Legislation in Colorado that would have imposed higher penalties for oil and natural gas operators that violated state regulations — supported by the governor and the energy industry — went down in defeat Wednesday, the final day of the session.

HB 1267 was one of several bills that had sought more oversight of the energy industry but which failed to win consensus in the General Assembly (see Shale Daily, May 8). The House had passed the original bill, which provided a $5,000/day minimum penalty and a maximum penalty of $15,000/day. The Senate voted to keep the maximum penalty, but it removed the minimum, which the House rejected.

Gov. John Hickenlooper had opposed the provision to set a minimum daily fine for oil and gas violations, now at zero, but he and the Colorado Oil and Gas Association (COGA) had backed raising the daily maximum penalties to $15,000 from the current maximum of $1,000.

COGA spokesman Doug Flanders said members were shocked by the bill’s defeat and “very disappointed that Colorado’s oil and gas industry could not find a reasonable middle ground with the sponsors and proponents of HB 1267 to increase fines…COGA was supportive of the increase and thought this was an obvious area for collaboration and compromise. Despite multiple offers to find common ground, all were rejected. There seemed to be more interest in a punitive message than a good bill.”

The industry is “dumbfounded that the proponents of the bill would rather see no increase in oil and gas fines than to lose their minimum fine, which not one state agency in Colorado has, nor even the U.S. Environmental Protection Agency. Instead of agreeing to a 1,500% increase in fining authority, we now have nothing.”

Flanders said the “lack of communication between some legislators and industry has been the most disappointing aspect of this legislative session. Fortunately, we have seen a willingness by other legislators to have an open dialogue with industry, which leads to pragmatic legislation…

“Confrontation is easy; however, successful collaboration takes effort and diligence. Whether we are discussing energy development in Boulder County, which has seen three new wells starts in the last five years, or Weld County with over 6,000 new starts, these early and often discussions are critical since oil and gas development occurs all across Colorado.”

Colorado ranks fifth in U.S. natural gas production and 11th in oil production, according to Flanders. “There are over 107,000 Colorado men and women whose jobs are supported by the industry and provides $6.5 billion in total labor income and $31 billion in economic output annually…Oil and gas regulations must work to both protect the environment and the business climate by encouraging best practices without being punitive.”

The decision to not enact maximum daily fines was a “lost opportunity,” said Hickenlooper spokesman Alan Salazar. “We agreed with the sponsors that fines have been too low.”

On the bill’s defeat, Hickenlooper Wednesday directed the Colorado Oil and Gas Conservation Commission through an executive order to reevaluate enforcement and fines policies. The order directs commissioners to apply the statutory maximum fines as needed and to establish fines in cases with egregious or aggravating factors.

State Rep. Mike Foote (D-Lafayette), who had sponsored HB 1267, called the executive order “ironic.” Lawmakers had “negotiated for a minimum daily fine” with the governor’s office “and just couldn’t get anywhere.” The minimum fines would have only applied to “serious” environmental incidents, such as “the contamination of an aquifer, the contamination of groundwater or the evacuation of nearby homes due to a threat of explosion.”

The amended bill by the Senate “was a paper tiger…There is no sense giving the commission a bigger hammer when they don’t use the one they have.”

Only one bill regarding oil and gas issues was passed during the session; it will increase spill reporting. The bill lowers the amount of the spill that has to be reported to authorities to one barrel from five barrels. The bill’s sponsor, State Rep. Diane Mitsch Bush of Colorado Springs, said legislators had tried to work with “all the stakeholders, including industry and the administration,” to ensure its passage.

The state legislature “did not get the job done” even with “intense citizen concern” over drilling, said Conservation Colorado spokesman Peter Maysmith.