On June 7, 2023, Governor Jared Polis signed into law House Bill 23-1294, titled “Pollution Protection Measures,” which establishes a new Legislative Interim Committee on Ozone Air Quality, directs the Colorado Oil and Gas Conservation Commission (“COGCC” or the “Commission”) to promulgate rules to evaluate and address the cumulative impacts of oil and gas development, and removes a longstanding affirmative defense provided in Colorado’s air pollution control regulations. Critically, HB 23-1294 removes the start-up, shutdown, or malfunction (“SSM”) affirmative defense from C.R.S. § 25-7-115(3)(b) that allowed operators to avoid enforcement for exceedances of Colorado’s air pollution control regulations if the operator could demonstrate that the exceedance occurred during a period of start-up, shutdown, or malfunction.
As explained in more detail below, HB 23-1294 will have an immediate impact on Colorado oil and gas operators and other industries with air emissions in the state.
Eliminating the SSM Affirmative Defense in C.R.S. § 25-7-115(3)(b)
The most significant and immediate impact of HB 23-1294 on Colorado operators is that the bill eliminates the SSM affirmative defense from C.R.S. § 25-7-115(3)(b). The longstanding SSM affirmative defense provided relief to Colorado operators for temporary exceedances of emission limits and emission control regulations that occurred during periods of start-up, shutdown, or malfunction. Such exceedances are often unavoidable, as emission limits and standards are developed based on normal operations, and SSM events are largely beyond an operator’s control.
While impactful, this change should not come as a surprise to Colorado operators because the U.S. Environmental Protection Agency (“EPA”) has taken the position that exceptions from, or affirmative defenses to, emission standards during periods of SSM are inconsistent with the federal Clean Air Act (“CAA”). Indeed, EPA previously issued a State Implementation Plan (“SIP”) call requiring states to remove such exceptions and affirmative defenses from their SIPs. In response to EPA’s SIP call, the Air Quality Control Commission (“AQCC”) revised its regulations in 2015 to clarify that the SSM affirmative defense was only available in state court proceedings and was not binding on EPA or federal courts. Furthermore, in December 2022, the AQCC directed the Division to work with sources, source categories, industry trade representatives, and other interested stakeholders to develop alternative emission limits and standards associated with periods of start-up, shutdown, or malfunction. This change would allow for an operator’s air permit to include alternative emission limits applicable to SSM events. By removing the SSM affirmative defense altogether, the Colorado Legislature has likely derailed this stakeholder process.
Formation of a new Legislative Interim Committee on Ozone Air Quality
As introduced, HB 23-1294 would have significantly limited air permitting in Colorado and fundamentally changed the state’s enforcement of air permit violations and emission limit exceedances. Rather than enacting such significant legislation, HB 23-1294 was amended to establish a new Legislative Interim Committee on Ozone Air Quality that is tasked with studying Colorado’s ozone air quality and devising strategies and potential legislation to address ozone pollution.
The stated purpose of the new Interim Committee is to “study ozone air quality in the state with a focus on (a) investigating the factors that contribute to ozone pollution in the state, including any scientific consensus around the issue of ozone pollution; (b) analyzing strategies to address and improve ground-level ozone issues; and (c) developing policy, technical, and financial solutions to improve ozone air quality in the state.” C.R.S. § 25-7-145. The Interim Committee will solicit presentations and comments from affected industries, workers, local governments, state agencies, and communities and go on field trips to better understand Colorado’s ozone air quality.
The Committee will consist of six members from the Colorado House of Representatives and six members from the Colorado Senate. Of the six members of the House, four will be appointed by the Speaker of the House, and two will be appointed by the Minority Leader. In the Senate, four members will be appointed by the Senate President, and two will be appointed by the Minority Leader.
The members of the Committee must be appointed by June 30, 2023, and schedule their first meeting by August 29, 2023.
New Rules to Evaluate and Address the Cumulative Impacts of Oil and Gas Operations
In addition to establishing the Interim Committee on Ozone Air Quality and tasking it with studying ozone pollution, HB 23-1294 also directs the COGCC to “promulgate rules that evaluate and address the cumulative impacts of oil and gas operations.” C.R.S. § 34-60-106(11)(d). Notably, in response to the Colorado Legislature’s passage of SB 19-181, the Commission commenced the “800/900/1200 Mission Change, Cumulative Impacts, and Alternative Location Analysis Rulemaking” that implemented several new requirements on oil and gas operators to evaluate and address the cumulative impacts of oil and gas operations in Colorado.
But in August 2022, environmental groups petitioned the Commission to do more and requested that it initiate yet another rulemaking to address the cumulative impacts of oil and gas operations in Colorado, particularly the impacts on Disproportionately Impacted Communities. Rather than engage in another cumulative impacts rulemaking, the Commission denied the environmental groups’ petition and convened an informal stakeholder group over the first quarter of 2023 to study the cumulative impacts of oil and gas operations and develop draft rules that incorporate a wide variety of perspectives to serve as the basis for future rulemaking.
HB 23-1294 requires that the Commission promulgate such rules by April 28, 2024.
Changes to the Division’s Processing of Complaints
Finally, HB 23-1294 changed the Division’s enforcement process associated with written complaints. Now, when the Division receives a written complaint that a person is violating or failing to comply with any of its rules, requirements, or permit conditions, the Division must commence a prompt and diligent investigation unless the complaint is frivolous, falsified, trivial, or the complaint is withdrawn before the investigation commences. Within 30 days of receiving the written complaint, the Division must respond to the complainant and provide an outline of the steps involved with its investigation. If, in response to a complaint, the Division determines that a violation or noncompliance exists, the Division must notify the complainant that it has commenced an investigation into the reported violations or instances of noncompliance.
If the Division chooses to issue an order requiring the operator to comply with its rules, the Division must send the order to the complainant, and if a hearing on the order is requested, the Division must provide the complainant with at least 45-days’ notice of the hearing, as the complainant is now authorized to participate as a party to the hearing. In addition, HB 23-1294 increased the potential civil penalties associated with a violation or instance of noncompliance. The Division must now consider the severity of the violation or noncompliance in assessing the amount of civil penalties. It cannot assess a penalty “that is less than the economic benefit that the owner or operator derived from the violation or noncompliance.” While it is unclear how the Division will make this determination, operators should expect to see increased civil penalties for violations or noncompliance with the Division’s rules.
Conclusion
While the late amendments to HB 23-1294 addressed the most concerning aspects of the legislation, Colorado operators should expect a slate of new regulations in 2024 aimed at addressing ozone pollution, air permitting, and the cumulative impacts of oil and gas operations in Colorado.
If you have questions about HB 23-1294 or how to participate in upcoming rulemakings, please contact Randy Dann or Cole Killion.