OKLAHOMA CITY – The state Legislature is an avid supporter of governmental “local control” – until a city or town tries to regulate some issue that’s of particular importance to lawmakers.
In the days before Bluetooth and hands-free telephone conversations, the issue was municipal ordinances that forbade use of mobile telephones while driving. The Legislature quickly interceded in 2001 with House Bill 1081, in which the state preempted all regulation “relating to inattentive driving and cellular telephone usage in automobiles.”
In 2015 the topic of discussion was oil and gas regulation, and efforts by cities and towns to limit energy production inside their boundaries. The Legislature responded with Senate Bill 809, which severely limited the power of cities and counties to regulate oil/gas production within their corporate limits.
As a direct consequence, Norman’s business licensing requirement that oil and gas operators maintain an umbrella liability insurance policy providing at least $2 million in coverage was overturned March 22, 2022, by the Oklahoma Supreme Court.
The case began when Magnum Energy Inc. filed an application with the Norman Board of Adjustment on Jan. 2, 2018, for a variance on the applicant’s Patty #1 Well in Norman.
Magnum Energy – which was established 43 years ago, Oklahoma Secretary of State records reflect – has operated that well since September 1989 and requested a waiver of the insurance requirement in the Norman Municipal Code.
The board denied Magnum’s application on Jan. 24, 2018. Nine days later Magnum filed an appeal in Cleveland County District Court.
Magnum argued that the municipal insurance requirement is in conflict with the state law enacted by SB 809, and therefore should be declared void and unenforceable. District Judge Jeff Virgin concurred and on March 19, 2019, barred the enforcement action against Magnum Energy.
A month later the Board of Adjustment filed an appeal with the state Court of Civil Appeals, which sided with the City of Norman on June 24, 2020, and reversed the district court order.
Magnum promptly appealed to the state Supreme Court, contending that the 2015 state law “curtailed the authority of localities to regulate oil and gas operations under the scope of their general police power” and thus the ordinance is precluded by statute.
State law limits city’s
regulatory authority
over oil/gas operations
Magnum noted that the state law allows a municipality, county, or other political subdivision to:
enact “reasonable ordinances, rules and regulations concerning road use, traffic, noise and odors incidental to oil and gas operations within its boundaries,” provided that such ordinances, rules and regulations “are not inconsistent with any regulation established by Title 52 of the Oklahoma Statutes or the state Corporation Commission, which regulates Oklahoma oil and gas industry.
establish “reasonable setbacks and fencing requirements for oil and gas well site locations as are reasonably necessary to protect the health, safety and welfare of its citizens, but may not effectively prohibit or ban any oil and gas operations,” including oil/gas exploration, drilling, fracking, completion, production, maintenance, plugging and abandonment, wastewater disposal, secondary recovery operations, flow and gathering lines or pipeline infrastructure.
enact “reasonable ordinances, rules and regulations concerning development of areas within its boundaries which have been or may be delineated as a 100-year floodplain,” but only to the minimum extent necessary to maintain eligibility for the National Flood Insurance Program.
With the exception of those three areas, “All other regulations of oil and gas operations shall be subject to the exclusive jurisdiction of the Corporation Commission,” the state statute decrees.
Prior to enactment of SB 809, state statutes declared that nothing in the law was intended to “limit or restrict the rights of cities and towns governmental corporate powers to prevent oil or gas drilling therein, nor under its police powers to provide its own rules and regulations with reference to well-spacing units or drilling or production which they may have … under the general laws of the State of Oklahoma.”
The Board of Adjustment contended that cities and towns “maintain a general police power to provide for the safety and well-being of their inhabitants, and pursuant to that authority municipalities may impose regulations on oil and gas production that go beyond the categories” enumerated in SB 809.
2015 measure altered
regulatory landscape
“While the precise issue raised in this appeal has not come before this court, it has been raised in other settings,” the Supreme Court justices wrote. Shortly after enactment of SB 809, several legislators requested an Attorney General’s opinion on “a number of questions related to the effect” of the new law on municipal authority to regulate oil and gas.
Then-Attorney General Scott Pruitt and his staff concluded that it was “clear from the entirety of Senate Bill 809 that the Legislature intended to limit local regulation to the areas specifically enumerated” in the measure. Although A.G. opinions are not binding on the Supreme Court, “they may be persuasive authority,” the justices wrote.
Oklahoma statutory and jurisprudential law previously “embraced broad municipal authority to regulate oil and gas production,” the justices noted. But with adoption of SB 809 the Legislature “drastically curtailed the jurisdiction of municipalities to regulate oil and gas production.”
Consequently, the Supreme Court concluded, Norman’s $2 million liability insurance requirement is “invalid and unenforceable.”
Contacted Wednesday by Southwest Ledger about the Supreme Court’s ruling, the City of Norman’s Legal Department issued the following statement:
“In this case, the Oklahoma Supreme Court answered various questions for the first time regarding the intended breadth and application of” Title 52 of the Oklahoma Statutes, Section 137.1.
“Both state law and the City of Norman require insurance coverage and other surety for private individuals and organizations in many cases where businesses are operating within municipal boundaries or constructing a public improvement, which situations squarely implicate the well-being of the public. This requirement falls securely within a municipality’s constitutional authority, which authority and police power has been upheld by the Oklahoma Supreme Court on numerous occasions.
“While the City disagrees that imposing an insurance requirement in this case constitutes a regulation ‘on oil and gas production,’ the City nonetheless respects the authority of the Supreme Court of Oklahoma and is evaluating how the City can best incorporate and honor this ruling.”
SB 809 was authored by then-Senate President Pro Tempore and now Secretary of State Brian Bingman, R-Sapulpa, and then-House Speaker Jeff Hickman, R-Fairview, who is now chairman of the State Regents for Higher Education.
The measure passed the Legislature in split votes: 64-32 in the House of Representatives, 33-13 in the Senate. Every vote in favor of the bill in both chambers was cast by a Republican; opponents included 27 Democrats and five Republicans in the House, six Republicans and seven Democrats in the Senate.