“From the outside, it looks like a closed-door, back-room effort, similar to the Clean Air–Clean Jobs Act,” one attorney says
A major deal, struck in secret, that would levy a fee on the oil and gas industry to fund Democratic spending priorities came as a complete surprise to many in the industry.
The last-minute agreement — which the governor’s office said was hammered out over “hundreds of hours” in conversations among “adversarial parties” at times — has since been introduced as Senate Bill 24-240 in the waning days of this year’s legislative session.
As of Sunday, the bill has passed out of the state Senate.
An oil and gas industry insider, who talked to The Denver Gazette on the condition of anonymity to be able to speak freely, said many “weren’t privy to the conversations held between the environmental groups, Chevron, Oxy, Civitas, and the governor’s office regarding this deal.”
“We were also caught off guard by the press availability yesterday afternoon at 4 p.m., as were others,” the source said, referring to the press conference last Monday, when Polis and others announced the deal.
Some critics said not having open public meetings is a bad way to do the public’s business and that “back room” efforts, such as the one that resulted in the agreement, have happened in Colorado before.
“From the outside, it looks like a closed-door, back-room effort, similar to the Clean Air–Clean Jobs Act, and it’s not a good way to make significant public policy decisions,” said Paul Seby of the Greenberg Trauig law firm. “It should be something that’s handled transparently and fairly and not with quid pro quo trading of interest.”
The deal would result in the withdrawal of several ballot measures proposed for the November general election by the oil and gas industry, as well as by environmental groups, Gov. Jared Polis and Democratic leaders earlier said. The Democrats did not immediately identify the ballot measures or similar legislation already working its way through the process that would be withdrawn.
The agreement delves into air quality, ozone mitigation and emissions, and a fee on the oil and gas industry to fund Democratic priorities on rail, housing, wildlife habitat conservation and acquiring private lands for public use.
In a news release, the governor’s office said the parties have “agreed that new costly, divisive legislation or ballot measures that impact the operations of industry, new regulatory changes for oil and gas, or ozone regulations is not in the best interest of the state.”
The governor added this is what it means to “lead the state” — pulling together people with “different viewpoints to work together and forge the best path forward for Colorado.”
“This important agreement does just that by taking important steps to improve air quality, transition away from emissions-causing transportation systems, and protect our lands, while also pulling down opposing ballot initiatives,” he said.
Seby, the attorney, told The Denver Gazette that the fees to be assessed on oil and gas production would disproportionately affect smaller producers not included in the negotiations.
“That’s not consistent with a market economy or a business environment — allowing some parties to go to the back room and cut deals,” Seby said.
Seby characterized that process as akin to what he described as the back-door dealing in passing the “Clean Air–Clean Jobs Act of 2010,” which incentivized converting coal power plants to natural gas and which then-Gov. Bill Ritter signed.
“We certainly saw that sort of behavior and conduct with the Clean Air–Clean Jobs Act — meeting in the basement of hospitals, special interests, and select meetings,” Seby said. “That era was rife with actions that were inconsistent with the Sunshine Act and the Open Meetings Law.”
Seby said that law was enacted under the presumption that the U.S. Environmental Protection Agency’s “Clean Power Plan,” which sought to reduce carbon emissions from power plants and move way from coal-fired energy production, would be enacted, thereby justifying Colorado’s action.
That regulation, issued during the Obama Administration in 2015, was ultimately overturned by the U.S. Supreme Court in 2022. The court said Congress did not grant the EPA the authority to “devise emissions caps based on the generation shifting approach” it took in the Clean Power Plan.
In the interim, Seby said, Colorado prematurely closed coal fired power plants.
“Colorado based an entire energy policy on an unlawful federal rule,” Seby said. “And now consumers are seeing massive increases in electric power bills because we miss stable low cost, clean coal-fired power plants.”
Last week, Democratic leaders of the House and Senate hailed the agreement, saying it would “create more permitting and enforcement authority for the state to reduce emissions, improve air quality, and reduce pollution in Colorado communities.”
“It will also generate significant new funding for transit and rail, as well as land and wildlife habitat conservation and restoration, from modest fees placed on oil and gas production in Colorado,” they said.
The estimated cost to be levied against oil and gas producers to pay for transit, housing and public lands is believed to be about $140 million.
In addition to policymakers, the parties to deal included Conservation Colorado, Southwest Energy Efficiency Project, Green Latinos, CoPIRG, Earthworks, Western Resource Advocates, Healthy Air and Water Colorado, and three major oil and gas operators — Occidental, Civitas, and Chevron.
Some industry representatives backed the deal believing it would bring some stability to the industry, which, they said, has been inundated with dozens of new laws and regulations in the last few years.
“We have said for years that providing regulatory and legislative certainty for business owners and operators across the state and ensuring stability for a vital industry is of utmost importance. We are pleased to see that the governor agrees,” Kait Schwartz, director of American Petroleum Institute Colorado, said in a statement.
“The regulatory landscape for our industry has been completely overhauled during the last five years and it is crucial that those regulations, some of which have only just recently been implemented, be given the chance to work,” she added.
“We’re encouraged by the proposed legislation’s fresh approach,” added Jennifer Brice, media relations for Occidental. “If these bills pass without amendments, we anticipate a period of stability, ending the legislative and ballot initiative conflicts in Colorado.”
Civitas offered no comment.
Earthjustice, one of the participants, declined to answer questions about the details of the negotiations, including the number of meetings held and whether there was agreement from any of Colorado’s other oil and gas operators to its terms.
“Unfortunately, we are going to have to pass on this one,” said Perry Wheeler, public affairs and communications strategist with Earthjustice. “These questions are best directed to the governor’s team as they were the ones who brought stakeholders together from all sides, including us.”Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found here.
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Inflated shipping costs are enabling Russian companies to earn far more from crude oil sales to India than previously recognised, according to a Financial Times analysis which suggests that the charges may have raised more than $1bn in a single quarter. Russia has, until recently, appeared to comply on this route with western measures designed to curb its revenues which were introduced after its full-scale invasion of Ukraine last year. Its oil producers have been selling crude to India for below the $60-per-barrel price cap. But when freight costs are included, they and the traders with whom they work have charged much higher sums. An FT analysis of ships running directly from Russia’s Baltic ports to India suggests that this overcharging, combined with fees earned from shipping the oil on Russia-linked vessels, may have been worth $1.2bn in the three months to July. Benjamin Hilgenstock, an academic at the Kyiv School of Economics, which has been studying evasion of the price cap, said: “Inflated shipping costs are a major concern as they effectively create a leak in the price cap regime through which someone, somewhere can siphon off billions of dollars.” James Cleverly, the UK’s foreign secretary, said: “It comes as no surprise that Putin is becoming increasingly desperate and dishonest in his attempts to mitigate the price cap’s impact — something that has been severely restricting Russian revenues since its introduction. Those aiding Russia’s attempts to fund this illegal war should know, the UK will continue to act alongside our partners to enforce this measure.” The price cap imposed by the G7 is intended to keep Russian oil flowing while squeezing revenues that could be used to fund the war. But the cap — which places requirements on buyers, shipowners and insurers from participating countries — does not impose any limit on freight costs.Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found here.
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The excess charges are therefore likely to have been captured by the sellers of the oil. According to Kpler, the data analytics company, the oil producers Lukoil and Rosneft have made direct sales to Indian refineries. In other cases, the sale is managed by trading companies that have emerged in the past year with close links to several Russian oil companies. Kpler estimates that Russia shipped 108mn barrels from the Baltic to India from May to July in 134 vessels, a time when the spread between Argus prices averaged $17 per barrel, after taking account of the lag between departure and delivery. At that time, Argus estimates that commercial shipping rates averaged $9 per barrel, suggesting that the overcharging may be worth around $800mn. Hilgenstock said: “If Russian oil companies and traders agree to these kind of contractual conditions, we have to assume that a portion of the spread is being captured by Russia — whether or not Russia owns the tankers moving the oil.” Russia does have a hand in the tanker fleet. Of the 134 vessels identified by Kpler as moving Russian oil to India from May to July, the FT has been able to directly link 23 of them to Russian entities via insurance, ownership or management documentation. Most of these are run by Sun Ship Management, which has been placed under sanctions by the UK and EU for being connected to Sovcomflot, the giant Russian state tanker fleet. The FT has identified a further 26 “ghost” vessels which were bought by their current owners since the start of the war. Their owners are secret, hidden via shell companies largely in the Marshall Islands and Liberia, but all have dramatically diverted on to the Russian oil routes since being bought — and some have previously been linked to Russia. In the three months to July, around 40 per cent of the oil shipped from the Baltic was carried by the Russia-connected fleet. The freight cost estimates calculated by Argus imply that this fleet may have earned more than $350mn in revenue on the route over the quarter. Adding the $800mn by which fees were inflated, this means that Russian entities may have covertly made a billion dollars more in revenue over that period than previously recognised. India now accounts for around a quarter of Russia’s crude and refined oil exports. Russia’s global oil exports amounted to $39bn in total over these three months, according to the International Energy Agency. Keeping the price in its Baltic ports below the price cap had allowed Russia to also use ships with western insurance. More than half of the vessels on the route during that quarter were G7-insured, with 46 of them run by Greek ship managers.