Jim Cole and Garin Vorthmann
The 2014 election saw changes to our state government. While Governor John Hickenlooper (D) was elected for a second term, there was quite a bit of turn over at the State Legislature, with 27 new members in the House and Senate. Plus, the Republicans took control of the Senate while the Democrats maintained their majority in the House. Most of the 2015 session centered on how to pass a balanced budget as required by the state constitution, while also resolving the political complications of the budget and general business bills. While it was generally quiet regarding oil and gas bills and we were able to talk about the industry as part of the larger business community in Colorado, there were a few bills that caught our interest.
Private Property Rights
Two bills were introduced dealing with mineral rights and regulatory takings, but neither had enough support in the House to pass. Senate Bill 93 (SB93), sponsored by Senator Jerry Sonnenberg (R-Sterling), outlined how a mineral owner is compensated for a diminution of their mineral interest caused by regulatory restrictions on extraction operations. It was supported by mineral owners broadly and was particularly relevant in light of the controversy concerning mineral development in urbanizing areas. The bill would have established a process under the state constitution for valuing the partial loss of mineral estates should local governments over regulate the development of the resource. This bill was especially important in the context of additional local regulations and bans being placed upon the oil and gas industry. While the bill passed the Senate, it was defeated in the House.
A second bill, House Bill 1119 (HB1119) was introduced in the House by Representative Perry Buck (R-Windsor) that asked the legislature to look at the responsibility of local governments that ban oil and gas development. It outlined process for communities that ban development to compensate mineral owners for the taking of that right. Like SB 93, it was defeated on a party line vote in the House State, Veterans and Military Affairs committee.
COGA supported both these bills as we wanted to ensure recognition by local governments that “local control” has real economic implications which affect real people. Those opposed to this idea believe that it is unfair to give mineral owners preferential treatment. While neither of these bills passed, the debate and discussion is important for these often forgotten, but protected private property rights.
Task Force Recommendations
In September of last year, Governor Hickenlooper created the Oil and Gas Task Force as part of a compromise to keep extreme anti-oil and gas initiatives off the November 2014 ballot and as a means to dialogue about mixed regulatory jurisdictions between local and state governments. After 6 months of meetings, the Task Force considered over 50 draft recommendations with 9 recommendations garnering the required two-thirds as an official recommendations. Of the 9- 7 were unanimous; 1 received 20 votes; and one 1 received 18 votes. Three of the final recommendations were industry-led proposals, and all of the approved recommendations had tremendous input and revisions by all the task force members. Six of the recommendations are directed to the Colorado Oil and Gas Conservation Commission (COGCC) and Colorado Department of Public Health and Environment (CDPHE) with only three recommendations requiring legislative action. Specifically, the Task Force recommended and the legislature approved additional funding for COGCC staff – specifically Inspection and Enforcement staff; additional funding for CDPHE air division staff and air monitoring equipment; and support for the Rule Review bill. Industry supported these efforts for it helped lower the friction and lessened the argument that each jurisdiction needed to create their own mini oil and gas commissions. All of these proposals were incorporated into the budget bill that passed with bipartisan support.
And, the most critical outcome is that none of the recommendations advanced by the task force allowed local governments to have veto authority over state rule because these ideas did not have the support the of the state civic leaders on the task force.
While the anti-oil and gas activists and lobbyists declared the process a failure before the task force had even voted on any final recommendations, many believe the process was fair, reasonable, and comprehensive and that the governor was successful in bringing diverse interests together to tease out the issues in a productive manner. Nor did it seem to be the opinion of the legislature, for by the end of the 2015 session, no oil and gas specific legislation was introduced.
The budget was the issue du-jour for most of the session and COGA was directly involved in these discussions. HB 1261 was introduced to help relieve general fund pressures which made changes to state law governing the amount that may be in held in reserve in cash funds that collect revenue from fees passed this year. This bill, requested by the Joint Budget Committee, alters the cash fund reserve requirement and swept all cash funds which had a fund balance 16.5 percent above the appropriation to general funds. As introduced, the bill would have negatively impacted the oil and gas operating account. Once this impact was pointed out, Senator Kevin Grantham (R-Canon City) agreed to exclude the fund from the bill thereby preserving the option to raise and lower the mill to meet the operating budget needs of the oil and gas regulators.
In the end, the 2015 legislative session was quieter than the past few sessions. We know this was the great work of so many people – not only at the state capitol but throughout the state. In the last three years, over 30 communities have used the tools at their disposal to engage with the state, companies, and citizens in responsible energy development within our comprehensive regulatory system. We had numerous legislative seminars, briefings, and open houses for legislators and local officials and created a large, diverse, and active coalition of civic and business leaders in support of oil and gas development. What we saw this session was the culmination of doing the unsexy work of discussing, negotiating, and working with so many stakeholders, to where elected officials have truly begun to separate real concerned citizens with those activists and lobbyists who just want to ban oil and gas.