United States: Colorado Energy Legislation 2016: The General Assembly Adjourned, But Was It All Bark And No Bite?

The Second Regular Session of the Seventieth Colorado General Assembly adjourned on May 11, 2016. Legislators introduced 685 bills this year, though just under half (309) passed both chambers. Most of those successful bills were bipartisan and enjoyed broad support. But, because it is an election year, we saw many pieces of legislation intended to force legislators to take difficult votes and provide "messaging" help to the parties. With primary elections on June 28th, and a general election on November 8th, the Republican-controlled Senate and Democratic House pushed bills to appeal to their base and try to motivate their voters to get to the polls. Interestingly, the messaging agendas for both sides included energy – though, as you can imagine, with slightly different objectives.

Energy Bills That Passed:

HB 1035 by Rep. Leonard and Sen. Scott – PUC Approval of Securities Only For Gas & Electric. Currently, all public utilities are required to submit an application to the Colorado Public Utilities Commission ("PUC") to issue securities. This bill clarifies that only public electric and gas utilities are required to apply to the Colorado PUC for approval to issue or assume securities. Other utilities are no longer subject to this requirement.

HB 1044 by Rep. J Becker and Sen. Hill – Extend Repeal Dates Petroleum Storage Tank Fund. This bill extends the repeal date for use of the petroleum storage tank fund for facility inspections and meter calibrations to 2018. Approved in 1989, the fund reimburses applicants for the cost of cleaning up underground and aboveground petroleum tank contamination. Without this legislation, the fund would have expired, which would have dramatically increased the cost of remediation.

HB 1053 by Rep. Kraft-Tharp and Sen. Hill – Retail Hydrogen Fuel Systems Regulation. This bill requires the Division of Oil and Public Safety to promulgate rules concerning the retail sale of hydrogen fuel for vehicles by January 1, 2017. The rules must conform to the minimum standards prescribed in the National Fire Protection Association's national fire code and include minimum design, construction, location, installation, and operation standards. Beginning July 1, 2017, the Division will be authorized to enforce the rules, thereby, allowing retail sale of hydrogen fuel.

HB 1091 by Rep. Thurlow and Sen. Sonnenberg – Change Due Dates for Electric Utilities' Transmission Plans. This bill allows the PUC to change the biennial filing review dates for rate-regulated investor-owned utilities. Currently, Black Hills and Xcel Energy are required to file certificates of public convenience and necessity ("CPCN") with the PUC on or before October 31 each odd-numbered year. The bill also eliminates requirements that reviews be conducted simultaneously, and the PUC issue an order approving or rejecting the CPCN for construction or expansion of transmission facilities 180 days after the application is filed. Both companies suggest that this bill will result in administrative efficiencies, and flexibility for responses to filing deadlines.

HB 1332 by Reps. Duran and Rankin and Sens. Scott and Johnston – Alternative Fuel Motor Vehicle Income Tax Credits. This bill makes two changes to the refundable income tax credits for innovative motor vehicles and trucks: (1) establish a fixed formula for credit computation and (2) allow the taxpayer to transfer the entire credit allowed to a financing entity when the lease or sale is finalized. Because used vehicles will no longer be eligible under this bill, the state forecasts a decrease in credits for passenger vehicles, but an increase in credits for trucks. Any individual or company considering a purchase of a qualifying vehicle should consider the changes made to the credits as a result of this legislation.

HB 1457 by Reps. Garnett and Wilson and Sens. Neville and Garcia – Sales & Use Tax Exemption Residential Energy. Current law exempts energy sources from taxation when sold for the purpose of powering residential fixtures and appliances, but only when sold to the occupants, and only when not resold. This bill clarifies that the sales and use tax exemption for residential uses of electricity, coal, wood, gas, fuel oil, and coke applies when energy sources are resold, or sold to persons who are not occupants of the residence. The bill applies the exemption to all sales for residential use, which includes sources purchased for multi-family residential property and resold to individual resident households, thus, increasing the applicability of the exemption.

SB 055 by Rep. Moreno and Sen. Grantham – Rural Electric Cooperative Election Procedures. Currently, cooperative electric associations ("CEAs") may exempt themselves from regulation by the PUC and operate under control of their board of directors. CEAs are permitted to contract with a third party to collect and count ballots for board elections. This bill allows ballots to be mailed directly to the third party and provides that a contractor is required to deliver the ballots to the CEA under seal after the count. This bill potentially increases participation in CEA board elections because all ballots, regardless of whether they are placed in a secrecy sleeve, as currently required, must be counted.

SB 171 by Sens. Martinez Humenik and Scheffel and Reps. Tyler and J. Becker – New Energy Improvement District Clarifications. The New Energy Improvement District ("NEID") is a statewide district that operates a program to encourage private financing of energy and water improvement projects to real property. This bill made several changes: (1) requires county treasurers to retain a collection fee for each NEID assessment it collects, (2) repeals the authority of the NEID to reduce the amount of any special assessment with the consent of the property owner, and (3) repeals the prohibition on a county assessor considering increases in a property's market value resulting from improvements financed through the NEID program when valuing property.

Energy Bills That Didn't Pass:

HB 1004 by Reps. Winter and Arndt – Measurable Goals Subject to Deadlines in Colorado's Climate Action Plan. This bill would have made the following changes to the state climate action plan: (1) specific and measurable goals for reduction of greenhouse gas emissions, (2) deadlines for the goals, and (3) annual progress measurements. The bill also would have required the analysis of the progress made to include an estimate of the economic, social, and health impact on low-income individuals that results or would result from meeting the deadlines as planned. Many argued that measuring economic or social costs would be subjective, or, at least, very challenging to quantify, and, thus, result in challenges for the industry.

HB 1181 by Rep. Buck – Local Government Compensate for Fracking Ban. This bill would have required local governments to compensate royalty or mineral rights holders if their property interests in mineral or oil and gas reserves were harmed due to local government regulations on extraction and production. Aimed at opponents of fracking, this bill would have dissuaded local governments from considering fracking bans because of the associated cost.

HB 1207 by Rep. Rosenthal – PERA Investments in Renewable Energy Companies. This bill would have required the Public Employees' Retirement Association ("PERA") to ensure that one percent of future investments be in renewable energy companies. Many expressed concerns that the increased cost of compliance (the state assumed PERA would have to hire additional staff), plus the mandate to invest in one area, would be too burdensome.

HB 1310 by Rep. Salazar and Sen. Carroll – Liability for Oil and Gas Operations for Earthquakes. This bill would have expanded oil and gas operator liability and would have made operators strictly liable if their operations caused an earthquake that resulted in property damage or personal injury. The first of its kind, this bill would have dramatically increased the scope of liability for operators in Colorado.

HB 1355 by Rep. Foote and Sen. Ulibarri – Local Government Siting Authority Over Oil and Gas Facilities. This bill would have given local governments new authority over siting decisions for oil and gas operators. The bill also would have given local government siting regulations preemption over state law in this area. Many businesses opposed this bill because of the risk of a patchwork of regulations at the local level, rather than the predictable statewide regulations. While most legislators would argue that local control is a good thing, the parties are split as to whether local control of oil and gas regulation is a good thing. This battle is far from over in the Legislature, though the voters may have an opportunity to make the decision at the ballot.

HB 1376 by Reps. Esgar and Winter – Expand Authority of the Office of Consumer Counsel. Currently, the Office of Consumer Counsel ("OCC") in the Department of Regulatory Agencies represents customers of electric and gas utilities in proceedings before the PUC. This bill would have expanded the representation to include customers of every common carrier, pipeline corporation, telephone corporation, and water corporation, thereby, increasing the workload of the OCC and making proceedings more costly.

HB 1430 by Rep. Lebsock – Oil & Gas Operators Sharing Development Plans with Local Governments. This bill would have required oil and gas operators to disclose their five-year drilling plans to county governments, in addition to the other local governments as currently required by law. Operators argued that the bill was redundant and would only increase compliance costs for little benefit.

HB 1441 by Rep. Tyler and Sen. Jones – PUC Consider Full Cost Carbon for Electric Generation. This bill would have required the PUC to consider costs associated with greenhouse gas emissions when considering a utility's proposal for electric resource planning.

SB 007 by Sen. Roberts and Rep. Coram – Biomass Renewable Energy Wildfire High Risk Areas. Currently, retail electric service providers are required to generate a specific portion of its sales from renewable energy resources, one of which is biomass. This bill would have specified that each kilowatt-hour of electricity generated from a biomass source using forest materials taken from areas with a high risk of wildfires would count as 3 kilowatt-hours for purposes of complying with the renewable energy standard ("RES"). This bill was particularly important to rural legislators – it would have decreased the risk of wildfire while also increasing RES compliance.

SB 046 by Sen. Cooke – Preserve Options to Respond to the EPA's Clean Power Plan Rule. Senate Bill 46, and other related efforts, was an attempt to address the Environmental Protection Agency's ("EPA") Clean Power Plan ("CPP"). At the federal level, the United States Supreme Court issued stay orders to halt its implementation. This bill focused on the regulatory actions, and associated costs, of implementation at the state level and generally sought to limit application of the CPP in Colorado. The bill essentially would have required regulators to cease work on implementing the state plan until new deadlines are established. Republicans argued that moving forward with the state implementation plan, given the uncertainty at the federal level, is inefficient. In addition, many resent the EPA's "top-down" approach to regulation in this area.

SB 061 by Sens. Cooke and Sonnenberg, and Rep. Dore – Ratepayer Protection from Carbon Dioxide Increased Costs. This bill would have required the PUC to create a "Ratepayer Protection" program to protect ratepayers as a result of the increased costs associated with the CPP compliance. Republicans continuously argue that increased costs on generation will be passed on to consumers – while making energy more expensive benefits the environment, it hurts the customer who has to pay the resulting increase.

SB 129 by Sen. Jones and Rep. Arndt – Neutral Oversight of Oil and Gas Activities. Currently, the Colorado Oil and Gas Conservation Commission ("COGCC") is tasked with, in part, "fostering" oil and gas development in Colorado. This bill would have removed that responsibility and, instead, compelled the COGCC to focus more on administrative and enforcement functions. Many on the left believe that the COGCC is too close or, at least, too helpful to the industry given that part of its mission is to "foster" development.

SB 157 by Sens. Cooke and Sonnenberg and Rep. Dore – Don't Implement Clean Power Plan Until Stay Lifted. This bill would have directed the Air Quality Control Commission and the Department of Public Health and Environment to suspend work on the CPP and the state implementation plan until the Supreme Court stay is lifted. The bill also would have required the state implementation plan be subject to legislative review.

So, what do these bills tell us? Republicans have generally been supportive of oil and gas operations and opposed to the Clean Power Plan, especially, because of its impact on coal in this state. They have argued, and, likely, will continue to argue, that increased regulation leads to higher costs, as well as reduced job prospects in the energy industry. Democrats have argued that increasing regulation results in a cleaner environment and incentives for alternative and renewable energy products. Of the bills that passed, all had bipartisan support and tended to be in the "clarification" or "efficiency" categories. The bills that did not pass were generally antagonistic to one side or the other and meant to put legislators on record (for example, local control over oil and gas).

Next session, we expect to see renewed efforts to give more authority over oil and gas to local governments, as well as increased liability for those operators. The theme there will be: "give local governments control over what happens in their back yards – the people should have a say." We can also expect Republicans to keep up the drumbeat against the state implementation of the CPP – a continuation of the "war on rural Colorado" theme. If Republicans hold their majority in the Senate, expect to see a stalemate. If Democrats retake the Senate, all eyes will be on Governor Hickenlooper, as he will have to balance his interest in supporting energy, especially oil and gas, while keeping the environmental-leaning portion of his base happy.

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