Drilling Further Into ‘Necessary and Reasonable’

Colorado’s controversial regulatory overhaul of oil and gas operations passed in the House Friday morning. In the bill, an added clarification that local government regulations of the industry be “necessary and reasonable” has raised a host of unknowns about how that term will get interpreted.

The one certainty oil and gas attorneys seem to agree on? That interpreting “necessary and reasonable” will be a case-by-case analysis, both when governments impose regulations and when courts then have the task of reviewing them.

Energy and natural resources attorney Crystal McDonough said the section of Senate Bill 181 delegating powers to local governments, which contains the “necessary and reasonable language,” seems to encapsulate the measure’s intent in overhauling oil and gas regulations.

“That new necessary and reasonable language adds to the definition of what minimizing adverse impacts means,” McDonough said. “So that’s going to require local governments and agencies to analyze whether their actions are going to minimize adverse impacts.”

Oil and gas attorney Phil Barber, who currently mainly represents local governments, said he’s not getting any heartburn from the term’s uncertainties. “I think it is an elastic concept, and if you try to define it, sometimes you create [as many] problems as you solve,” he said.

Barber said any particular dispute over the meaning of necessary and reasonable may not help define the term in a broader context. Necessary and reasonable regulations on oil and gas will probably mean something different on Colorado’s sparsely populated Eastern Plains, for example, than on the Front Range, he said.

Necessary and reasonable standards exist in other areas of law, such as personal injury and landlord-tenant relationships. “I don’t see necessary and reasonable as that foreign of a concept,” Barber said.

He added even if SB 181 didn’t contain the “necessary and reasonable” language, courts would probably interpret the statute as implicitly requiring local government regulations to be necessary and reasonable anyway, because a law can’t be unreasonable on its face.

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