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July 8, 2024 SB 24-229
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Final Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 24-1188
Sen. Winter F.; Priola
Rep. Bacon; Willford
Date:
Bill Status:
Fiscal Analyst:
July 8, 2024
Signed into Law
Matt Bishop | 303-866-4796
matt.bishop@coleg.gov
Bill Topic: OZONE MITIGATION MEASURES
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☒ Local Government
☐ Statutory Public Entity
The bill modifies regulations and enforcement criteria regarding ozone precursor
emissions. It increases state revenue and expenditures beginning in FY 2024-25.
Appropriation
Summary:
For FY 2024-25, the bill requires and includes appropriations of $932,284 to multiple
state agencies.
Fiscal Note
Status:
The final fiscal note reflects the enacted bill.
Table 1
State Fiscal Impacts Under SB 24-229
Budget Year
FY 2024-25
Out Year
FY 2025-26
Revenue Stationary Sources Control Fund - $697,237
Total Revenue - $697,237
Expenditures General Fund $753,157 -
Cash Funds $179,127 $820,245
Centrally Appropriated $98,479 $92,353
Total Expenditures $1,030,763 $912,598
Total FTE 5.8 FTE 5.5 FTE
Transfers - -
Other Budget Impacts TABOR Refund - $697,237
General Fund Reserve $112,974 -
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July 8, 2024 SB 24-229
Summary of Legislation
The bill limits pollutant emissions from oil and gas operations, modifies how the Department of
Public Health and Environment (CDPHE) and the Energy and Carbon Management Commission
(ECMC) in the Department of Natural Resources (DNR) enforce air quality requirements, requires
CDPHE to publish additional enforcement reports, establishes community liaisons in the ECMC,
and allows for the plugging of marginal oil and gas wells.
Limiting nitrogen oxide and ozone precursor emissions. CDPHE must adopt rules by
August 31, 2026 to reduce nitrogen oxide emissions from upstream oil and gas operations
between May 1 and September 30 in the ozone nonattainment area by 50 percent from a 2017
baseline to 2030. The ECMC in the DNR must require oil and gas operators to take actions to
limit emissions. Also, oil and gas operators must obtain a license to operate from the ECMC, in
addition to the current license required for drilling operations. In addition, CDPHE may adopt
stricter standards for nitrogen oxide emissions in disproportionately impacted communities.
Enforcement of air quality regulations. When issuing an enforcement order for a violation of
permitted emissions, CDPHE may include a requirement to perform projects that reduce the
potential for future violations, and the state or local governments may file for an injunction
against a violator to reduce the potential for future violations. Current law prohibits temporary
restraining orders or preliminary injunctions that would harm the violator; the bill repeals this
restriction. The bill increases the maximum civil penalty for certain violations from $500 per day
per violation to $1,000 per day per violation.
In addition, the bill expands:
CDPHE’s authority to impose civil penalties to include toxic air contaminant emissions,
fenceline monitoring, community-based monitoring, and petroleum refinery emissions
monitoring;
the factors that CDPHE must consider when assessing the amount of a civil penalty, and
limits the factors that it must consider for reducing the amount of a civil penalty;
the factors on which the ECMC may issue a cease-and-desist order to an oil and gas
operator, including impacts to public health, safety, welfare, the environment, or wildlife; and
the circumstances under which the ECMC must order an operator to appear for a hearing.
Enforcement reporting. CDPHE must publish annual reports summarizing its enforcement
actions taken, penalty decisions, and violations resolved, starting with a multi-year baseline
report in 2024, and one-year reports beginning in 2025. CDPHE must also establish an email
notification system to alert interested parties of violations and settlements.
Community liaisons. The bill requires the ECMC to hire at least two community liaisons to
disproportionately impacted communities. The liaisons serve as advocates for disproportionately
impacted communities, work to improve relationships with the ECMC, conduct outreach, and
organize events. Page 3
July 8, 2024 SB 24-229
Marginal wells. The Orphaned Wells Mitigation Enterprise, created by Senate Bill 22-198, funds
the plugging, reclaiming, and remediating of orphaned oil and gas wells. The bill authorizes it to
do the same for marginal wells, which are oil and gas wells at risk of becoming orphaned.
State Revenue
The bill increases cash fund revenue from fees to the Stationary Sources Control Fund beginning
in FY 2025-26 by around $700,000 per year. It may also increase revenue from civil penalties. In
addition, the bill may increase cash fund revenue to the Orphaned Wells Mitigation Enterprise
Cash Fund.
Permit fees for oil and gas operators. The bill increases state cash fund revenue from fees by
up to $700,000 in FY 2025-26. Out-year expenditures in subsequent years may also require
adjustments to fees depending on the level of expenditures and fund source balance. Permit
applicants and operators pay fees depending on the type of permit sought, the amount of
emissions allowed, and the time required for CDPHE to process the permit. This fee revenue
accrues to the Stationary Sources Control Fund. The fiscal note assumes that CDPHE will adjust
its fees as necessary in FY 2024-25 to generate revenue that covers its costs beginning in
FY 2025-26. This revenue is subject to TABOR. If CDPHE cannot generate sufficient revenue,
additional General Fund may be required in future years, which will be addressed through the
annual budget process. While the fiscal note estimates the total amount of revenue, given the
multitude of different fees charged by the CDPHE for permits, the impact on individual permit
types cannot be estimated.
Civil penalties. By increasing the maximum penalty that CDPHE may levy, the bill may increase
revenue from civil penalties, which is subject to TABOR. For FY 2024-25, 20 percent of this
revenue is credited to the General Fund; the remainder, and all penalty revenue beginning in
FY 2025-26 is credited to the Community Impact Cash Fund. As this revenue depends on
violations of state regulation and case-by-case decisions by the department, it cannot be
estimated.
Orphaned well fees. The Orphaned Well Mitigation Enterprise charges fees for orphaned wells
that it covers. Depending on actions taken by the enterprise board, the bill may increase the
number of wells it covers by including marginal wells. If its expenditures increase, it may increase
the orphaned well fee. Fees are set administratively by the board and are updated annually.
State Expenditures
The bill increases state expenditures in CDPHE by about $820,000 in FY 2024-25, paid from the
General Fund, and by $700,000 in FY 2025-26, paid from the Stationary Sources Control Fund. It
also increases expenditures in DNR by about $215,000 per year beginning in FY 2024-25, paid
from the Energy and Carbon Management Cash Fund. Expenditures are shown in Table 2 and
detailed below.
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July 8, 2024 SB 24-229
Table 2
Expenditures Under SB 24-229
FY 2024-25 FY 2025-26
Department of Public Health and Environment
Personal Services $312,865 $284,423
Operating Expenses $4,224 $3,840
Capital Outlay Costs $33,350 -
Photochemical Studies $165,000 $110,000
Data System Upgrades $122,500 $122,500
Legal Services $115,218 $115,218
Centrally Appropriated Costs
1
$67,382 $61,256
FTE – Personal Services 3.3 FTE 3.0 FTE
FTE – Legal Services 0.5 FTE 0.5 FTE
CDPHE Subtotal $820,539 $697,237
Department of Natural Resources
Personal Services $153,988 $153,988
Operating Expenses $2,560 $2,560
Capital Outlay Costs $13,340 -
Vehicle Costs $9,239 $27,716
Centrally Appropriated Costs
1
$31,097 $31,097
FTE – Personal Services 2.0 FTE 2.0 FTE
DNR Subtotal $210,224 $215,361
Total $1,030,763 $912,598
Total FTE 5.8 FTE 5.5 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Public Health and Environment. Expenditures increase in the department to
create the annual report, collect and share data with the ECMC, update rules, and update
enforcement practices.
Staffing. CDPHE requires 3.0 FTE to conduct additional permit emissions modeling to
ensure a lower nitrogen oxide emissions threshold in disproportionately impacted
communities. This ongoing expenditure is prorated for a September 1 start date in
FY 2024-25. Identifying best management practices for oil and gas operators, updating rules,
and preparing the initial, four-year report on enforcement actions requires 0.8 FTE in
FY 2024-25 only. Workload increases in future years to publish annual enforcement reports,
notify interested parties of enforcement actions, and to coordinate with the ECMC regarding Page 5
July 8, 2024 SB 24-229
ozone season emissions. This ongoing work can be accomplished within existing
appropriations.
Rulemaking. In order to prepare and evaluate strategies to inform its rulemaking
proceedings in 2026, CDPHE must update its ONGAEIR data system and acquire contracted
photochemical analyses. The total cost for these items is shown in Table 2; the department
requires roll-forward spending authority through FY 2026-27 to complete the activities
before the final rules are proposed.
Legal services. CDPHE requires 900 hours of legal services per year beginning in
FY 2024-25, provided by the Department of Law, to support its reporting requirements,
support rulemaking, and provide general counsel. Legal services are provided by the
Department of Law at a rate of $128.02 per hour.
Enforcement. By expanding CDPHE’s enforcement authority, expenditures may increase to
take additional enforcement actions. Any change from current practice will depend on
regulatory decisions made by the department, and any increase in expenditures will be
addressed through the annual budget process.
Department of Natural Resources. Expenditures in DNR increase to liaise with
disproportionately impacted communities, to issue to licenses for oil and gas operations, and to
remediate marginal wells.
Staff. Beginning in FY 2024-25, the ECMC requires 2.0 FTE liaisons to interface with
disproportionately impacted communities, as specified in the bill. Additional costs include
leased vehicles and related operating expenses, which are prorated in the first year.
Licensing. The ECMC will convert existing regulatory processes to include licenses, which will
be awarded to oil and gas operators for no fee. This can be accomplished within existing
appropriations.
Enterprise. The bill increases expenditures in the Orphaned Well Mitigation Enterprise, the
extent of which depends on decisions taken by the enterprise’s board. Expenditures are paid
from a continuously appropriated cash fund.
Colorado Energy Office. Workload may increase to intervene in rulemaking proceedings at
CDPHE and the ECMC. This is expected be minimal in FY 2024-25. If additional resources are
required in future years, they will be addressed through the annual budget process.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs
associated with this bill are addressed through the annual budget process and centrally
appropriated in the Long Bill or supplemental appropriations bills, rather than in this bill. These
costs, which include employee insurance and supplemental employee retirement payments, are
shown in Table 2.
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July 8, 2024 SB 24-229
Other Budget Impacts
TABOR refunds. The bill is expected to increase the amount of state revenue required to be
refunded to taxpayers by the amounts shown in the State Revenue section above. This estimate
assumes the March 2024 LCS revenue forecast. A forecast of state revenue subject to TABOR is
not available beyond FY 2025-26. Because TABOR refunds are paid from the General Fund,
increased cash fund revenue will reduce the amount of General Fund available to spend or save.
General Fund reserve. Under current law, an amount equal to 15 percent of General Fund
appropriations must be set aside in the General Fund statutory reserve. Based on this fiscal note,
the bill is expected to increase the amount of General Fund held in reserve by the amounts
shown in Table 1, decreasing the amount of General Fund available for other purposes.
Local Government
The bill may increase workload for district attorneys to address additional enforcement
proceedings. The fiscal note assumes that most of these actions will fall on the Attorney
General’s office and any impact on district attorneys will be minimal.
Effective Date
This bill was signed into law by the Governor and took effect on May 16, 2024, except that
Section 6 took effect when House Bill 24-1338 was enacted on May 28, 2024, and Section 5 does
not takes effect.
State Appropriations
For FY 2024-25, the bill requires and includes a General Fund appropriation of $753,157 to the
Department of Public Health and Environment, and 3.3 FTE. Of this, $115,218 is reappropriated
to the Department of Law, with an additional 0.5 FTE.
For FY 2024-25, the bill requires an appropriation of $179,127 from the Carbon and Energy
Management Cash Fund to the Department of Natural Resources, and 2.0 FTE.
State and Local Government Contacts
District Attorneys Judicial Law
Natural Resources Public Health and Environment
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit the General Assembly website.