New Mexico has been a major producer of oil and natural gas since hydrocarbons were discovered in the State in the 1920s; they are a lynchpin of the State’s economy and are essential for its continued fiscal health. In 2012, New Mexico derived more than 27 percent of its general fund revenues from taxes and royalties on oil, natural gas, and carbon dioxide production, which, through the years, have contributed over 90 percent of the principal in the Severance Tax and Land Grant Permanent Funds, the earnings on which are used to fund the common schools, specific education or charities and institutions, and other state governmental operations. Other petroleum tax receipts go directly into the State’s general budget. More than 88,000 New Mexican citizens are employed directly by the oil and gas industry.
In 1978, New Mexico passed the New Mexico Oil and Gas Act, which created the Oil Conservation Commission and Oil Conservation Division that are vested with complete “jurisdiction, authority and control” regarding the development of oil or gas. The Division regulates oil and natural gas activity within the State so as to protect, among other things, fresh water, public health, safety and the environment and issues rules for “safety procedures for drilling and production of oil and gas wells.”
On April 29, 2013, asserting a “local bill of rights,” despite the preeminence of State law as to oil and gas, Mora County passed the “Mora County Community Water Rights and Local Self-Government Ordinance,” which bars the lawful development of oil and natural gas, prohibits hydraulic fracturing within Mora County, and restricts the rights of corporate entities as protected by the First and Fifth Amendments to the United States Constitution.
On November 11, 2013, Mary Vermillion, Jay Land Ltd. Co., Yates Ranch Property LLP, and the Independent Petroleum Association of New Mexico (IPANM) filed a complaint in New Mexico federal district court alleging that the Ordinance violates the First, Fifth, and Fourteenth Amendments to the U.S. Constitution, and that the Ordinance is preempted by New Mexico law governing oil and gas extraction. On December 3, 2013, Mora County filed an answer denying the allegations and further claiming that the County has an “inalienable right” to local self-government and is therefore, “not subject to preemption by state or federal law, or to nullification by corporate rights.” On January 10, 2014, SWEPI LP (formerly Shell Western E&P Inc.) filed a similar complaint against Mora County.
On January 22, 2014, the court issued an initial scheduling order. On March 4, 2014, a joint status report was filed along with a provisional discovery plan. On March 18, 2014, the parties exchanged initial disclosures. On March 20, 2014, the court issued a scheduling order. On November 3, 2014, despite the court’s scheduling order, Mora County filed a motion to dismiss. On November 26, 2014, the landowners and IPANM filed their opposition. On December 19, 2014, Mora County filed a reply brief.
Meanwhile, on November 13, 2014, the landowners and IPANM filed a motion for summary judgment. On December 15, 2014, Mora County filed a motion for summary judgment and a separate opposition to that of the landowners and IPANM. On January 15, 2015, the landowners and IPANM filed their response and reply. On January 19, 2015, in the SWEPI LP challenge to the Mora County Ordinance before a different judge, the district court invalidated the Ordinance in its entirety as preempted by the U.S. Constitution. On February 15, 2015, Mora County filed its reply in support of a motion for summary judgment. On March 27, 2015, Mora County voted unanimously to repeal the Ordinance. On April 14, 2015, the parties filed a joint stipulation of dismissal and on April 14, 2015, the court entered an order dismissing the case without prejudice, each part to bear its own costs and fees.