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2017 Colorado Energy Outlook

2017 Colorado Energy Outlook

In the wake of one of the most surprising electoral outcomes in recent memory, we here at the Independence Institute have been assessing what the next few months, the 2017 Colorado legislative session, and the general future of energy policy in Colorado will look like under a President-elect Trump administration and a split legislature with Gov. John Hickenlooper finishing his second term.

Let’s start with something fairly simple.

Personnel is policy.

This will be true at both the state and federal levels. For the sake of argument, let’s assume that a Trump administration follows through with policy objectives mentioned during the campaign–promoting coal, pushing back on the Clean Power Plan, offering different approaches to other government regulations.

If Trump is able to nominate a Supreme Court justice to replace Antonin Scalia, who died earlier this year, and get that candidate, ostensibly someone in the mold of the departed justice, through the Senate confirmation process, then the Supreme Court will nominally return to the 5-4 split that issued a stay in February right before Scalia’s death. First things first, however, as we await the DC Circuit opinion on the lawsuit brought by 27 states and joined by parties like the Independence Institute. Without knowing that outcome, or even who Trump might tap to be the next SCOTUS justice, it is difficult to predict what the immediate or long term outcome on the Clean Power Plan will be. Both sides, no matter the next decision, will likely challenge the outcome, as has been expected. The Supreme Court will eventually hear the Clean Power Plan lawsuit, but that may be a little too far down the road at this point.

Alternatively, a Trump administration might not as aggressively pursue this and other cases, as has been suggested by legal observers. Without getting too far into the weeds on the legal side of things, it still remains true that personnel like a new SCOTUS justice and other nominations to the judiciary by the new administration could alter the scope and outcomes of legal battles in the energy policy field that are already in the pipeline or will soon be based on different policy objectives at the agency level. These processes are multi-year and comprehensive, so it’s unlikely to be an immediate radical change there.

However, the extent to which the new administration appoints new staff at the top levels of government, from Cabinet-level positions for Energy, Interior, Commerce, Agriculture, Defense, Transportation, etc., to directors of the Environmental Protection Agency and other offices (and their political subordinates, too, in regional offices), will decidedly alter the trajectory of energy policy. While some regulatory objectives like the ozone rule are required by Congress every five years (and likely due for reconsideration during the Trump administration), other policy agenda items, like the Clean Power Plan, will likely be reviewed and changed, perhaps considerably. Roadblocks imposed by the current administration on pipeline construction may be reversed by a Trump administration eager to push through infrastructure projects that would answer campaign calls to promote job creation.

Bureaucratic inertia

From a 30,000 foot view, these policy, agency, and department changes will be immediately less drastic than most would expect. Even the most aggressive climate hawk touting the Clean Power Plan under the Obama administration acknowledges the procedural time consumption involved in proposing and promulgating a new rule. It has taken several years to move from policy proposal to rule finalization to the legal challenges that have resulted in a stay of one of this administration’s top energy objectives, with resolution likely not coming for possibly another year or two. Any Trump administration attempt to move against current objectives, despite personnel changes at some levels, will also possibly hit resistance from other agency employees, and will certainly incur the wrath of activists and organizations and corporations seeking the same objectives and heavily invested in rules like Clean Power Plan.

For example, it is doubtful that efforts to promote renewables in the Department of Energy or Defense will suddenly shut down overnight. A Clinton administration would not see oil and gas lobbyists disappear, and neither would a Trump administration see solar and wind lobbyists, advocates, and supportive legislation disappear overnight. The wind production tax credit will not end until December 31, 2019 (unless other legislation is passed), and the credits will be given their full lifespan of 10 years to those units put into service. Strong advocacy ensured the previous extension, and with typically conservative rural areas where wind energy is possible and lease payments a lucrative attraction, getting Republican support, even under a GOP administration, to dispense with wind subsidies might be a tough sell. Look no further than the Rush Creek wind project in Colorado to see the collusion between utilities, agricultural interests, and Republican county officials and lobbyists who once opposed renewable subsidies now take a bite of cronyist government largesse in the name of job creation and rural redevelopment.

Energy in Colorado: a legislature divided

At the state level, Democrats, under Hickenlooper, still control the offices dealing with energy and environmental policy, while the legislature’s GOP Senate and Democratic House will possibly yield stalemate on several issues, like fracking.

One of the largest battles in the 2016 legislative session was over funding for Colorado Department of Public Health and Environment and a decision by the Hickenlooper administration to attempt to proceed with planning Clean Power Plan compliance for Colorado even as the rule was put under a SCOTUS stay. A budget battle ensued, and while the ultimate decision to remove more than $100,000 from CDPHE’s budget as a way of halting any continued coordination between the agency and the EPA for planning purposes on the rule made it clear that the CPP was dead letter while under judicial review, agency officials promised to do as much as possible to work on CPP objectives piecemeal, perhaps through other enabling legislation or rulemaking, so that they wouldn’t find themselves “too far behind.”

Of course, this says nothing of Hickenlooper’s possible use of an executive order. “The draft executive order directs Colorado’s state agencies to implement policies to achieve a minimum 25 percent reduction in carbon dioxide emissions from 2012 levels in 2025, and a 35 percent reduction in carbon dioxide emissions from 2012 levels in 2030,” wrote Andrew Restuccia of PoliticoPro in August. Whether or not enabling legislation would be required to actually enforce this executive order, or if it would conflict with current laws remains to be seen, as the draft remains a draft and has not been issued formally.

A divided legislature will likely result in many killed bills proposed by either side. In this case, personnel is directly responsible for policy as bills are sent to kill committees by the leadership in the House and Senate, respectively. Expect anti-fracking measures, some likely in the wake of the passing of Amendment 71, but also as a continuation of other bills in previous sessions, to be proposed in the House and killed in the GOP-controlled Senate. Likewise, Senate bills aimed at challenging renewable subsidies, offering ratepayer protections, increasing utility bill transparency or possibly even to address Hickenlooper’s proposed executive order on emissions reductions, will face a similar fate in the Democratic-led House.

Many expected the state Senate to flip to Democrats in an anticipated Clinton-driven progressive wave that would secure not only 9 Electoral Votes for the former Secretary of State but also bring coattails and eliminate the Republicans’ one seat majority, giving the Democrats control of the Governor’s office and both legislative chambers. Had that happened, the same question as in 2013 would have arisen–how moderate would Hickenlooper be in the face of likely onerous anti-energy and anti-fracking legislation from his own party, which has been at odds with him over these issue since he took office? Progressives have been disappointed by Hickenlooper’s pro-oil and gas stance, including the battle over state supremacy on O&G regulations, resulting in the May 2016 Colorado Supreme Court decision overruling local bans on fracking.

That question, however, will be tempered by the split legislature, which is unlikely to deliver any truly controversial energy bill to his desk in 2017. Bill topics will slowly emerge over the next few weeks heading into January, so it is unclear what issues precisely will be taken up by Republican and Democrat lawmakers. As usual, the Independence Institute will be monitoring and testifying on bills, and providing materials and public education on these issues throughout the session.

Needless to say, the rather bleak outlook for natural resource development, ratepayer protections, and subsidy reforms anticipated before November 8, with a projected Clinton victory at the federal level and a sweep of both legislative chambers at the state level, has moderated substantially.

Vigorous opposition

But personnel is policy too for anti-energy activists, donors, organizations, and government employees. As we’ve seen, even a progressive, pro-renewable, climate hawk administration like Obama’s was subject to extensive criticism and lawsuits as by eco-left activists who took agencies to court to enforce rulemaking (ozone rule) or harass duly diligent projects with federal approval (Colowyo Mine lawsuit). The same groups frequently expected a seat at the table along with utilities and state agencies, in negotiating closures of coal assets, like the one at Craig Station. A Clinton administration would ensure the closure remained settled, and it isn’t yet clear that the decision might be revisited under a Trump administration.

Either way, Coloradans should expect the deep-pocketed activist groups to ramp up those efforts while also launching attacks on any attempt by the Trump administration to reverse Obama-led initiatives at any level. Federal agency blockage of oil and gas leases in Colorado, signed just this week, could be revisited through legal challenges, even as Interior Secretary Sally Jewell said the decisions would likely “stick.”

The escalation of protests and efforts to subvert Keystone XL pipeline construction under the Obama administration to the current situation regarding the Dakota Access pipeline will likely continue and become even more prominent. Already, protests in solidarity with #NoDAPL activists in North Dakota have spread across the country and will grow should Trump’s officials push forward with that project, even under the proper channels and agency approval.

For energy as with so many other policy areas, pre-positioning during the administration transition period will turn into an off-to-the-races jockeying for attention as policy priority decisions are made. Will Trump make energy a top tier, first 100 days issue? Folks on both sides are betting that it will, given energy’s interplay with other critical issues the GOP candidate emphasized on his road to victory–job creation, economy, foreign relations (Paris climate agreement).

But the swamps of DC have drowned many previous hopes at regulatory reform. Only time will reveal whether Trump will roll back or even attempt the effort on key components of Obama’s energy agenda.

As we like to say here at II, stay tuned.