On a brilliant spring day on the steps of the Capitol building in Denver, an unlikely coalition of stakeholders gathered to watch Gov. Bill Ritter sign into law the historic Colorado Clean Air-Clean Jobs Act (HR-1365). The landmark legislation—the most comprehensive passed by any state to date—creates a blueprint for the state's economic and environmental future.
Natural gas producers stand to benefit.
The federal Clean Air Act requires the state to submit a plan to address regional haze by early next year, or else the Environmental Protection Agency will write its own plan for Colorado. The goal is to restore vistas in wilderness areas and national parks to natural levels. With this law, Colorado stakeholders have leapfrogged those standards, and on their own terms. And they have provided a template for other states.
Under the new law, Minneapolis-based Xcel Energy Inc., the state's largest utility, is required to significantly reduce pollutants like nitrogen oxide over the next seven years by up to 80% at aging power plants. Some 900 megawatts—energy capable of powering 675,000 homes on an average day—must be retired or retrofitted. The utility must give first consideration to natural gas to achieve those goals.
To solve the volatility of natural gas prices, Xcel will be able to negotiate long-term contracts for natural gas, and customers will have to pay that price even if gas prices fall beneath it.
The effort was co-sponsored by Republican Senate Minority Leader Sen. John Penry—no friend of the governor in past legislative battles—and received the support of most Democrats in both chambers.
Fewer than a handful of Republicans joined in.
Among the varied stakeholders working to achieve passage of the legislation were Xcel Energy and other power producers, members of the oil and gas industry, the Colorado Oil and Gas Association, and environmental groups.
"This law is a template for tomorrow that allows us to transform our energy portfolio, our economy and our environment by working strategically and collaboratively," said the governor, widely credited for his role in the legislation's crafting and passage.
"By shifting our oldest and least-efficient coal plants to cleaner, Colorado-produced natural gas, we send a strong message to the rest of the country that we can cut air pollution and protect public health while also creating jobs and protecting taxpayers."
The group was celebratory at the signing event, with plenty of puns riffing on the clarity of Colorado's air—from suggestions that citizens could now "breathe easier," to characterizations of the collaborative new legislation as a "breath of fresh air."
Among leading oil and gas producers in the state who worked to design the legislation were Anadarko Petroleum Corp., Encana Corp. and Noble Energy Inc.
Said Jim Kleckner, vice president of Rocky Mountain operations for Anadarko in an interview with Oil and Gas Investor after the signing ceremony, "With cooperative effort among the stakeholder groups, we were able to build a balanced approach to address air-quality issues along the Front Range.
"This is a model to increase (natural gas drilling) activity in the Rockies. In Colorado, the expectation is for about a 10% increase in drilling, creating up to 400 new jobs in gas production and development."
Assuming all the coal retirements occur that are considered in the legislation, approximately 160 million cubic feet per day of additional natural gas use could result, according to Scott Moore, vice president of natural gas marketing for Anadarko. Xcel will work with the Colorado Department of Public Health and Environment to submit a plan to the PUC by August 15, detailing how it will retire or retrofit capacity.
Key to the legislation is its approach to assessment, noted John Christiansen, Anadarko's manager of external communications. "It's a broad-based, long-run assessment of the whole emissions picture and costs, including total emissions of all fuel sources, and the costs of abating them on a long-term basis. These are complex issues."
Colorado's "new energy economy" features a 30% renewable energy standard and a new set of balanced drilling rules, the governor noted. That rulemaking sharply divided stakeholders during 18 months of contentious debate ending just over a year ago, making the team effort on HR-1365 even more unlikely—and impressive.
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