DISTRICT COURT, COUNTY OF CITY AND

COUNTY OF BROOMFIELD, STATE OF

COLORADO

Court Address: 17 DesCombes Drive
Broomfield, Colorado 80020










COURT USE ONLY

SOVEREIGN OPERATING COMPANY LLC, a
Colorado limited liability company

Plaintiff

v.

CITY AND COUNTY OF BROOMFIELD,
COLORADO

Defendant


Case Number:

14CV30092

Division B

ORDER


This matter coming on upon the parties Cross-Motions for Summary J udgment
this 22
nd
day of September, 2014 the Court having reviewed the Motions, responses,
replies, supplemental filings, heard the oral arguments of counsel, the Courts file and
deeming itself fully apprised in the premises, DOTH FIND AND CONCLUDE:
Summary judgment is proper by a party prosecuting or defending a claim where
the pleadings, affidavits, or discovery show that there is no genuine issue as to any
material fact and that a moving party is entitled to judgment as a matter of law. Rule
56(a)(b)(c), C.R.C.P. Abrahamsen v. Mountain States Tel. & Tel. Co., 177 Colo. 422,
494 P.2d 1287 (1972). The Colorado Supreme Court has held in Mt. Emmons Min. Co.
v. Town of Crested Butte, 690 P.2d 231, 238 (Colo. 1984) that:
DATE FILED: September 25, 2014 4:09 PM
CASE NUMBER: 2014CV30092

Because the grant of summary judgment denies the party opposing the
motion the right to a trial, summary judgment is appropriate only in those
circumstances where there is no dispute as to material facts and thus no
role for the fact finder to play. Thus, a court may enter summary
judgment on behalf of a moving or nonmoving party if, in addition to the
absence of any genuine factual issues, the law entitles one party or the
other to a judgment in its favor. Cool Fuel, Inc. v. Connett, 685 F.2d 309
(9th Cir.1982); Morrissey v. Curran, 423 F.2d 393 (2d Cir.1970), cert.
denied 399 U.S. 928, 90 S.Ct. 2245, 26 L.Ed.2d 796 (1970); 6 J . Moore,
Moore's Federal Practice 5612 (2d ed. 1982 & 1982-84 Supp.).

It is only in the clearest of cases that summary judgment should be entered and
the court must deny a motion for summary judgment if, under the evidence, reasonable
people may reach different conclusions. In making this determination, . . . all doubts as
to the existence of a triable factual issue must be resolved against the moving party,
Travelers Insurance Co. v. Savio, 706 P.2d 1258 (Colo.1985), and the opposing party is
given the benefit of all favorable inferences that may be drawn from the facts. Kaiser
Foundation Health Plan v. Sharp, 741 P.2d 714 (Colo.1987). Mohr v. Kelley, 8 P.3d
543, 545 (Colo.App. 2000). Issues of credibility, absent existence of extraordinary
circumstances, are uniquely jury issues and preclude entry of summary judgment.
Andersen v. Lindenbaum, 160 P.3d 237 (Colo.2007).
Once a party has established a prima facie showing that that party is entitled to
summary judgment, the burden shifts to the non-movant to establish that judgment should
not enter. Rule 56(e), C.R.C.P.; Continental Air Line, Inc. v. Keenan , 731 P.2d 708
(Colo.1987).
The Court finds that the parties agree on the salient facts necessary for
determination of the issues raised in the motions for summary judgment, that there is no
disputed issue as to any material fact and that judgment as a matter of law should enter in
this case.
The undisputed facts in this disclose that the Defendant City and County of
Broomfield, (hereinafter referred to as Broomfield), had not updated its regulatory
scheme for permitting of oil and gas exploration and extraction for a period of
approximately twenty years. Broomfield desired to update the regulatory scheme by
obtaining input from stakeholders and various experts. The intent was to develop a
comprehensive plan that could be implemented by addressing the competing interests
involved without illegally limiting the exploration and extraction of oil and gas while
simultaneously dealing with safety and health concerns raised by other stakeholders.
Several study sessions, town hall meetings, and public hearings were held in
connection with the development of the new Broomfield ordinance regulating the
exploration and extraction of oil and gas. The extended process resulted in Broomfield
adopting Ordinance 1986 revamping the permitting and regulatory procedures pertaining
to oil and gas exploration and extraction.
The revised ordinance permitted those seeking to obtain a permit for exploration
and extraction of oil and gas to proceed in one of two ways. An owner of oil and gas
rights could seek to proceed under a traditional special permit procedure and only be
subject to traditional regulation by the State of Colorado with limited Broomfield
supervision.
If an owner elected to subject themselves to significantly stricter supervision, a
greater amount of regulation and higher safety standards (hereinafter referred to as Best
Management Practices), the owner was offered an expedited permitting process upon
execution of a Memorandum of Understanding. The Plaintiff Sovereign Operating
Company, LLC (hereinafter referred to as Sovereign) opted to proceed on a number of
its sites under the expedited process. This agreement was approved by Broomfield City
Council and signed on August 27, 2013. The permits were issued to Sovereign pursuant
to the agreement of the parties.
At approximately the same time that Broomfield was considering the regulatory
scheme referenced above, a citizens petition initiative was undertaken to place a
moratorium on oil exploration and extraction by a process known as fracking on the
November, 2013 election ballot. On August 2, 2013, the signed petitions regarding the
initiative to amend the home rule charter were filed with the City and County Clerk and
on August 9, 2013 the clerk issued his Certificate of Sufficiency placing the issue on the
ballot.
After an election held on November 5, 2013 and an election contest trial, this
Court upheld the election results adopting the amendment to the home rule charter. The
Court will take judicial notice of its Order of February 27, 2014 that became a final
judgment twenty days thereafter once the time for appeal had run. See, Rule 201(b) of
the Colorado Rules of Evidence; 1-11-214(2), C.R.S.
The charter amendment provides, in relevant part:
Policy.

It shall hereby be the policy of the City and County of Broomfield that it is
prohibited to use hydraulic fracturing to extract oil, gas or other
hydrocarbons within the City and County of Broomfield. In addition,
within the City and County of Broomfield, it is prohibited to store in open
pits or dispose of solid or liquid wastes created in connection with the
hydraulic fracturing process, including but not limited to blowback or
produced wastewater and brine.

This prohibition will expire after five years from the date of its
implementation, unless it is extended by a majority vote by the people of
Broomfield prior to expiration.

Retroactive application.

In the event this measure is adopted by voters, its provisions shall apply
retroactively as of the date the measure was found to have qualified for
placement on the ballot.

Prior to the final results of the election being certified and pursuant to its
agreement, Sovereign commenced preparation for oil and gas exploration and extraction
as well as the operation of producing oil and gas well sites. All of these activities were
done in compliance with the heightened requirements of the Memorandum of
Understanding rather than the less stringent state and federal regulations. The agreement
resulted in existing operations also being brought under stricter scrutiny. See, Plaintiffs
Exhibit 4, paragraph 5. The Court concludes that the undisputed evidence before it is that
these operations were at a greater expense to Sovereign and placed a greater burden upon
Sovereigns operations than would have otherwise been required.
Central to the resolution of the claims of the parties are the terms and conditions
of the Memorandum of Understanding. The parties have urged differing interpretations
of the language of paragraph 8 of the agreement that the Court must resolve in order to
determine the issues before it.
Paragraph 8 of the Memorandum of Understanding provides that:
Future Regulations. The City reserves the right in the future to
enact and apply prospectively oil and gas regulations that are general in
nature and are applicable to all similarly situated oil and gas activities
subject to land use regulation by the City, even though such regulations
may be more or less stringent than the standards applicable to the Well
Sites by virtue of this Agreement.

As a preliminary matter, interpretation of contractual provisions and whether such
provisions are ambiguous are questions of law for the Court. Specialized Grading
Enterprises, Inc. v. Goodwill Construction, Inc., 181 P.3d 352 (Colo.App.2007). In
making such determinations, the Court must strive to ascertain and give effect to the
intent of the contracting parties. Pepcol Manufacturing Company v. Denver Union
Corporation, 687 P.2d 1310 (Colo.1984).
Where a contract is an integrated written instrument, the intent of the parties must
be determined from the language of the contract itself. Ad Two, Inc. v. City and County
of Denver ex rel. Manager of Aviation, 9 P.3d 373 (Colo.2000). The Court must review
the language of the contract in harmony with the plain and generally accepted meaning of
the words used and reference must be made to the entire agreement and all of its parts in
determining the intent of the parties. Bledsoe Land Company LLLP v. Forest Oil
Corporation, 277 P.3d 838 (Colo.App.2011).
The Court in applying these rules of construction to the instant case finds that the
language in paragraph 8 of the agreement set forth above applies to the specialized rules
pertaining to Best Management Practices as defined in paragraph 2.b. of the agreement.
In making this determination the Court has considered the several factors.
First, in the introductory provisions of the agreement setting forth the purposes for
the agreement, the parties expressly stated their intent as follows:
Whereas, the City and the Operator value a balanced approach to oil
and gas development that is protective of public health, safety and welfare,
including the environment and wildlife resources. To that end, in order to
achieve those goals in a cooperative manner, the City and the Operator
enter into this Agreement to identify best management practices (BMPs)
for the operators drilling and production operations for the Well Sites.

The remaining declarations in the introductory provisions of the agreement all relate to a
variety of regulated practices that fall within the Best Management Practices anticipated
by the agreement.
Second, the agreement, in its totality, deals with managing the development and
extraction of oil and gas resources through the agreed upon practices exclusive of any
other municipal ordinance or regulation relating to subject of the agreement. The only
method that Broomfield contractually reserved unto itself to terminate the agreement was
if Sovereign fails to comply with the Best Management Practices established by
Broomfield. See, Plaintiffs Exhibit 4, paragraph 1. Broomfield did not reserve to itself
any discretion to refuse to issue permits or administrative approvals so long as Sovereign
complied with the Best Management Practices.
Paragraph 4 of the Memorandum of Understanding contains obligatory, not
discretionary, language in numerous subsections. For example, paragraph 4.a. provides:
The Operator shall not be required to obtain from the City Council any use
by special review approvals or approval under the then existing Oil and
Gas Regulations in the Broomfield Municipal Code for any wells subject
to the terms and conditions of this Agreement, including any
Approved/Pending Wells or any New Wells and/or Refiled Wells on the
Well Sites, as long as the Operator complies with the terms and conditions
contained herein, and this Agreement shall control all oil and gas
operations conducted by the Operator on the Well Sites during the Term of
this Agreement. (Emphasis supplied).

Likewise, paragraph 4.b. of the agreement provides that [t]he City shall issue
administrative approvals . . . for such operations, including Approved/Pending, New
Wells, and/or Refiled Wells on the Well Sites . . . with limited exclusions and those
inure to the benefit of Sovereign. Paragraph 4.d. permits to review amendments to any
submittals required by the agreement but provides that Broomfield . . . shall review and
approve . . . those submittals so long as they comply with the agreement.
Sovereign brought existing facilities under stricter scrutiny and regulatory review
under the provisions of the agreement as part of the bargained for exchange. See,
Plaintiffs Exhibit 4, paragraph 5. Moreover, specific well sites to which the agreement
applied were identified by the Memorandum of Understanding.
Broomfield attempts to construe the language of paragraph out of context. First,
there are no other similarly situated producers in Broomfield. All parties have conceded
at oral argument that the only operator subject to the specialized rules regarding Best
Management Practices in Broomfield is Sovereign. Other operators are subject to far less
stringent regulatory standards.
Second, contextually, the language was expressly referencing changing regulatory
practices to meet the requirements for safe extraction of oil and gas as the scientific
evidence and technological advances occurred. The ability to modify the regulatory
structure included input from Sovereign. To construe the language otherwise would
result in a complete renunciation of the stated intent of the parties to . . .achieve those
goals in a cooperative manner, the City and the Operator enter into this Agreement to
identify best management practices . . . because the enactment of the moratorium by
initiative was not part of a cooperative negotiation, but rather part of an independent
ballot process.
All of these considerations lead the Court to find and conclude that the language
of paragraph 8 of the Memorandum of Understanding only applies to Best Management
Practices as defined by the agreement.
The Court having determined that the language of paragraph 8 of the agreement
does not incorporate the initiative procedure, the Court must, nonetheless, determine
whether application of the prohibited activity contained in the Broomfield Charter
Amendment violate the Colorado Constitutions prohibition regarding ex post facto laws.
Article II, Section 11 of the Colorado Constitution provides that:
No ex post fact law, nor law impairing the obligation of contracts, or
retrospective in its operation, or making any irrevocable grant of special
privileges, franchises or immunities, shall be passed by the general
assembly.

As a preliminary matter, it has long been the law in the State of Colorado that this
provision applies to local governmental entities as well as the state legislature. City and
County of Denver v. Denver Buick, Inc., 141 Colo. 121, 247 P.2d 919 (1959); City of
Golden v. Parker, 138 P. 3d 285 (Colo.2006). Initially, the Court acknowledges that an
enactment is presumed constitutional and must be proven unconstitutional beyond a
reasonable doubt. Mesa County Board of County Commissioners v. State, 203 P.3d 519
(Colo.2009).
In the leading case of City of Golden v. Parker, 138 P.3d 285 (Colo.2006), the
Colorado set forth the standards for determining whether a citizen enacted charter
amendment is retrospective.
We use a two-step inquiry to determine whether or not a law is
retrospective in its operation. DeWitt, 54 P.3d at 854. First, we look to
the legislative intent to determine whether the law is intended to operate
retroactively. Id. We require a clear legislative intent that the law apply
retroactively to overcome the presumption of prospectivity. Ficarra, 849
P.2d at 14. However, express language of retroactive application is not
necessary to find that a law is intended to apply retroactively. Id.

If we find intent of retroactive application, the second step of the
inquiry is to determine whether the retroactively applied law operates
retrospectively. A law is retrospective if it either "(1) impairs a vested
right, or (2) creates a new obligation, imposes a new duty, or attaches a
new disability ...." DeWitt, 54 P.3d at 855. We consider each of these
prongs of the retrospectivity analysis in turn. In regard to the first prong,
we have found that a right is vested only when it has an "independent
existence." People v. D.K.B., 843 P.2d 1326, 1331 (Colo.1993). A
vested right may be derived from a statute or the common law, but "once it
vests it is no longer dependent for its assertion upon the common law or
statute under which it may have been acquired." Ficarra, 849 P.2d at 15.

We do not employ a fixed formula or a bright-line test for
determining whether a right is vested. Id. at 17. Rather, we look to three
factors: "(1) whether the public interest is advanced or retarded; (2)
whether the statute gives effect to or defeats the bona fide intentions or
reasonable expectations of the affected individuals; and (3) whether the
statute surprises individuals who have relied on a contrary law." DeWitt,
54 P.3d at 855.

A determination that retroactive application of a law impairs a
vested right is not dispositive of the retrospectivity inquiry because such a
finding "may be balanced against public health and safety concerns, the
state's police powers to regulate certain practices, as well as other public
policy considerations." Id. Retroactive application of a law that implicates
a vested right is only permissible, however, if the law bears a rational
relationship to a legitimate government interest. Id. In past cases, we have
"appl[ied] a balancing test that weighs public interest and statutory
objectives against reasonable expectations and substantial reliance."
Kuhn, 924 P.2d at 1059-60 (quoting Ficarra, 849 P.2d at 17).

If a vested right is not implicated, we consider the second prong of
the analysis. Under this prong, "retrospectivity may result from the
creation of a new obligation, imposition of a new duty, or attachment of a
new disability with respect to" past transactions or considerations.
DeWitt, 54 P.3d at 855. Application of a law is not deemed retrospective,
however, "merely because the facts upon which it operates occurred
before" its adoption. City of Greenwood Village, 3 P.3d at 445.

138 P.3d at 290

In the present case, it is absolutely undisputed that the charter amendment is
intended to apply retroactively. The amendment on its face provides:
Retroactive application.
In the event this measure is adopted by voters, its provisions shall apply
retroactively as of the date the measure was found to have qualified for
placement on the ballot.

No clearer statement regarding the intent to apply retroactively can be made.
There is absolutely no intent that the act apply prospectively and any interpretation to the
contrary would be highly contorted. The Court concludes that the presumption that the
act was intended to act prospectively is overcome by the charter amendments express
language and that the enactment is retroactive.
In considering whether the public interest is advanced or retarded, the Court finds
that the public interest in the context of this case is retarded by application of the charter
amendment to the Memorandum of Understanding.
The charter amendment is of dubious constitutionality. Two district courts have
stricken similar enactments finding they were impliedly preempted or that an operational
conflict prohibited enforcement of those enactments. Additionally, Broomfields own
legal staff has advised its governing body that any attempt to regulate oil and gas
exploration and extraction that conflicts with the rules and regulations of the Colorado
Oil and Gas Commission is in contravention of the Colorado constitution. Accordingly,
the stricter regulatory scheme incorporated into the agreement promotes enhanced public
health and safety.
In assessing the second consideration, the Court finds that the amendment
completely frustrates the contractual expectations and intentions of the parties. The
contractual duty of Broomfield is absolute. Unlike the situation in the City of Golden,
case, supra, Broomfield has no discretion with respect to the issuance of approvals or
permits so long as Sovereign complies with the Best Management Practices. The rights
created by contract clearly have an independent existence. Nothing more need be done to
exercise the contractual rights, they can only be terminated by the specific procedures set
forth in the agreement, and the party seeking enforcement has substantially changed its
position in reliance upon the contractual rights granted it. Moreover, Broomfield
received significant concessions that enhance public health and safety in the community.
The Court finds that the parties were not completely surprised by the enactment
since the ballot issue had been certified at the time of the execution of the agreement.
However, the parties clearly relied upon prior law regarding preemption and operational
conflict in negotiating the agreement.
Based upon the foregoing City of Golden analysis, the Court concludes that the
contractual rights in this case are undoubtedly vested. Both the public interest and
reasonable reliance of the parties leads the Court to find that the charter amendment is
retrospective. The Court concludes the charter amendment violates Article II, section 11
of the Colorado Constitution beyond a reasonable doubt and cannot be enforced to affect
the provisions of the Memorandum of Understanding between the parties.
BASED UPON THE FOREGOING FINDINGS AND CONCLUSIONS, THE
COURT DOTH ORDER:
The Plaintiffs motion for summary judgment is GRANTED. The Defendants
motion for summary judgment is DENIED.
DONE AND SIGNED IN OPEN COURT this 25
th
day of September, 2014.
BY THE COURT:



_________________________
Chris Melonakis
District Court J udge

CERTIFICATE OF SERVICE

I certify that a true and correct copy of this order was served on all parties
electronically by ICCES on this 25
th
day of September, 2014.



________________________
District Court J udge