New Mexico Federal Court Frames The Issues That Will Define Future Fights Over Local Fracking Regulation

On January 15, 2015, the United States District Court for the District of New Mexico became the first federal court to address questions related to the scope of local governments' ability to regulate oil and gas development within those governments' jurisdictional boundaries. In SWEPI, LP v. Mora County, New Mexico, the district court struck down a county ordinance prohibiting the extraction of oil and gas, a decision that has generally been hailed as a victory for industry. Yet a closer reading of the 199-page opinion that United States District Judge James O. Browning issued reveals that the real import of the SWEPI decision is not the result, but the framework the court articulated for analyzing two issues driving the public debate over the regulation of oil and gas development: whether state and federal laws permitting oil and gas extraction preempt local regulation of oil and gas operations, and whether, if local regulation is permissible, those regulations can represent a taking of private property.

In SWEPI, the federal district court concluded that, while there may be limitations on local communities' ability to regulate oil and gas operations, at least in New Mexico those limitations are not likely to foreclose local governments from regulating entirely. And while not deciding the issue, Judge Browning became the first federal judge to meaningfully grapple with the question regarding whether local regulation of oil and gas, and specifically regulation of hydraulic fracturing, has the potential to result in an uncompensated taking of a mineral interest in violation of the Fifth Amendment to the United States Constitution. Given the court's comprehensive treatment of the pertinent legal issues relevant to those questions, the opinion in SWEPI is likely to be influential in shaping the approach of both regulators and industry in the future.

  1. BACKGROUND

    Beginning in 2010, Royal Dutch Shell subsidiary, SWEPI, LP ("SWEPI"), acquired a series of oil and gas leases in Mora County, New Mexico. Mora Country is a sparsely populated rural county in northeastern New Mexico. There was no oil and gas production activity in Mora County at the time that SWEPI obtained its interest in the leases, and none has occurred in the county since.

    Notwithstanding this lack of development activity, on April 29, 2013, the Mora County Board of County Commissioners enacted an ordinance entitled "Mora County Community Water Rights and Local Self-Government...

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