American Oil and Gas Reporter - June 2016 - 31

had expressed disappointment with the
committee's approval of the bill, saying
legislation should wait for the decision
by the Colorado Supreme Court on local
drilling bans (see story, page 14).
"This really was a bad bill," Haley
holds. "Having two Democrats vote against
it in the House was a turning point for us
in this session. If the opposition pursues
anti-industry ballot initiatives in November,
Coloradans need to know this local control
bill was killed in a bipartisan fashion."
In April, Haley continues, the House
passed HB 1430, which was intended to
expand on a recommendation discarded
by the Governor's Task Force. It would
have required companies to notify adjacent
counties about planned drilling locations,
a requirement that was rejected by both
the task force and in the COGCC's subsequent rule making.
In the Senate, HB 1430 was sent to
the Agriculture, Natural Resources and
Energy Committee, where it was killed
on April 28.
Governor Hickenlooper was quoted
saying the local notice effort was another
in the long line of conflicts between
surface and mineral interests. The battles
over such fundamental property rights
will continue, he told local media, until
"we can find some way of engineering a
compromise."
Although it was never given much
chance of surviving, Haley says a bill introduced by Representative Joe Salazar,
D-Thornton, succeeded in garnering more
headlines than any other aimed at the oil
and gas industry this year. HB 1310
would have laid strict liability on an oil
and gas operator for earthquake damage
to a surface owner's property deemed to
have been caused by hydraulic fracturing
or fluid reinjection.
The bill was passed out of the House
and on arrival in the Senate, was sent to
the Agriculture Committee, where it was
killed.
Governor Hickenlooper also expressed
concern over the potential impact of
Salazar's bill. The earthquake liability bill
was an example of a "solution in search
of a problem," the governor was quoted
saying. More importantly, he said it would
change the state's reasonable accommodation doctrine, which he said had proven
successful in managing conflicts between
surface and mineral property owners.
"We faced this one head on," Haley
observes. "The science tells us induced
seismicity is not a significant issue in
Colorado. In the one instance where an
injection well may have caused a tremor
near Greeley, our strong rules came into
play. The operator was told to shut down
the well, reduce pressure, and do some

work at the bottom. After the modifications, the well resumed injections and is
operating safely today."
Severance Tax Refund
At the close of the session, Haley reports,
SB 218 passed both houses three days
after it was drafted by the Joint Budget
Committee. The bill sets aside $78 million
to pay refunds to companies that were not
allowed to deduct processing and transportation capital expenses from severance
taxes. The refunds are owed as the result
of a ruling by the Colorado Supreme Court.
On April 25, the Supreme Court ruled
in BP America v. Colorado Dept. of Revenue that the company could deduct from
its state severance tax bill, those capital
costs invested in natural gas processing
and transportation facilities. The "plain
language" of the state's tax law "authorizes
a deduction for any transportation, manufacturing, and processing costs, and . . .
the cost of capital is deductible," the justices wrote.
"We believed the Department of Revenue's original tax ruling was incorrect
all along and that it would lose the case
eventually," Haley responds. "No one in
the Capitol should have been surprised
by the ruling."
Down The Middle
Commenting on the outcome of the
2016 session, Flanders says he views it
as playing down the middle: some grandstanding by the opposition, but no damage
in the final score. Much of the positive
outcome can be attributed to the strong
ties COGA enjoys with other state business
groups.
It wasn't always that way. Five years
ago, Flanders recalls, when the association
approached leaders of Colorado's various

chambers of commerce seeking support
during a difficult session at the Capitol,
it was surprised to have the question
turned back on it.
"They asked how many of our members
also were members of local chambers,"
Flanders relates. "When we polled our
members, we found very few were in
their local chambers. From there, we advocated members take an active role in
local business issues, and it has paid off."
Now, the chambers call us," Flanders
reveals. "They ask where we are on an
issue before they move on it."
As part of their regular discussions with
business groups, he says COGA's directors
and staff regularly explore issues and discuss
which group will promote a position and
what sort of support can be provided. "Ultimately, these anti-oil bills really are against
all industry, and that is something that resonates with business groups," Flanders says.
Finally, in response to some published
reports that characterized the 2016 session
as "just short of a do-nothing," one senator
was quoted pointing out that legislators
had avoided the familiar tussle over a
state budget this year.
After restoring nearly $373 million in
early cuts to programs such as education
and affordable housing, as well a deep
cut proposed for the Air Pollution Control
Division to prevent enforcement of the
federal Clean Power Plan, reports say,
both houses passed and the governor
signed a $27 billion budget bill.
Despite concerns over the state's growing
budget, that the legislature was able to
reach a compromise during the regular
session was a major accomplishment, contended one legislator. "I have not seen a
budget put together as comprehensive as
this for the entire state," Senator Ellen
Roberts, R-Durango, told local media. r

Kansas Legislators Delay Acting
On State's Financial Challenges
TOPEKA, KS.-Kansas legislators ended their 2016 session without reacting to
a court's decision that the state's method
of funding public schools was unconstitutional. According to media reports, lawmakers must either resolve the problem
in a special session or see K-12 schools
closed at the end of June.
In February, the Kansas Supreme Court
ruled methods used to finance schools
was inequitable, media reports say. Legislators rewrote the formula for distributing
funds, but on May 27, the justices ruled
that response also was unconstitutional.
Legislators initially considered authorizing

spending another $40 million on schools,
but opted instead to end the session, news
accounts say.
Edward Cross, president of the Kansas
Independent Oil & Gas Association, says
the sine die ceremony that closed the
legislative session on June 1 involved a
final vote on an omnibus tax bill. SB 280
received unanimous support in both House
and Senate before it was sent to Governor
Sam Brownback, and legislators overrode
his veto 39-1 in the Senate and 120-0 in
the House.
"Legislators struck out other oil and
gas tax changes in SB 280 before they
JUNE 2016 31



American Oil and Gas Reporter - June 2016

Table of Contents for the Digital Edition of American Oil and Gas Reporter - June 2016

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