Deal, or no deal? Time's running out

The Colorado Statesman

A deal brokered by Gov. John Hickenlooper to avoid an onslaught of proposed ballot questions that could lead to more bans on hydraulic fracturing remains complicated at best, as both environmentalists and industry executives are fractured.

The wishful grand bargain spearheaded by Hickenlooper, a Democrat, aims to get U.S. Rep. Jared Polis, D-Boulder, to drop his push to allow local governments to create their own rules and regulations governing the oil and gas industry. He would also like to increase well setbacks to at least 1,500 feet. The current standard is 500 feet.

Polis, a self-made millionaire, has vowed to fund the proposed ballot initiatives after he experienced hydraulic fracturing firsthand. A well was fractured near his country home just outside of Loveland, inspiring Polis to jump on the local control bandwagon.

Fracking is used in wells by utilizing chemicals, sand and water to create small fractures under the ground in order to stimulate production of new and existing oil and gas wells.

Fears exist that water can become contaminated and air polluted. There are also nuisance concerns, such as noise and congestion.

Hickenlooper sat down with the Polis camp, as well as with stakeholders from Anadarko Petroleum and Noble Energy, in an effort to strike a deal. The governor made significant progress, with both sides agreeing to a bill that some view as a compromise.

If the governor can get some guarantees that he would have support in the legislature, then he would call a special session to address the legislation. That is rumored to be anytime between June 11 and 22.

But at around $22,000 a day, Hickenlooper won’t want to call a special session until he has a near guarantee that the bill would pass. It would take at least three days to pass the legislation through the House and Senate.

House Majority Leader Dickey Lee Hullinghorst, D-Boulder, who has been leading a legislative effort to address the issue, received a copy of the proposed bill and began sending it out to fellow lawmakers last Friday in an effort to gain broad-based support.

The draft bill, obtained by The Colorado Statesman, would allow local governments to regulate noise and impose setbacks. Jurisdictions would also be allowed to conduct inspections and enact health and safety standards separate of the state.

The measure is considered a compromise because it would also allow oil and gas companies to appeal local government mandates, and it would only allow local governments to impose a moratorium on oil and gas activities “for an amount of time that is reasonably necessary to facilitate informed decision-making and planning…the length of such moratorium shall not be arbitrary or excessive.”

In a letter to colleagues, Hullinghorst said the bill is the “closest we have come to an agreement…”

She later said in a prepared statement, “I’m happy with the latest draft of the local control bill, and with the good-faith efforts of stakeholders including representatives of the Hickenlooper administration, the oil and gas industry, the conservation community, local governments and others. As we continue our outreach to stakeholders, I’m optimistic that these extended negotiations will come to a successful conclusion.”

Coloradans for Local Control, the group supported by Polis, said on Wednesday that local elected officials are embracing the proposal, which bodes well for calling a special session to address the bill. They demonstrated support from a long list of county commissioners that span both rural and urban parts of the state, though many of them are Democrats.

“This bill would be a step in the right direction in balancing the health and safety of communities with the needs of oil and gas operations,” said Eva Henry, an Adams County commissioner. “Local officials need to feel confident they can use their authority to ensure the health and safety of residents and I believe this bill articulates that we can.”

“The bill represents a reasonable compromise by the governor, legislative leaders, industry and affected neighbors,” added Nancy Jackson, an Arapahoe County commissioner. “I would really like to see consensus on going forward and passing this bill in a special session.”

“The reality is that oil and gas drilling is happening within a few hundred feet of homes, putting the health of our residents, their property values and the environment at risk,” continued Gwen Lachelt, a La Plata County commissioner. “Our constituents expect us to protect the health, safety and property values and this bill will allow us to do exactly that.”

Colorado Concern, a group of high-level business executives, is also urging a bipartisan agreement on legislation.

“We applaud Gov. Hickenlooper and all those who have been working to forge a meaningful, bipartisan legislative solution on oil and gas development that will forestall a statewide initiative election this fall,” read a joint statement from Pat Hamill, chairman of Colorado Concern and chief executive of Oakwood Homes, and Tamra Ward, president and chief executive of Colorado Concern.

“The governor’s leadership in bringing widely divergent interests together has been invaluable,” the statement continued. “Compromise is never easy to achieve but we encourage all parties to keep at it.

“As an organization of more than 100 CEOs focused on fostering economic growth in Colorado, we believe that the enactment of any of the current crop of proposed initiatives would be devastating to our economy and result in a massive loss of jobs,” Hamill and Ward added. “It would set Colorado’s economic development and job creation efforts back decades.”

“In contrast, a bipartisan legislative solution could be enacted soon and could be amended in future legislative sessions if necessary. A Constitutional amendment… would be virtually impossible to amend much less repeal. We urge negotiations to continue, and a Colorado compromise to emerge. ”

The Denver Metro Chamber of Commerce is also urging legislation, though it will not yet take a position on the proposed bill until it is introduced.

“Coloradans have a long history of working together to find solutions. Whether it is over the future of our education system, expansion of our transportation network or improvements in our environment and health, we have historically found a way through these challenging issues through collaboration and negotiation,” explained Kelly Brough, president and chief executive of the Denver Chamber.

“It is our hope we can successfully find common ground on this issue as well,” she continued. “The Chamber has and continues to be very engaged in trying to find a solution that allows Colorado to take advantage of the economic opportunity presented by natural gas and preserves property owner rights while also protecting our environment.

“We’ve been working hard to find resolution on this issue and take it off the ballot,” Brough added. “We strongly prefer a negotiated solution that is respectful of the various affected parties’ interests.

“We have long been opposed to the ballot initiatives that would result in significant constraints being written into our constitution with catastrophic consequences,” explained Brough. “The constitution frankly isn’t the place to regulate oil and gas. Our existing oil and gas regulations are safe and consistent… We appreciate the efforts of the parties involved in trying to find a legislative solution to this issue.

“However, we are continuing our efforts through Coloradans for Responsible Reform to prepare for a fight at the ballot, should the negotiations not resolve the issue,” Brough concluded.

A spokeswoman for Anadarko said the corporation is appreciative of the governor’s effort to find a legislative fix, but that it is prepared to move ahead with outreach even if there is no special session.

“We continually work collaboratively to harmonize our activities with the needs of the people in our communities; it’s how we’ve approached challenges in the past, and how we’ll approach them in the future,” explained Robin Olsen. “Regardless of a special session, we’re continuing our efforts to share the facts, science and the importance of fracking and oil and natural gas development with voters… and to other forums to ensure voters have the information they need to make informed decisions.”

“Noble Energy supports the legislative proposal because it is the right thing to do for the state of Colorado, the economy, our communities and the oil and natural gas industry,” added Ted Brown, senior vice president of Noble Energy. “We appreciate the governor’s leadership. He brought together stakeholders — including other energy companies — and asked them to find a solution.

“This unique approach makes sense in Colorado, because of the proximity and growth of communities near oil and natural gas development, and it is a better way to address the concerns of local governments and communities than a constitutional amendment,” he continued. “We understand that all parties will not agree with every element of the proposal, but a constitutional amendment leaves no room for negotiation and flexibility to protect private property rights or respond to local needs.

“As one of the largest oil and natural gas development companies in the state, we are looking out for thousands of employees and plan to invest $12 billion in the state between 2014 and 2018,” Brown added.

Fracturing stakeholders on both sides

But not everyone in the oil and gas industry is as keen on a compromise as Anadarko and Noble. The Colorado Oil and Gas Industry, which represents local companies, and the Colorado Petroleum Association, which represents larger national interests, have both opposed the compromise bill.

COGA’s board on Monday officially voted to oppose the current language.
“COGA acknowledges the desire of local governments in Colorado to ensure they and their citizens have a voice in how our energy resources are developed. Colorado has the most comprehensive rules in the country which ensures those resources are developed responsibly and wisely, and industry is committed to working with local governments to do that,” explained Doug Flanders, a COGA spokesman.

“COGA applauds Gov. Hickenlooper for his efforts to bring local governments, industry, the agricultural community and others together in a way that balances the concerns of communities, mineral and surface owners, and energy companies,” he continued.

“COGA agrees that local governments have an important role in regulating oil and gas development. COGA further believes that very powerful mechanisms, such as the Local Government Designee process, work to ensure local government authority,” Flanders added. “We continue to support efforts to clarify the role of local governments, but we cannot support the [current] language…

“COGA is eager to continue to engage in productive dialogue with each stakeholder and is dedicated to ensuring a balance between the state government’s authority, local governments’ responsibility, and the industry’s ability to operate responsibly in the state of Colorado,” he concluded. “The industry has a 150-year history of operating in this state with local governments, and we plan on continuing to do so for another 150 years.”

Stan Dempsey, president of the Colorado Petroleum Association, said his members worry about the local control aspect. He believes local governments already have significant input into the rulemaking process.

“We think that local governments have multiple tools to be able to participate in the Oil and Gas Conservation Commission’s permitting process currently, and beyond that, we would oppose any expansion of local control,” explained Dempsey.

He also takes issue with the process itself, suggesting that too much attention is being placed on Polis and his demands.

“Congressman Polis needs to do the responsible thing and withdraw his initiatives, and certainly not dictate to the 100 members of the General Assembly the terms and conditions of his withdrawal…” said Dempsey. “It’s offensive on its face.”

Meanwhile, environmentalists are also concerned with the compromise. Colorado Community Rights Network has established an issue committee to support their own local control ballot drive, and the group says it will not back down in the face of pressure over a grand bargain.

Currently standing as Initiative 75, the proposed ballot question would stretch even further than those proposed by Coloradans for Local Control by offering local governments more control over businesses and corporations that impact the health and safety of a community.

The effort grew out of initiatives in five municipalities that have already banned fracking, beginning with Longmont in 2012, and then spilling over into other communities along the Front Range. Broomfield, Fort Collins and Boulder passed five-year moratoriums last year, and Lafayette passed a ban on new oil and gas activities. Loveland will also soon be considering a moratorium on fracking with a ballot question that will be decided on June 24.

The local bans have resulted in ongoing lawsuits. Industry leaders and Hickenlooper believe that the ordinances overstep the state’s authority. Colorado currently promulgates oil and gas rules through the Colorado Oil and Gas Conservation Commission.

Initiative 75 proponent Clifton Willmeng, who was instrumental in pushing the fracking ban in Lafayette, has spearheaded the statewide proposal from Colorado Community Rights Network. The language has already received approval from the Colorado Supreme Court and proponents are collecting signatures.

Willmeng is unapologetic that voters could be faced with a similar ballot question, despite a grand bargain. Proponents must collect 86,105 valid signatures to make the November ballot.
“When the doors opened on Friday, the politicians and industry had come to an agreement on the future of Colorado’s people — people who were not invited to attend or participate,” lamented Willmeng.

He described his group as the “grassroots” faction of the local control movement, unlike Polis’ group, which Willmeng described as being entrenched in Washington, D.C.-like politics.
“Problematic and quite outside the script of industrial/governmental relations, ballot Initiative 75 reads far more like the Declaration of Independence than the talking points of politicians and national environmental groups,” added Willmeng.

“The talks between Polis, Hickenlooper and Anadarko were a transparent, obvious attempt to keep people outside of decisions and subservient to a defunct system of corporate law,” he continued. “The time has long come to remind the powerful that we will not so easily be cast aside.”

Demonstrating their aggressive ability, Colorado Community Rights Network has initiated a class-action lawsuit against COGA, the state and Hickenlooper, requesting immediate enforcement of the ban in Lafayette, which is currently being challenged by COGA. The group and its supporters have also lobbed countless attacks at Hickenlooper, pointing to the former geologist’s unwavering support of fracking.

Sam Schabacker, regional director for Food and Water Watch, which played a large role pushing fracking bans in Colorado’s five communities, said the frustration and tension is palpable.

“We’re deeply disappointed with the compromise. Gov. Hickenlooper has been the main driver of this 11th-hour behind closed doors deal that’s being brokered…” said Schabacker. “We’re certainly hoping that all of the people that were involved with this compromise understand that it’s not in the interest of their constituents, it’s not what their constituents voted for, and that they will decide not to move forward with the special session because it is not what’s best for the people of Colorado.”

Schabacker said he is not worried about infighting within the local control, anti-fracking crowd, suggesting that the different factions will work it out. He said the grassroots is solely focused now on defeating a compromise bill.

The largest concern is over language around preemption, which would establish that the local government requirement would be preempted if it “materially impedes” the recovery of oil and gas, which could halt moratoriums and bans.

“I don’t see any way a local government could do anything in order to protect their citizens’ health, safety and welfare, and not be threatened with a lawsuit,” explained Schabacker. “We think it’s worse than the current standard; we think it will have a chilling effect in local communities because officials will not want to do something out of fear of getting sued.
“I’m more focused right now on what a bad deal this compromise is and making sure that those who are trying to cut this deal understand that it’s not going to be really representing the will of their constituents, but would actually be actively subverting it,” added Schabacker.

Tough climb in the legislature

Even if Hickenlooper is able to build enough broad-based support to comfortably call a special session, he faces an incredibly difficult journey in the legislature.

For one thing, he will likely need every Democrat in the Senate to vote for the compromise, as Republicans are going to be a harder sell. Democrats hold only a one-seat majority in the Senate.

Hickenlooper is already facing pushback, with several Senate Democrats expressing concern over the compromise. One vote that he does not currently have is that of Sen. Lois Tochtrop, D-Thornton.

Tochtrop is mostly frustrated with the process that has unraveled, including the push by Polis. She has been told that the bill must pass without amendments in order to meet the terms of the compromise. But that doesn’t work for Tochtrop.

“I think it’s completely disingenuous for one elected official to hold 100 members of the general assembly hostage,” Tochtrop told The Statesman. “That’s not how the process works. So, no, the governor doesn’t have my vote. Maybe if I could sit down and talk about it and offer amendments. But as of right now I find the entire process disingenuous and I can’t support it.”

The GOP in both the House and Senate has also expressed concern with the bill, pointing to a lack of industry support.

There are also political ramifications. In a contested election season in which Democratic U.S. Sen. Mark Udall will face off against Republican U.S. Rep. Cory Gardner, the GOP is looking for any excuse to pounce on Democrats.

Republicans have already chided Polis for threatening to push the ballot initiatives without a legislative fix. Several Republicans are pulling Udall into the conversation, pressuring him to take a stand on the issue.

“Jared Polis doesn’t have a vote in the legislature,” said Sen. Ted Harvey, R-Highlands Ranch. “I’m not negotiating against myself. Jared Polis is the one who wants to get this through the legislature, and he isn’t a legislator.

“This is the legislative process in the state of Colorado, not Washington, D.C.,” added Harvey. “Negotiating with Udall and negotiating with the governor doesn’t mean anything. They have to get the votes in the legislature.”

Rep. Frank McNulty, R-Highlands Ranch, said he does not expect House Republicans to buy into the negotiations without broad-based support.

“Jared’s take this or leave it attitude, maybe that’s why things aren’t getting done in Congress. Too many people back there like him,” quipped McNulty.

“Politics are intertwined throughout this…” added McNulty. “The Democrats have their political motivations, and they’re playing from that perspective, and I certainly realize that and appreciate it. But this is an issue where real people get hurt if Jared Polis is successful with pushing his initiatives. So, if there is consensus and there is common ground and there is a legislative solution that has that type of broad-based support, then I think you have to put politics aside and assess it through as much of a non-political lens as you can.”

If there is no special session and Polis moves ahead with his ballot drive, the election is likely to run in the tens of millions of dollars because of big spending on both sides of the debate.

Coloradans for Safe and Clean Energy, the issue committee established to financially support Coloradans for Local Control, started with $1.4 million.

Protecting Colorado’s Environment, Economy and Energy Independence, the issue committee created to fight fracking bans, has already raised $3 million.

And a business-oriented group, Coloradans for Responsible Reform, has joined the opposition, reserving nearly $8 million worth of ad time in preparation for the campaign. CFRR on Wednesday reported a contribution of $2.3 million from the American Petroleum Institute, bringing their total contributions to about $3.1 million.

“People seem to forget about this one, but Initiative 75 is so broadly based it involves all businesses, and they’re out collecting signatures,” explained Dan Hopkins, spokesman for CFRR. “So, regardless of what happens with a special session… we’re as concerned about 75 and the impact it will have on jobs as any of the others.”

Dempsey also highlighted Initiative 75, suggesting that the campaign will likely end up with national dollars that could make it a real threat.

“We’re going to be fighting a ballot initiative whether or not Polis withdraws his initiatives,” cautioned Dempsey. “The fact is that we know that those groups are funded with national money.”

Peter@coloradostatesman.com