Leading Colorado Democrats and the state’s oil and gas industry announced a preemptive armistice Monday — one that seeks to defuse the latest round of dueling ballot initiatives and legislation aimed at the industry and its environmental impacts.

The proposals, described to reporters by Gov. Jared Polis and legislative leadership, include imposing a new per-barrel production fee on the industry and enacting new environmental standards. In exchange, the industry, lawmakers and several environmental groups agreed to abandon recent attempts at regulatory legislation and ballot initiatives that are backed by deep pockets.

“In coming together, this diverse group agreed that costly, divisive ballot measures and legislation are not in the interest of the state — and it’s better to find a way to work together to an outcome that everybody can live with and moves the ball down the field in terms of achieving our goals,” Polis said.

A key part of the deal takes the form of two new bills set to be introduced in the coming days — roughly one week before the end of the legislature’s 2024 session.

One bill would institute a fluctuating production fee on oil and gas that is expected to generate roughly $138 million annually, based on returns from recent years. Much of that money would go toward supporting transit in Colorado, potentially including metro Denver’s Regional Transportation District. The state also would set aside a slice to help restore public lands impacted by oil and gas production.

The second bill would seek to reduce emissions and improve air quality via new permitting and enforcement authority. It would include funding to plug orphan wells and strategies to help communities that are disproportionately impacted by the oil and gas industry, Polis and legislative leaders said at Monday’s late-afternoon news conference.

Polis said negotiations included major players in the oil and gas industry, legislators who had eyed tighter regulations on production and several environmental groups, with eight of the latter named in a news release.

The deal means that ballot initiatives filed by both the industry and by environmentalists — and at various stages of state review — will be abandoned. Those supported by the industry, which has the money to run effective campaigns backing them, were seen as particularly concerning to environmentalists, since among the aims was to thwart state and local regulations.

In turn, environmental groups filed ballot measures targeted at addressing the industry’s harms on public health and the environment.

Democrats in the legislature agreed to drop four bills that had been winding through its chambers. Those measures sought to curb emissions by changing the state’s permitting process, halting drilling in the summer and increasing potential penalties for companies that violate their air-pollution permits.

If the two new bills win approval, the environmental groups, legislators and key industry players agree not to run any new ballot measures or legislation for the next few years. Polis and Senate President Steve Fenberg told reporters the time-out was intended to give the new policies time to be implemented.

But if the bills fail, the state will continue along the “status quo,” Fenberg said.

“Stability and certainty is vital” to industry

The political breakthrough was welcomed by Dan Haley, the president and CEO of the Colorado Oil and Gas Association. He said in a statement that the industry still was absorbing dozens of new regulations at various stages of implementation.

“Colorado’s oil and natural gas industry has been leading the state in emissions reductions and has been at the table for more than two dozen rulemakings in just the past few years,” he said. “But political and legislative stability and certainty is vital to our industry’s future success here, and we’re pleased to see our state’s political leaders share that vision.”

Kait Schwartz, the director of the American Petroleum Institute’s Colorado chapter, echoed in a statement that “stability for a vital industry is of utmost importance.”

The oil and gas industry supported 54,420 direct jobs and 249,320 indirect jobs in the state in 2021, accounting for about 7.7% of the state’s total employment, according to a report last May from the American Petroleum Institute. The industry contributed $48.7 billion to the state’s economic output, or about 11% of the total.

The governor’s office said the oil and gas producers Occidental, Civitas and Chevron were involved in the coalition and supported the new legislation.

A collection of environmental groups that took part in the talks sent out a joint statement at about the same time as the industry, calling on the legislature to pass the package.

Signed by Conservation Colorado, GreenLatinos, the Southwest Energy Efficiency Project and others, the statement warned that without the bills, the state would see “potentially devastating ballot measures from the oil and gas industry that could have rolled back a decade of climate progress in Colorado.”

“These bills represent significant progress for disproportionately impacted communities, providing much-needed protections from pollution, resources to enhance the lives of transit-dependent individuals, and crucial remediation efforts for both the ecosystem and affected communities,” added Ean Thomas Tafoya, the Colorado state director of GreenLatinos.

Republican leadership in the state House did not offer immediate comment on the proposals.

Sen. Barbara Kirkmeyer, a Brighton Republican, said she had not seen the new legislation. Her district includes Weld County, which produces most of the oil and gas in the state. She said she’d take a cautious look at each bill before committing one way or the other, keeping workers in mind as she considered it.

“It’s not about the oil and gas companies getting something. It’s not about are we satisfying the environmentalists,” she said. “It’s really about: How do we protect those workers in the industry and give them certainty that they have a future where they’re going to make a great income to be able to provide for their family?”

Details on two new bills

House Speaker Julie McCluskie said the permitting and air quality bill would include funding “specific to orphan wells and marginal wells,” plus specific direction to the Colorado Energy and Carbon Management Commission “around minimizing impacts” to disproportionately impacted communities. That refers to communities that are likely to experience high levels of harm from poor environmental quality.

The bill also would codify a 30% nitric oxide reduction from oil and gas production by 2025 and a 50% cut by 2030, McCluskie said, and it also would strengthen “enforcement mechanisms.”

Under the oil and gas production fees bill, 80% of proceeds would go to local transit agencies like RTD and to rail projects and a competitive grant program for transit. The remaining 20% would go to “habitat conservation and restoration as mitigation for oil and gas activities” on public lands, Polis said.

The governor said the per-barrel fee, set to fluctuate based on market conditions, would have a minimal effect on energy prices in the state as it filters through international markets. He noted that other states have higher severance taxes than Colorado and would continue to do so under this proposal.

Staff writer Aldo Svaldi contributed to this story.

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