunities Clause, the First
Amendment, the Contract Clause, and the Due Process Clause. It asked the court to
enjoin the Commission from entering the pooling order and for a declaratory
judgment declaring the statute unconstitutional. The district court denied injunctive
relief as unripe but asked the Commission to consider all the issues raised by
Wildgrass in a hearing.
The Commission complied and set a date for a hearing considering whether
Extraction made a “reasonable offer” for Wildgrass members’ mineral interests.
Before the hearing, Wildgrass was permitted to serve twenty interrogatories, twenty
requests for production, and twenty requests for admission. The Commission granted
many of Wildgrass’ requests but did not allow Wildgrass access to all internal
documents concerning Extraction’s financial condition or information on all lease
offers made by Extraction within a twenty-five-square-mile radius of the drilling unit
and did not allow Wildgrass to introduce certain evidence of Extraction’s history of
accidents.
At the hearing on the pooling application, Extraction and Wildgrass were each
given an hour and fifteen minutes to present their cases, which included the
introduction of evidence and the presentation and cross-examination of fact and
expert witnesses. After carefully considering the evidence presented, the
Commission approved the pooling application, finding the leasing terms reasonable.
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Wildgrass then amended its complaint in district court, adding a procedural
due process claim concerning the events at the hearing. As relevant to this appeal,
Wildgrass argued that the Commission failed to grant it sufficient time to present its
case, erroneously denied several discovery requests, failed to state what information
it would consider in determining whether the leasing terms were reasonable under
Rule 506(c)(3)(E), and did not provide a meaningful opportunity for Wildgrass to be
heard on issues pertaining to health, safety and wellness concerns, and environmental
and financial protections.
The defendants filed a motion to dismiss based in part on the Burford
abstention doctrine. The court granted the motion and dismissed the procedural due
process claim under Burford and the other claims on the merits. Wildgrass only
appeals the dismissal of the due process claim under Burford.
II
A district court’s decision to abstain under Burford is reviewed for abuse of
discretion. Marshall v. El Paso Nat. Gas Co., 874 F.2d 1373, 1377 (10th Cir. 1989).
A court abuses its discretion when its decision “is arbitrary, capricious, whimsical, or
manifestly unreasonable.” United States v. Durham, 902 F.3d 1180, 1236 (10th Cir.
2018) (quotation omitted).
Under the Burford abstention doctrine, federal courts must decline to interfere
with the proceedings of state administrative agencies when the court is sitting in
equity, timely and adequate state-court review is available, and either “there are
difficult questions of state law bearing on policy problems of substantial public
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import whose importance transcends the result in the case then at bar” or “the
exercise of federal review of the question in a case and in similar cases would be
disruptive of state efforts to establish a coherent policy with respect to a matter of
substantial public concern.” New Orleans Pub. Serv., Inc. v. Council of City of New
Orleans, 491 U.S. 350, 361 (1989) (quotation omitted).
The district court did not abuse its discretion in holding that each of these
requirements was met. Wildgrass sought declaratory and injunctive relief, thus the
district court was sitting in equity. Timely and adequate state court review of the
Commission’s decision was available to Wildgrass under Colorado’s Administrative
Procedure Act. Though Wildgrass brought a federal claim, state courts are fully
equipped to review the constitutionality of a state agency’s procedures. See Burford
v. Sun Oil Co., 319 U.S. 315, 325-27 (1943) (emphasizing Texas state courts’
specialized knowledge over Texas’ oil and gas regulatory regime in directing the
district court to abstain from resolving a federal due process claim).
Additionally, the district court did not abuse its discretion in holding that
federal review of the procedural issues presented risked “disrupt[ing] [] state efforts
to establish a coherent policy with respect to a matter of substantial public concern.”
New Orleans Pub. Serv., 491 U.S. at 361 (quotation omitted). The Supreme Court
has noted the risk of disruption in cases involving procedural challenges to whether a
state agency “misapplied its lawful authority.” Id. at 362. For example, in Burford
itself, the Court considered a challenge to whether the Texas Railroad Commission
properly applied Texas’ complex oil and gas regulations in granting a permit to drill
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four wells. 319 U.S. at 323-24. The Court directed the district court to abstain from
deciding the procedural issue, noting that the plaintiff failed to exhaust state court
review; Texas’ regulations concerning well permits, spacing, and drilling addressed
public policy problems of substantial import; and Texas had created a system of
judicial review that permitted state courts and the railroad system “to acquire a
specialized knowledge.” Id. at 327.
As in Burford, Wildgrass has not exhausted state court remedies for its
procedural due process claim, and it likewise challenges whether a state agency
charged with regulating oil and gas properly applied its governing statute.
Wildgrass’ procedural challenges also raise important questions of state law,
including whether the Commission must consider information pertaining to the
environment, public health, and the operator’s financial condition in pooling hearings
under C.R.S. § 34-60-116. Resolving this case therefore risks creating “needless
friction with state policies” and disrupting the Commission’s longstanding methods
of applying its own statute. Id. at 332 (quotation omitted). Under these
circumstances, we cannot say the district court abused its discretion.
III
For the foregoing reasons, the judgment of the district court is AFFIRMED.
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Appellant’s motion to dismiss intervenor-appellees American Petroleum Institute and
Colorado Oil and Gas Association is DENIED.
Entered for the Court
Carlos F. Lucero
Circuit Judge
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