January 27 Colorado Energy Cheat Sheet: COGCC rulemaking pleases no one; anti-fracking measures disastrous for Colorado economy; pushing back against Clean Power Plan

Even small changes to oil and gas regulations can have deep and damaging effects on Colorado’s economy, according to researchers at the University of Colorado:

A statewide, 2,000-foot buffer zone between drilling rigs and homes, schools and businesses would take a hammer to Colorado’s oil and gas industry, already reeling from low commodity prices, as well as the state’s wider economy, according to a new study from University of Colorado Boulder’s Leeds School of Business.

Such a setback requirement “could result in slower economic growth” for Colorado’s economy as well as state revenue, according to the study released Wednesday.

The study said its forecast on the effects of a 2,000-foot setback included:

Production of oil and gas statewide could drop between 25 percent and 50 percent;
A $6 billion to $11 billion drop in Colorado’s gross domestic product;
A loss of 33,000 and 62,000 jobs between 2015 and 2030;
Loss of $214 million to $428 million in per year in tax revenues from oil and gas companies.

Given that the Colorado Oil and Gas Conservation Commission just concluded a round of rulemaking based on the Governor’s Oil and Gas Task Force recommendations from 2015, new and more onerous regulations like the setback examined by CU researchers or the more dangerous proposed fracking bans and various setback ballot measures could have catastrophic consequences on top of the recent commodity downturns impacting the state.

Anti-energy activists have intimated that even more proposals could be in the offing for 2016:

Larimer County resident Katherine Hall, who testified in favor of local control, said she would not be surprised if a citizen-initiated measure ended up on November’s ballot.

“The final outcome of the rule making does not go far enough to ease the concerns of Colorado citizens,” Hall said.

Remember when this blog said the Oil and Gas Task Force was merely kicking the can down the road?

We’ve made our way down that road, and the can is about ready to explode.

In the near term, the COGCC rules could go into effect in as few as 6 to 8 weeks, subject to review by the legislature and the Attorney General:

Compton said the months of rulemakings were “the most difficult” that he’s been through — a string that included the 2008 wholesale overhaul of Colorado’s oil and gas regulations.

The commissioners voted 5-4 to define “large” oil and gas facilities, the threshold that triggers the communication process between energy companies and local governments, as eight new wells and storage tanks that can hold up to 4,000 barrels of oil and natural gas liquids. The commissioners restricted the rule to large facilities in “urban” areas, defined as 22 buildings within 1,000 feet of the wellsite, rejecting request from some quarters to take the rule statewide.

But the rules appear to exceed the recommendations, and create ambiguities that will only incur more procedural red tape:

The process approved by the COGCC will triple, from 90 days to 270 days, the amount of time needed to get a hearing on a large project before the oil and gas commissioners, said Tracee Bentley, the executive director of the Colorado Petroleum Council, an arm of the American Petroleum Institute.

The final rules also said facilities should be “as far as possible” from existing buildings, a phrase Bentley called “vague and confusing” that would cost energy companies time and money to comply with.

The commissioners also rejected a request that existing surface-use agreements between energy companies and landowners be grandfathered, and allowed to avoid the notification and consultation process.

“We feel the industry brought reasonable solutions to the table that were largely ignored, and the rules still go beyond the recommendations of the task force,” said Dan Haley, president and CEO of the Colorado Oil & Gas Association.

Bringing reasonable solutions and constructive dialogue should be expected of the industry, but the same can’t be said for the forces calling for the end of natural resource development altogether:

Activists addressing a state oil and gas rulemaking hearing this week levied a barrage of accusations and insults toward state officials and even renewed calls to eliminate Colorado’s state agency responsible for regulating oil and gas development.

Speaking at the Colorado Oil and Gas Conservation Commission (COGCC) hearing, Lauren Swain, representing national climate activist group 350.org, largely ignored the fact that the rulemaking was supposed to be the focus of the hearing and instead used her time to complain about the agency. From Swain’s testimony:

“With this new proposed rule, the COGCC has proven once again that it can no longer be considered a legitimate state agency because the COGCC continues to facilitate the pace of hazardous polluting oil and gas drilling and fracking operations near homes and schools subjecting communities to the risks of toxic emissions, spills and explosions.”

But Swain took her testimony even farther by lobbying for disbanding the agency in favor of creating a new agency that would “swiftly” transition the state to 100 percent renewables using the Solutions Project at Stanford as a guide. From Swain:

“The COGCC must be replaced with one or more agencies charged with one, facilitating to protect Coloradans from the harmful impact of oil and gas production and two, to aid and foster Colorado’s swift transition to one hundred percent renewable energy production and consumption using the Solutions Project developed at Stanford University as a guide.”

Up next was testimony from an activist who has previously accused the oil and gas industry of having a “personality disorder” and of being “socially deviant.” This time, Amanda Harper called oil and gas producers a “short sighted, selfish and sociopathic industry.”

Not a lot of balance or reasonable tone, it seems.

Colorado Governor John Hickenlooper offered his comments at an event that saw journalists kicked out and required an open records request to seek audio of the Democrat’s comments–and while he questioned the leverage of the anti-energy groups to get the proposed measures on the 2016 ballot, he surreptitiously argued that the COGCC rules discussed above had, in his opinion as well, gone further than his own Oil and Gas Task Force had recommended:

“I haven’t heard of any funding source for any of them,” Hickenlooper began. “Like the normal, large funders of those initiatives, you know, I haven’t heard of. So, maybe they’ll get on the ballot, but without a lot of money, I don’t think they’re going to do well. I can guarantee you there’ll be money spent showing that, the, the problems associated with any of those initiatives.” (Forum Q & A – 17:05)

Moments later, he added, “Again, we’re going further even than the commission recommended, and in certain cases, to try and give local, local municipal elected officials more, a greater role.”

Further.

We’ll see how that plays out.

***

The Environmental Protection Agency’s Clean Power Plan received a stay of its own last week when the DC circuit refused to grant a stay of the rule, forcing 26 states to appeal the case to the US Supreme Court.

Meanwhile at the Colorado legislature, Sen. John Cooke (R-Greeley) has championed measures designed to keep the implementation of the Clean Power Plan at arms’ length, allowing lawsuits to be completed before the state moves forward, something Coloradans clearly support:

Two weeks into the 2016 legislative session, Sen. John Cooke, a Republican from the heart of the Front Range oil and gas patch in Greeley, has introduced two bills that take aim at the plan, which requires power plants to cut carbon emissions by 32 percent from 2005 levels by 2030, largely by shutting down or converting coal-fired plants to alternative fuel sources.

One of Cooke’s bills couldn’t be more timely. After several state attorneys general, including Colorado’s Cynthia Coffman, failed to win a stay of the plan from a federal court Thursday, Cooke’s Senate Bill 46 jumps into the ring like a tag-team wrestler, working from another angle to stall implementation of the Obama administration plan.

“Well, it wasn’t really a surprise that the court in D.C. struck down the stay request,” Cooke told The Colorado Statesman. “Unfortunately, the bill is more relevant now.”

The “Preserve State Clean Power Plan Options Act” aims to “slow down the implementation process” in part by suspending it “until all [related] lawsuits are done,” Cooke told members of three rural Colorado advocacy groups, including some representing coal mining areas, who were visiting the Capitol Friday.

In effect, Colorado wouldn’t need a stay from a court because it would have passed a stay for itself, written by Cooke.

Cooke’s other bill, SB 61 or “Ratepayer Protection Act,” would require the Colorado Department of Public Health and Environment to pay for costs generated as a result of Clean Power Plan implementation.

***

NEWS ROUNDUP:
Silverton punts on Superfund designation

How the EPA handled Flint, MI water contamination, vs. Animas River spill

Plunging oil prices means lower severance tax revenue in Colorado

Lower gas prices? Let’s raise taxes!

Anti-energy activists oppose coal development on the Western Slope. News at 11.

Trading: Coal extraction for sage grouse habitat

August 27 Colorado Energy Cheat Sheet: Bennet says ozone rule “not going to work”; net metering gets a boost from PUC

bennet

Sen. Michael Bennet, joined a bipartisan group of officials in Colorado questioning the proposed Environmental Protection Agency’s new ozone rule proposal at the recent Colorado Oil and Gas Association Energy Summit in Denver:

Senator Bennet and Gardner participated on a panel hosted by the Colorado Oil and Gas Association on August 26. Below is the question posed to Senator Bennet, and his response:

Manu Raju, Politico: Senator Bennet, a big issue here in the room is the ozone standards. Environmental groups, EPA officials are concerned about excessive levels of ozone; that they could lead to premature death and respiratory problems. The business community warns that the standards EPA is proposing would be very bad here in Colorado; it would cost a lot of jobs. The current ground-level ozone standard set in 2008 is 75 parts per billion. EPA’s proposal is lowering it to 65 to 70 parts per billion, and it could go even lower. Question to you: Do you think the EPA proposal is fair? Should they go to 65 parts per billion?

Senator Bennet: I’m deeply concerned about it. I think we should understand how they arrived at that conclusion, because the way some statutes are written, they don’t sometimes have the flexibility we think they should have. And this is the perfect example of applying the law and doing it in a way that doesn’t make sense on the ground. Because of the pollution that’s come in from other Western states, from across the globe, from wildfires in the West, we have significant parts of our state that would be in non-attainment [unintelligible] from the very beginning of the law. That doesn’t make any sense. That’s not going to work.[emphasis added] Having said that, we need to care a lot about our kids and the elderly and the quality of the air that they breathe, and we need to care about children in our state that have asthma. So my hope is that we can work together to get to a rational outcome, but I’m not—The one that’s been proposed is not yet there.

Earlier this month, The Center for Regulatory Solutions issued a report that included opinions from Democrats, Republicans, and other elected officials from across the state opposing or pushing back against the EPA ozone rule. A sampling of those statement can be found in our August 13 edition.

***

Net metering, a handout from folks who don’t own solar panels to those who do, in the form of retail price reimbursement for the electricity they generate–gets a boost from a unanimous Public Utilities Commission decision to keep the current rates in place:

Colorado’s Public Utility Commission ruled Wednesday afternoon that no changes were needed to the state’s net metering process, meaning that homeowners with solar arrays will continue to receive retail rates for energy they produce.

“The PUC voted (3-0) today to maintain the status quo for the net metering program and close the docket,” PUC spokesman Terry Bote confirmed via email.

Net metering provides a credit for every kilowatt-hour an array puts on the grid at the same price residential customers are charged for electricity – about 10.5 cents.

Xcel Energy, the state’s largest electric utility, has been pushing a plan to cut the incentives for each kilowatt-hour produced to a fraction of a penny, but solar users and industry groups have lobbied hard against changes that would remove a key financial incentive.

“This appears to be the outcome we have been working towards in more than a year of work on this docket,” said Rebecca Cantwell, executive director of the Colorado Solar Energy Industries Association. “We have worked in full collaboration with other members of the solar industry, and this represents a tremendous amount of hard work from many people. Xcel officials could not immediately be reached for comment.

“Key financial incentive” = subsidy.

From my op-ed late in 2014, as the PUC was steering through a slate of meetings to determine the “value of solar”:

At issue is the method of calculating the “value of rooftop solar,” as the Public Utilities Commission chairperson put it this year. Solar proponents believe the credits for excess electricity generated by solar panels and pushed back onto the grid should continue to get 10.5 cents per kilowatt-hour — the average of annual residential retail rates.

Xcel is arguing for a reduction to 4.6 cents, saying the costs associated with maintaining the grid made the reimbursement unfair.

Xcel representatives called maintaining the 10.5-cent credit a “hidden cost” for its 1.2 million Colorado ratepayers. “Everybody needs to pay for the cost of the grid,” said spokesperson Hollie Velazquez Horvath.

Rooftop solar uses the grid in multiple ways. For customers pulling energy when the sun isn’t out (or near maximum generation) or pushing electricity onto the grid at the peak of summer, the grid balances supply and demand, regulating and stabilizing electrical output. It also acts as the exchange mechanism when a customer goes from generating and reselling excess electricity, to periods when the customer needs more electricity than the solar panel provides.

Customers who generate enough “revenue” from their net metering credits end up paying little or nothing for the grid costs. The costs get shifted to the utilities’ non-solar customers.

In other words, solar proponents advocate that non-solar ratepayers continue to subsidize grid maintenance for solar customers and then purchase electricity from those same solar customers at a price higher than they would pay for Xcel to generate the power.

The PUC has closed the docket on this proposal, but the legislature may look to take up the issue of net metering in future sessions.

***

Speaking of Sen. Michael Bennet (D-CO), the Democrat up for reelection in 2016 has some words of advice for embattled Democratic Party presidential frontrunner Hillary Clinton on #KeystoneXL:

DENVER — Sen. Michael Bennet (D-Colo.) on Wednesday dinged Hillary Clinton for punting on the issue of Keystone XL oil pipeline.

“I think she should take a position,” Bennet said of his party’s presidential frontrunner at a Colorado Oil and Gas Association conference here. “She should take a position for it — or she should take a position against it.”

Speaking at a forum moderated by POLITICO, Bennet said he supports building the pipeline. He is up for reelection next year in this perennial swing state and could face a tough battle if the GOP fields a formidable opponent.

***

A Colorado Association of Commerce and Industry panel of five of the state’s Congressional delegation was split on whether federal or state and local authorities were the best in dealing with oil and gas regulations–an issue Colorado registered voters in a recent Independence Institute poll said should go the state’s way, 37 to 5 percent, over DC-based rulemaking:

On energy legislation, the three Democrats and two Republicans who represent portions of metro Denver took not two but three different stances on which government should be most responsible for oversight of the oil and gas industry:

Democratic U.S. Rep. Diana DeGette of Denver said that while she respects the laws the state has drafted, the federal government must play a role in regulating the effects of drilling on waterways that flow between states.

Coffman said that regulations should fall to the state government, where bodies like the Colorado Oil and Gas Conservation Commission are much more in touch with the needs of local residents.

And Democratic U.S. Rep. Jared Polis of Boulder — who last year backed two state constitutional amendments to increase the role of cities and counties in regulation of drilling before pulling the measures— said it is actually local governments like those in Weld County that should decide where and how oil rigs should be allowed to operate in their communities. “I don’t trust the D.C. politicians. I don’t trust the Denver politicians,” said Polis, a fourth-term congressman. “This is a decision that should be made at the local level.”

Don’t be too impressed with Polis’s “local level” mantra as anti-fracking activists look to resurrect ballot issues designed to ban oil and gas development under the guise of “local community control.” Polis backed similar measures in 2014 before they were pulled in favor of Governor John Hickenlooper’s oil and gas commission.

***

The Clean Power Plan may have been finalized on August 3, but serious questions about the EPA’s assumptions for the rule remain, as an analysis by Raymond L. Gifford, Gregory E. Sopkin, and Matthew S. Larson show (all emphases added):

• EPA scaled back on carbon dioxide reductions from coal plant improvements and energy
efficiency in its Final Rule under the Clean Power Plan, but nevertheless increased its
carbon reduction mandate from 30 percent to 32 percent by 2030. EPA did so through its
use of “potential renewables” as the variable driving eventual state carbon budgets. EPA now
forecasts that incremental renewable energy electric generation (Building Block 3) will more
than double, from 335,370 gigawatt hours in the Proposed Rule to 706,030 GWh in the Final
Rule.

• EPA uses a complicated and unprecedented methodology to achieve its new renewable
energy forecast for the years 2024 through 2030. Looking to historic renewable capacity
additions during 2010-2014, EPA selects the maximum change in capacity for each renewable
resource type that occurred in any year over the five-year period, and adds this maximum
capacity change year-over-year from 2024 through 2030. The maximum capacity addition
year selected by EPA for each resource is more than twice as much as the average over 2010
- 2014.

EPA’s methodology fails to account for the fact that expiration of the production tax
credit, or PTC, drove the development of renewable energy resources during 2012.

Renewable energy capacity additions fluctuated substantially between 2010 and 2014,
especially the largest component of Building Block 3, onshore wind power. EPA uses the
anomalous year, 2012, to predict future growth of wind power. In 2012, the wind production
tax credit was expected to expire at the end of the year, causing producers to rush to install as
much wind capacity as possible. Other renewable resource types also showed non-linear and
unpredictable trends during 2010 – 2014.

• EPA’s renewable energy expectations diverge by an order of magnitude from the EIA’s
base case renewable energy capacity and generation forecasts over the 2022 – 2030 period.
Notwithstanding these incongruences with EIA’s forecasts, EPA suggests that its forecasted
renewable energy additions would occur in the normal course even without the CPP.

EPA assumes that fossil fuel generation could be displaced based on the average capacity
factors of renewable energy resource types (e.g., 41.8 percent for onshore wind power).
However, utilities and restructured market system operators assign a much lower capacity value
for wind power, in the 10-15 percent range, because wind production is often not available during
peak load conditions.
To the extent that the EPA’s assumed renewable energy displacement of
fossil fuel resources does not occur because wind, solar, or other intermittent generation is not
available, system capacity will in real terms be lost absent planners assigning a much lower
capacity value to the given renewable resource (and in turn adding additional capacity, be it
fossil-based or renewable).

The authors conclude:

Setting aside enforceability, the President gave EPA a goal in his Climate Action Plan: achieve a 30% carbon emission reduction by 2030. EPA proceeded to solve for that goal with a capacious construction of the BSER [Best System of Emission Reduction] under the Clean Air Act. While gas “won” in the near-term under the Proposed Rule, in the end renewable energy resources assume a Brobdingnagian role in determining the level of carbon emission reductions that are purportedly possible under the BSER. EPA’s Final Rule constructs a method that solves for a conclusion, instead of having a method that yields a conclusion. Of even greater concern, EPA’s use of renewable average capacity factors instead of capacity credit exacerbates reliability risks to the electric system during peak load conditions. The end result may be unknown, but the method of getting there is highly questionable at best.

***

LINKS

Despite tanking oil prices, a new outfit, Evolution Midstream, announced a planned $300 million launch, saying of the current situation that “this too shall pass.”

Paving the way for the EPA’s Clean Power Plan, the billionaire Tom Steyer funded and pushed a “state-level advocacy network” to prop up the controversial plan and give endangered politicians cover.

Colorado’s oil and gas production projected to fall, according to a University of Colorado study.

***

Animas River updates

EPA officials knew of a “blowout” potential as much as a year before the Animas River spill, but even the release of this info took place late on a Friday, in what AP reporter Nick Riccardi called a “very late-night document dump on Gold King mine”:

U.S. officials knew of the potential for a catastrophic “blowout” of poisonous wastewater from an inactive gold mine, yet appeared to have only a cursory plan to deal with such an event when a government cleanup team triggered a 3-million-gallon spill, according to internal documents released by the Environmental Protection Agency.

The EPA released the documents late Friday following weeks of prodding from The Associated Press and other media organizations. While shedding some light on the circumstances surrounding the accident, the newly disclosed information also raises more questions about whether enough was done to prevent it.

The Aug. 5 spill came as workers excavated the entrance to the idled Gold King Mine near Silverton, Colorado, unleashing a torrent of toxic water that fouled rivers in three states.

A June 2014 work order for a planned cleanup noted the mine had not been accessible since 1995, when the entrance partially collapsed.

“This condition has likely caused impounding of water behind the collapse,” the report said. “Conditions may exist that could result in a blowout of the blockages and cause a release of large volumes of contaminated mine waters and sediment from inside the mine.”

An EPA internal review post-spill revealed that they never checked the water levels or the pressure contained within the mine despite their June 2014 work order:

Dangerously high water pressure levels behind the collapsed opening of the Gold King Mine were never checked by the Environmental Protection Agency, in part because of costs and time oversights.

The revelations came Wednesday as the EPA released an internal review of a massive Aug. 5 blowout at the mine above Silverton. The report called an underestimation of the pressure the most significant factor leading to the spill.

According to the report, had crews drilled into the mine’s collapsed opening, as they had done at a nearby site, they “may have been able to discover the pressurized conditions that turned out to cause the blowout.”

EPA officials claim they were caught unaware:

EPA supervisor Hays Griswold, who was at the scene of the blowout Aug. 5, told The Denver Post in an interview this month conditions in the mine were worse than anticipated.

“Nobody expected (the acid water backed up in the mine) to be that high,” he said.

The report says, however, that decreased wastewater flows from the mine, which had been leaching for years, could have offered a clue to the pressurization. Also, a June 2014 task order about work at the mine said “conditions may exist that could result in a blowout of the blockages.”

The inability to obtain an actual measurement of the mine water pressure behind the mine’s blocked opening “seems to be a primary issue,” according to the review. It went on to say if the pressure information was obtained, other steps could have been considered.

It did not elaborate on what those steps could have been.

“Despite the available information suggesting low water pressure behind the debris at the adit entrance, there was, in fact, sufficiently high pressure to cause the blowout,” the review says. “Because the pressure of the water in the adit was higher than anticipated, the precautions that were part of the work plan turned out to be insufficient.”

Stan Meiburg, EPA’s deputy administrator, said during the call that “provisions for a worst-case scenario were not included in the work plan.”

The 3 million gallon orange spill was, apparently, the worst-case scenario.

The internal investigation called the agency’s preparedness when it came to analysis of the water issue as “insufficient.”

It may take a while–many years–to know how the toxic minerals and metals released by the EPA will settle in the sediment of the Animas River and further downstream:

As communities along the Animas River continue to wonder about the long-term consequences of the Gold King Mine spill, one of the biggest questions remaining is the orange sediment lying along riverbeds and riverbanks.

What’s in it? How long will it be there? How might it affect our drinking water and our health? These are all concerns for community members, and many experts say we may not know until time goes by and a few spring runoffs continue to wash it downstream.

The EPA isn’t getting off the hook with the release of internal reports admitting lack of preparation or failure to measure water levels, or even late-night docu-dumps:

Republicans say the administration has been too wrapped up in guarding the world against climate change to address environmental dangers closer to home and should be held accountable, according to Texas Republican Lamar Smith, who is leading a probe into the spill in the House.

“Even in the face of self-imposed environmental disaster, this administration continues to prioritize its extreme agenda over the interests and well-being of Americans,” said Smith, chairman of the House Science, Space and Technology Committee.

The committee has scheduled a Sept. 9 hearing on the spill and has requested the head of EPA and the contractor involved in the mine incident to testify. It appears from the internal reports that the contractor involved in the spill was the same one that drafted the blowout report.

The report that was released “in the dead of night” Friday raises new questions about the depth of EPA’s culpability, according to Smith. “The actions that caused this spill are either the result of EPA negligence or incompetence,” he said. “We must hear from all those involved to determine the cause of what happened and how to prevent future disasters like this.”

The agency’s lack of timely dissemination of documents and details has been a theme since the spill erupted earlier this month.

But partisan flaps at the federal level between Republicans in Congress and one of the administration’s favorite agencies is not the only scene of squabbles, as local officials allege Republican Attorney General Cynthia Coffman had a partisan agenda in mind when scheduling meetings in Durango in the aftermath of the spill.

And finally, Silverton decided to seek federal funds for clean up operations after years of reservations over possible “Superfund” designation:

After two decades resisting Environmental Protection Agency funds for cleanup of the festering mines that dot its surroundings, Silverton on Tuesday announced it is seeking federal help.

A joint resolution passed by the town’s board and the San Juan County Commission says officials will work with neighboring communities to petition Congress for federal disaster dollars they hope will address leaching sites quickly.

“Silverton and San Juan County understand that this problem is in our district, and we feel we bear a greater responsibility to our downstream neighbors to help find a solution,” the resolution said.

The decision is a paradigm shift for the small town of about 650 year-round residents in the wake of a 3 million-gallon wastewater spill Aug. 5 at the Gold King Mine in the mountains to the north.

July 16 Colorado Energy Roundup: Sec. Jewell adds Colowyo Mine visit; renewable energy mandate upheld

July 16, 2015 by michael · Comments Off
Filed under: CDPHE, Environmental Protection Agency, Legal, preferred energy, renewable energy 

A week after the Department of the Interior declined to move forward with an appeal in the Colowyo Mine case, and facing mounting pressure to visit the northwest portion of Colorado during a scheduled trip to Aspen, Sec. Sally Jewell appears to have conceded to a meeting with county commissioners:

Moffat County Commissioner John Kinkaid said Wednesday that Jewell has added a meeting with northwest Colorado county commissioners to her itinerary Friday following her speech at the Aspen Institute.

“We look forward to meeting Secretary Jewell this Friday evening,” Kinkaid said. “I hope that she will be able to give us some assurances that our miners can keep working.”

He said he expected the meeting to include commissioners from Moffat and Rio Blanco counties, whose communities would bear the brunt of a mine closure. The meeting will take place in Glenwood Springs.

Jewell had come under pressure to visit the area after it was announced that she would deliver remarks Friday at the Aspen Institute, about a three-hour drive from Craig, where residents are alarmed about the future of the mine.

We’ll keep you posted on developments of the planned meeting.

***

Colorado’s preferred energy renewable mandate was upheld this week:

The mandate, which voters passed in 2004 and expanded in 2010, was challenged by the free-market advocacy group Energy and Environment Legal Institute. The group argued that the renewable energy requirements violate the U.S. Constitution.

The lawsuit claimed that the requirement that large utilities such as Xcel Energy get 20 percent of their electricity from renewable sources violates constitutional protections for interstate commerce.

The plaintiffs argued that because electricity can go anywhere on the grid and come from anywhere on the grid, Colorado mandate illegally harms out-of-state companies.

The 10th Circuit Court of Appeals in Denver disagreed. The three-judge panel ruled that the mandate does not wrongly burden out-of-state coal producers. The judges also pointed out that Colorado voters approved the mandate.

The full text of the ruling can be found here.

***

For those who do not think increased energy costs–whether from increased cost of supply of fuel, onerous regulations, or government picking (more expensive) energy winners–affect lower and middle income families in Colorado, a new examination of the state’s Low-Income Energy Assistance Program (LEAP) reveals how devastating even modest price increases in energy can be:

About 430,000 households in Colorado — 22 percent of all households — are eligible for federal energy assistance.

These households have incomes below 150 percent of the federal poverty level, or about $36,372 for a family of four.

About 13 percent of Colorado households are below the federal poverty line of $24,250 for a family of four.

The federal Low-Income Energy Assistance Program, or LEAP, administered by local agencies, provided $47 million for heating bills during the 2014-15 season.

The article laments that program has a low reach at the present time, with only 19 percent of those eligible receiving outreach.

But the article’s lede is buried–even small, incremental increases have a large and outsized effect on low-income folks given the portion of income they spend on energy:

Xcel, the state’s largest electricity utility, calculates monthly payments based on 3 percent of a household’s income.

Average households pay 2 percent to 3 percent for energy, compared with low-income households, which often pay as much as 50 percent.

“That leaves very little for food, clothing, medicine,” said Pat Boland, Xcel’s manager of customer policy and assistance.

“Once we get them in the door, we want to keep them in the door,” Boland said in a presentation.

According to the article, Black Hills reaches only 10 percent of those eligible within its system. It pays for the assistance by charging other ratepayers, and is considering a rate hike to cover the program, which is currently losing money. That hike, along with three other rate increases since 2008, make Black Hills among the most expensive electricity providers in the state, the Post article said.

***

Despite a quiet 2015, fracking is still maintaining a low boil on the backburner of the state’s energy debate, and there is every indication that it won’t be simmering any time soon, and Democratic Rep. Jared Polis told the Associated Press that options remain:

Polis said fracking could be on the 2016 ballot if state officials don’t further regulate the industry. He stopped short of saying whether he would organize the effort, but he wants lawmakers and regulators to adopt three proposals that weren’t formally recommended by the task force.

One would let local governments impose stricter rules than the Colorado Oil and Gas Conservation Commission, charged with regulating drilling statewide. Another would change the commission’s role from facilitating oil and gas development to simply regulating it. The third would set up a panel to resolve disputes between energy companies and local governments or property owners before they land in court.

It remains to be seen whether or not activists, with or without Polis’s sponsorship, pursue a strategy like they did in 2013, targeting friendly and even tossup municipalities with fracking bans and moratoria, or wait for statewide opportunities in the 2016 Presidential election cycle.

***

The Bureau of Land Management has closed off nearly 100,000 acres of federal land from future leasing:

The Bureau of Land Management rejected all 19 protests from conservation groups, the oil and gas industry and other interests in approving a new resource management plan for the Colorado River Valley Field Office.

The Colorado River Valley Field Office, in Silt, manages more than 500,000 acres of land and more than 700,000 acres of subsurface federal minerals in Garfield, Mesa, Rio Blanco, Pitkin, Eagle and Routt counties. The agency says the majority of the 147,500 acres with high potential for oil and gas production under the office’s jurisdiction are already leased and will continue producing under the plan.

The plan closes 98,100 acres for future leasing, including in the Garfield Creek State Wildlife Area near New Castle, areas managed for wilderness characteristics, areas of critical environmental concern, municipalities and designated recreation areas.

***

In addition to the endangered Colowyo Mine, another Colorado mine with 150 employees faces environmental review and possible closure:

A second Craig-area coal mine apparently also will have to undergo a remedial federal environmental review process if it hopes to avoid a shutdown based on a recent court order.

The Trapper Mine near Craig is now looking at going through the same kind of review currently underway in the case of the Colowyo Mine between Craig and Meeker following a federal judge’s ruling in May.

U.S. District Court Judge R. Brooke Jackson, in a suit brought by WildEarth Guardians, found that the federal Office of Surface Mining Reclamation and Enforcement illegally approved expansions of the two mines because it failed to provide public notice of the decisions and account for the environmental impacts.

The Trapper Mine faces discrepancies over permitted areas and coverage under filings with Judge Jackson, who did not impose a similar ruling as that issued for the Colowyo Mine.

In a notice filed last week to alert the court about the new information, the Trapper attorneys said they support doing remedial environmental analysis involving the Trapper Mine after the Colowyo review is done.

Bob Postle, manager of the program support division for the OSMRE’s western region, said the notice has “just been filed, and we’re now working through how we’re going to address it.”

Given the discrepancies, it isn’t clear at this moment whether a new or remedial environmental review is necessary, according to Trapper’s legal counsel.

***

In a meeting with Republican Senator Cory Gardner, western slope businesses and entrepreneurs described facing onerous regulatory burdens imposed by DC bureaucrats:

A Moffat County sheepherder, Delta hardware shop owner and Grand Junction manufacturer all walked into a meeting Friday with U.S. Sen. Cory Gardner, R-Colo., each with much the same punchline in mind.

The common theme: The federal government is reaching too far into their businesses, discouraging them from seeking out new ways of doing business and growing.

Constraining regulations have “taken the creativity out of business,” Jim Kendrick, owner of Delta Hardware, told Gardner. “The move is to make us all do business the same way. That’s stifling growth.”

Gardner met with two dozen western Colorado business and economic leaders at Colorado Mesa University in hopes of finding ways to improve the state’s sputtering rural economy.

“I spend all my time on regulatory compliance and none of it on product development,” one Department of Defense contractor said. That would result in pushing more business to bigger vendors able to hurdle all of the regulatory red tape due to a larger staff.

Fracking bills: regulations in search of problems

January 25, 2012 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

Two bills concerning hydraulic fracturing can be summarized best as excessive regulations in search of problems. I consulted with Doug Flanders, director of policy and external affairs for the Colorado Oil and Gas Association (COGA), who provides a summary of each bill citing statistics from the Colorado Oil and Gas Conservation Commission (COGCC), the state agency charged with the “responsible development of Colorado’s oil and gas natural resources.”

Bill Summaries

HB12-1173 Restrictions on the Use of Open Pits in Connection with Hydraulic Fracturing

House Sponsors: Roger Wilson (D-HD 61)

Senate Sponsors: None

Rep Wilson wants to ban all hydraulic fracturing open pits. It’s a little like other “zero tolerance” policies, which always have negative unintended consequences. Besides, the trend already is toward a closed loop system as Flanders explains:

According to the COGCC, the percentage of well pads utilizing closed loop or pitless drilling systems has increased from 31% in January 2010 to 79% in March 2011 and that number continues to rise.  The COGCC considers many factors when reviewing permit applications for surface operations, all of which are designed to protect the health, welfare, and safety of the surrounding population. COGC Rule 907 provides general requirements to ensure that exploration and production waste is properly stored, handled, transported, treated, recycled, and disposed. Operators are encouraged to: reduce the quantity and toxicity of their waste; recycle, reuse and reclaim it; treat it to reduce toxicity; and dispose of it in a manner that protects the environment. Several of the 900 Series Rules require simple practices for reducing waste toxicity and volume, including: removing oil and condensate before produced water is placed in a production pit (Rule 907.c) and subsequent removal of any accumulation within 24 hours (Rule 902.c).

Prediction: Rep. Wilson apparently is not a fan of hydraulic fracturing, but the majority of House members are. This bill dies in committee.

HB12-1176 Oil and Gas Surface Owner Horizontal Drilling Setbacks

House Sponsors: Su Ryden (D-HD 36), Dickey Lee Hullinghorst (D-HD 10), Matt Jones (D-HD 12), Nancy Todd (D-HD 41), and Wilson

Senate Sponsors: None

Another bill going after hydraulic fracturing with a reasonable sounding title, but in reality the details reveal burdensome and unnecessary regulations with severe negative consequences including reducing the regulatory discretion of the COGGG. Most dangerous is the expanded definition of “surface owner” which would allow for the violation of private property rights as Flanders explains in his summary:

COGCC has already looked at wells in subdivisions and determined 300 feet as the appropriate distance for public safety in high density residential areas. However, at their discretion, the COGCC can determine that a greater distance is required.  COGCC has been tracking setback metrics since the adoption of the amended rules on December 17, 2008.  Of the 4836 well locations sited during this period, 91% or 4410 are 500 feet or greater from a building structure. (And buildings are often not residences.)

The value of the surface to homebuilders should be considered in determining any setbacks.  If there is an existing well, then any new homes or schools would also have to be 1000 feet from the existing well.

The bill also changes the definition of a surface owner to be more than just the owner of the land where the oil and gas operations occur, but would also include any land which overlays the horizontal path of the operations if hydraulic fracturing occurs, despite that fact that horizontal drilling can extend over one mile in length and over a mile and half in below the surface.  This would unnecessarily hinder drilling operations below surface that would not impact surface buildings.

Prediction: Reason will prevail in the House. This bill will die in committee.

Final Thoughts

Those who thought environmentalists would tolerate development of natural gas as a “clean” technology along side wind and solar were mistaken.

There could be one less sponsor of anti-fracking legislation next year, Rep Wilson was drawn out of his current House district and will not seek re-election.

Remember to check the energy blog for updates on all energy legislation. We read this stuff so you don’t have to.

Is Colorado “addicted” to economic activity?

December 6, 2011 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

Part two of a series responding to a Denver Post guest column titled “Is Colorado addicted to oil?” from Gary Wockner of Clean Water Action.

Gary Wockner’s editorial is long on conjecture and short on facts. It’s little more than 20 questions, which could be answered if Wockner bothered to do a modicum of research. I answered his headline, “Is Colorado addicted to oil?” in my first post. Now I’ll address his next questions about the “role” of the oil and gas industry in Colorado’s economy.  Wockner begins:

A few years ago, President George W. Bush stood in front of Congress in a nationally televised speech and said that “America is addicted to oil.” And then he spoke about how we must end that addiction for the good of our economy, our environment, our national security, and our future. Recently, after another huge oil field was discovered in Weld County, Gov. John Hickenlooper was quoted in The Denver Post as saying, ‘Anadarko’s announcement today shows once again that Colorado is a leader in the energy sector of our country’s economy. We are thrilled to see the company plan a significant investment in Colorado.’

Addicted or thrilled? Which is it?

Obviously Wockner isn’t thrilled, which is the whole point of his demogoguing.  Yet, it isn’t unreasonable for Coloradans including Governor Hickenlooper to be thrilled about Anadarko’s announcement because we, our economy and way of life, are reliant upon petroleum.  As I wrote in my first response, Colorado like any other culture not living in the 13th century needs to have petroleum. Until we find some type of cost effective alternative, petroleum is it. Personally, I am thrilled, but I can’t speak every other Coloradans so I won’t try.

Wockner continues:

Obviously, these are two very conflicting views of the role oil should play in our economy and our future, and they raise honest questions the public needs to address: What is the actual role that oil and gas plays in our economy? Where do all the billions of dollars go?

Wockner and his Clean Water Action are opposed to fossil fuels so they are the ones in a state of conflict, which makes me wonder if Wockner is opposed to economic activity. In our economy, private companies provide goods and services that consumers want who voluntarily exchange some form of currency for products, which benefits both groups as business profits by meeting consumers’ wants and needs. Producers can earn a profit, and consumers obtain the goods and services they want. So the role of oil and gas is to provides goods and services that consumers want. The oil and gas industry then returns some of that profit to communities in the form of capital investment, charitable contributions, dividends to shareholders or anything else a private company wants. It’s not up to Wockner and his ilk to decide how the oil and gas industry spends its profits.

In Colorado, the oil and gas industry is a major economic player. Besides using fossil fuels to heat our homes (it’s -8 degrees right now), power our cars, produce precious solar panels, and make thousands of items we use every single day, here are a few facts about the economic impact of oil and gas in Colorado according to the Colorado Oil and Gas Association (COGA):

  • The OIL & GAS industry in Colorado directly employs 50,000 people and supports over 190,000 jobs in the state and provides $12.4 billion in total labor income and $24 billion in value added economic output annually; this is 9.3% of the total in the state.
  • The NATURAL GAS industry in Colorado directly employs 30,000 people and supports over 137,000 jobs in the state and $8.4 billion in total labor income and $18.4 billion in value added economic output annually; this is 7.3% of the total in the state.
  • Our industry is responsible for roughly 6% of total employment in Colorado.
  • Only the cities of Denver, Colorado Springs, and Boulder have more jobs than the State’s oil and natural gas industry.
  • In Colorado, more than 75 percent of residential homes use natural gas as their primary energy source for home heating, one of the highest shares in the nation.3
  • Colorado had more than 40,000 oil & gas wells in production.
  • Ten of the Nation’s 100 largest natural gas fields and three of its 100 largest oil fields are found in Colorado.
  • Colorado produces 1/4 of all coalbed methane in the U.S.
  • Severance tax is levied on extraction of metals, coal, oil and gas and is part of TABOR revenue base. Oil and gas pay over 90% of the state’s severance tax.
  • The total assessed values for taxable Oil and Gas property in 2010 was $6.25 billion or 5.63% of the state total

Yesterday I spent an hour talking with John Christiansen and Brian Cain of Anadarko Petroleum Corporation on my radio show. Anadarko is one of the world’s largest independent natural gas and oil exploration and production companies in the world. It had total sales revenue of just under $11 billion for 2010 according to its most recent annual financial report.

Anadarko, its employees, and the community were celebrating the ribbon cutting on their newly expanded field office in Evans, Colorado. It’s an unassuming but comfortable 46,000 square foot build out paid for by Anadarko. It’s efficient with video conferencing to save the company time and money and a modest kitchen for employees who don’t want to leave for lunch. No taxpayer-guaranteed loan here (think Solyndra) so no 300,000 square feet of “the Taj Mahal”, no spa showers with liquid-crystal water temperature displays, no conference rooms with glass walls that change from clear to smokey with the touch of a button, no robots whistling Disney tunes. When I asked why Anadarko’s new building didn’t have a spa, the response was simple, “it’s not necessary.”

Globally, Anadarko employs roughly 4,400 an increase of 10 percent since 2007 after a decline from 2006.

In Colorado, Andarako employs roughly 260 people out of Evans field office, another 100 in Brighton and couple hundred more in Denver office. The average salary is between $70,000 and $80,000. And unlike Abound Solar, Cain and Christiansen told me that Anadarko is hiring.

Because of the recent discovery of up to 1.5 billion BOE in the Wattenberg Field, Anadarko expects to invest $1 billion in Weld County alone in 2012. County Commissioner Sean Conway says the additional oil and gas activity could mean as much as $50 million in additional revenue to county coffers. This is all direct investment. The ripple effect of this economic activity will be profoundly positive for Colorado and Weld County.

Also, giving back to the community part of the mission of the oil and gas industry, which certainly shows in Weld County. At the ribbon cutting yesterday, Anadarko handed a check for $25,000 to the Boys and Girls Club of Weld County. A combination of several oil and gas companies, including Anadarko, Noble, Encana, Halliburton, and others, have provided $250,000 for the Weld Food Bank. By contrast, Abound, which has its manufacturing plant in Weld County, has received a $400 million taxpayer guaranteed loan from the DOE, and tax credits from Weld County, is not a contributor to the food bank. Vestas Blades, also with manufacturing in Weld County, has given a one time donation of $750.

But where the money goes should be irrelevant because a private company can do what it wants with its money. However, if Anadarko or any other oil and gas company mismanages its profits, can’t remain competitive, or can’t provide goods, services people want then it will go out of business (unless it gets a DOE loan). And it should.

Perhaps Colorado is “addicted” to oil because we are “addicted” to a modern lifestyle and economic activity. We’re also addicted to water and oxygen. Nothing wrong with that.

Next, I’ll address Wockner’s gratuitous attacks on Weld County and Greeley.

For fun, which of these was paid for with a taxpayer-guaranteed loan?

Lavish offices.

Lavish offices.

Evans Office

Evans Office

Legislature provides cover for Xcel Energy

April 12, 2011 by Amy · 8 Comments
Filed under: Archive, CDPHE, New Energy Economy 

Xcel Energy enjoys great success at the state Capitol. It seems that whatever Xcel wants legislatively, Xcel gets. Relief for ratepayers is met with opposition.

According to the Secretary of State’s online lobbying information, through March 2011, the utility company has taken positions on 28 different bills this year: opposing 14, supporting 3 and “amending” or “monitoring” 11.  So far, bills the utility company supports have either passed or are making their way through the General Assembly.

Most interesting are the 14 bills Xcel opposes, including pro-consumer legislation such as transparency on ratepayers’ energy bills and reducing energy costs through utilization of a “least cost principle.”

Under the leadership of Speaker Frank McNulty (R-Highlands Ranch), the House has done its part by killing all seven bills Xcel opposed in that chamber, including HB 1240 which would have repealed Colorado’s carbon tax and restricted Xcel’s rate of return on capital construction.  The “phantom carbon tax,” as my colleague William Yeatman and I have labeled it, is:

a central component of his [Governor Bill Ritter] New Energy Economy…a big, hidden energy tax that makes customers pay for the controversial theory of global warming.

In order to make Ritter’s New Energy Economy appear affordable, the Public Utilities Commission (PUC) allows Xcel Energy to incorporate at least a $20-per-ton carbon tax into the economic models the utility uses to make resource acquisition decisions.  The tax is used in the models, and the models dictate spending.

Ritter’s carbon tax is the worst kind of virtual reality because it leaps from the computers to your wallet.

Representative Spencer Swalm garnered bi-partisan support for the repeal, but Republicans killed it in the House Agriculture Committee with “NO” votes from Representatives Glenn Vaad (Greeley), Ray Scott (Grand Junction), and Committee Chairman Jerry Sonnenberg (Sterling). Sonnenberg and Scott were even listed as sponsors of the legislation.

The all-Republican Weld County Board of Commissioners also joined the Ag Committee Republicans, going on record as supporters of Colorado’s phantom carbon tax.  Commissioner and Chairwoman Barbara Kirkmeyer, testified that her “entire board” opposed HB 1240 and thus opposed the repeal of the phantom carbon that is so costly to ratepayers.

Furthermore, in 2008, Vaad, Sonnenberg and McNulty opposed the initial legislation that enabled the carbon tax that they now support.

The State Senate, under the leadership of Senate President Brandon Shaffer, also has done its part to appease Xcel. So far, it has killed five Xcel-opposed bills, including the “least cost principle,” and two more are languishing in committee.

Monday the House continued its anti-ratepayer policy with passage of HB 1291, which would approve Colorado’s State Implementation Plan (SIP) for regional haze costing ratepayers an additional $1 billion according to Xcel’s 2010 annual report. The plan is both expensive and likely illegal. The $1 billion price tag is of little concern to Xcel because it recovers the entire cost from ratepayers. Xcel customers can thank Representatives David Balmer, Don Beezley, Kathleen Conti, Don Coram, Robert Ramirez and Spencer Swalm for their courageous “NO” vote.

Mr. Yeatman, our energy policy analyst, has written extensively on the SIP. In particular, he has detailed the plan’s unnecessary inclusion “of two small coal fired power plants near Steamboat Springs, Hayden 1 and Hayden 2, because it mandates controls that are at least $100 million more expensive than what is required by the Environmental Projection Agency.”

Yeatman notes:

  • Costs of the plan exceed benefits by a 40:1 ratio.
  • Even the EPA concedes that the chosen technology, Selective Catalytic Reduction (SCR), is not cost effective for smaller plants such as Hayden 1 and Hayden 2.
  • Utah determined that SCR is not cost effective.
  • Evidence suggests that the Colorado Department of Public Health and Environment grossly overestimated visibility benefits.
  • The threat of a federal takeover if the plan was not submitted by January 2011 was greatly exaggerated, rushing the deliberative process.
  • Under Colorado law (§25-7-105.1(1) C.R.S.), a SIP cannot impose emissions controls that are more stringent than what the EPA requires.

HB 1291 must be important because the Colorado Oil and Gas Association (COGA) is saturating television and radio with ads encouraging Republicans to approve it. Leaving nothing to chance, sponsorship includes two heavy hitters – Speaker McNulty and Senate Majority Leader John Morse – essentially guaranteeing passage at the expense of ratepayers.

The prevailing paradigm on Colorado’s energy policy is that industry, the utility, politicians, environmentalists and bureaucrats have come together to forge a united “clean energy” path for Coloradans. However, there’s one group that has been noticeably absent – ratepayers, those fools who actually pay the bill.

Yeatman conservatively estimates that the four most prominent aspects of the New Energy Economy will cost Colorado ratepayers an additional $212.3 million in 2011 alone.  Add millions more for the SIP that the Colorado General Assembly does not have the courage to challenge along with tiered seasonal rates, and Colorado ratepayers are in for an expensive 2011.

There is good news.  Two State Senators Kevin Lundberg (R-Berthoud) and Lois Tochtrop (D-Adams County) are challenging leadership and providing a voice for consumers.  Senator Lundberg introduced SB 237 to require state to consider the cost-effectiveness of the SIP and be more energy-neutral.

According to the Colorado News Agency, Tochtrop’s bill SB 236 would replace “a key provision of the PUC-backed” SIP with “what Tochtrop says is less costly approach.”

Energy experts say that either Lundberg’s or Tochtrop’s bills likely would save ratepayers between $100-200 million dollars, which means they probably don’t have a chance in this state legislature.

While it’s not surprising that an investor-owned, state-sanctioned monopoly would seek favor with the legislature, it is surprising that elected officials expected to represent the interests of their constituents would simply rubber-stamp Xcel’s political and financial agenda.

But with this General Assembly, Xcel gets its way.