Policy storm poses wider implications for the industry at large
By Michael Sandoval
New state-based fracking regulations will not be on the Colorado ballot in November, but that does not mean the raging debate over the traditional extraction method will die down anytime soon—for this state, or our neighbors to the north in the Bakken region.
In fact, the last-minute “compromise” brokered by Democratic Gov. John Hickenlooper, which resulted in the withdrawal of four ballot measures by their proponents in exchange for an 18-member blue-ribbon commission, ensured a shift in the acrimonious battle from this year to the 2015 legislative session. Or even back to the ballot in 2016, with no guarantees that any legislative solution offered by the commission and introduced next year will produce a satisfying outcome for the industry, anti-fracking environmental groups, or Colorado residents alike.
How Did We Get Here?
The success of anti-fracking activists in a handful of municipal ballot questions across Colorado in 2013, which included “time-out” bans on hydraulic fracturing, emboldened local grassroots citizens and their out-of-state backers to shift gears for a statewide offensive in 2014. By May, more than a dozen initiatives had been filed by opponents of fracking, including at least nine supported by Rep. Jared Polis (D-CO) and his group, Coloradans for Local Control.
By early August, two Polis-backed measures had appeared to clear the final hurdle for November. Initiative 88 would have extended the state regulation to a 2,000-foot setback for new oil and gas operations. Initiative 89, a so-called environmental bill of rights to “conserve Colorado’s environment,” would have amended the state constitution to permit “more restrictive and protective” local laws and regulations to supersede those at the state level.
In addition, at least three of the cities that voted to ban fracking in 2013 – Boulder, Lafayette, and Longmont – were facing mounting legal bills as they faced state challenges to their new regulations.
By early summer, a festering policy storm looked increasingly likely to develop into a full-blown political hurricane. Industry spending could jump into the tens of millions of dollars, according to analysts like Floyd Ciruil; dark money from wealthy foundations backing out-of-state anti-fracking efforts like Water Defense, extensively documented in a July 2014 report from the Senate Environment and Public Works Committee, ensured that local groups fighting for “local control” would not be left inadequately funded for outreach necessary to pass the measures.
But the issue was not merely one of rabid environmentalists and local control advocates pitted against deep-pocketed oil and gas developers. With much of the financial and earned media support for the anti-fracking ballot measures coming from a millionaire member of Congress in Polis, the matter and the urgency took on an increasingly political tone. It not only gave rise to bipartisan ads in support of oil and gas to Colorado’s economy by two former governors – Republican Bill Owens and Democrat Roy Romer – but also to the possibility that the issue might have rather stiff repercussions up the ballot, particularly for members of Polis’s own party.
Adding to the high-stakes face-off, two measures sought to push back against the anti-fracking onslaught: by making local governments enacting prohibitive rules on oil and gas development to be ineligible to receive any state tax revenues derived from such activities elsewhere in the state, and by requiring a fiscal note – a cost to the taxpayer – for any citizen ballot measure.
Though rumors of a possible special session in the Colorado legislature to avert a November showdown persisted throughout the early summer, Gov. Hickenlooper’s July decision not to call the legislators back to address the growing entanglement that threatened the state’s $30-billion oil and gas industry, tens of thousands of jobs, and billions in tax revenues.
State of the State – Did Colorado Dodge a Bullet?
With just hours to spare on August 4, the deadline for signature submission for the ballot measures, Gov. Hickenlooper announced plans that he had finally brokered a deal. In exchange for the withdrawal of both of the Polis-backed measures, the State of Colorado would drop ongoing litigation over the rules passed by the City of Longmont, and the two industry counter-measures would be dropped, as well.
For the time being, a “scorched earth” campaign from both sides had been averted, homebuilder Pat Hamill told the Denver Post.
Polis defended dropping his initiatives to a cacophony of criticism from anti-fracking activists, who felt betrayed by the move, in a guest commentary at the Post.
“This deal represents progress. For the first time ever, citizens will be directly at the negotiating table, on equal footing with the oil and gas industry. They will have their voices heard about the impacts of fracking on their health, their property values, and on Colorado’s landscape. With this agreement, they now will have a forum to continue pressing for the common-sense reforms that Colorado needs,” Polis wrote.
“To those who say this deal doesn’t go far enough, I respond that that is up to us. We need to make sure that the voices of Coloradans impacted by fracking are heard. We have a real opportunity for progress. However, if we dismiss this commission before it even convenes, we will have given oil and gas companies a platform to push watered-down policies that put profits before people. We need the environmental community, local officials, and all Coloradans to stand up and fight for this commission. The time for criticism and condemnation is over. We must be united in solving this problem because the people of Colorado are worth it,” Polis concluded.
“You feel used,” Therese Gilbert, an anti-fracking proponent, responded. Gilbert was not alone.
Shane Davis, an outspoken anti-fracking activist, took to Change.org to voice his condemnation.
“What you and the Democratic Party have done in this state is hijack our democratic process,” Davis wrote, according to the Colorado Observer.
“Your actions prove that we not only have an environmental crisis, but also a democracy crisis,” the petition said.
“We are not bargaining chips in some sort of game of ‘Chicken’ with the Democratic Party and Governor [John] Hickenlooper.”
“This deal only strengthens our resolve to work in our communities for real citizen initiatives that will ensure a safe and healthy future for all Coloradans,” said Russell Mendell of Frack Free Colorado, in a press release at the Food and Water Watch website. “It’s time for Coloradans to stand up take back our democratic rights.”
Meanwhile, Hickenlooper outlined an 18-member taskforce drawn from three groups: six citizens directly affected by oil and gas development, six representatives of the industry, and six “respected Coloradans.” To lead the group, Hickenlooper named two co-chairs: La Plata county commissioner Gwen Lachelt and XTO Energy president Randy Cleveland.
Lachelt acknowledged the charged climate, and that the fate of any proposals would rest not only with the legislature, but also one that might find a different composition than the Democratically-dominated one currently in place come January 2015.
“I’m not naïve,” Lachelt told the Durango Herald. “It’s certainly my hope that whatever legislature convenes … that they will take these recommendations seriously … But we could spend a lot of time developing the best protections possible and have it fall on deaf ears.”
In addition to her role as county commissioner, Lachelt, a long-time environmental activist, also served as project director for the Earthworks Oil and Gas Accountability Project. In 2010, Lachelt delivered these remarks at an Earthworks conference in Pittsburgh:
“Back in the day, we used every trick in the book to block drilling, stop drilling, slow drilling, regulate drilling and we’ve fought to put new laws and regulations on the books where they didn’t exist before. We’ve blocked bulldozers, filed restraining orders, filed lawsuits, received death threats and been put on trial.”
XTO Energy operates across three Colorado counties – Las Animas, La Plata, and Rio Blanco. In 2013 the company paid $24 million in taxes to the State of Colorado, and gave an additional $1.5 million to education, civic, and cultural activities in the state, according to its website.
With approximately 200 applications received by August 19, the actual composition of the commission will not be available until after this publication’s deadline. Sorting through the applicants could take weeks, as Hickenlooper and his staff handpick the selections. It is unclear whether geographic diversity will play any part in the committee makeup, given the concentration of hydraulic fracturing in a handful of counties. In any case, the first meeting will likely occur in September.
“People ask me, ‘Who’s gonna pick ’em?’ I am,” Hickenlooper said, according to Colorado Community Media. “The buck stops here and I guarantee you we’re going to have everybody pissed off again. The one criteria is that everyone who is going to be on that list is someone who believes we can get to a yes (on a compromise).”
But prospects of the taskforce reducing the contentiousness surrounding the issue stumbled out of the gate when Hickenlooper felt the Associated Press had misquoted him.
“Its success is dependent upon it ending in regulation,” the AP quoted Hickenlooper.
“What I said was legislation,” Hickenlooper told the CCM reporter. “Go back and look at the quotes. I never said we needed more regulation.”
But whether any regulation emerges from the possible legislative proposals will be determined not only by the prospective content, but as Lachelt noted, by the makeup in the Colorado legislature when it reconvenes next year.
And a deadlocked legislative session in 2015 will only mean more efforts, locally in the off-year election, and statewide come 2016.
With Colorado as the experimental testing grounds for not just politics but policy over the last decade, a significant win here for anti-fracking activists will only embolden efforts elsewhere in the United States, particularly in the Bakken region. But lessons learned in the Colorado battle over natural resource development can surely be put to use by all interested parties, and residents and developers alike in Montana, North Dakota, and southern parts of Canada should stay tuned in over the next several months.
Meanwhile, thousands of Coloradans will get to keep good-paying jobs and millions of dollars in taxes will flow to state and local coffers, as an already heavily regulated industry complies with state regulations. The situation in Colorado remains fluid, but like a shaken can of soda, has only been kicked down the road.
About the Author:
Michael Sandoval is energy policy analyst and investigative reporter for the Independence Institute in Denver, Colorado. Michael was most recently an investigative reporter for the nation’s leading conservative think tank, The Heritage Foundation, where he specialized in coverage of green energy issues, government waste, and social media strategies. Michael’s work has been featured by the Drudge Report, The New York Times, Washington Post, Politico, Fox News, Fox Business News, Townhall and dozens of radio outlets around the country, as well as blogs like MichelleMalkin.com, HotAir.com, and Instapundit.com.by