Select Committee Committee on Joint Select Committee on Job Creation and Economic Growth (01/16/2009)

Final
STAFF SUMMARY OF MEETING

COMMITTEE ON JOINT SELECT COMMITTEE ON JOB CREATION AND ECONOMIC GROWTH

Date:	01/16/2009	ATTENDANCE

Time:	11:11 AM to 02:47 PM	Balmer	X
		Heath	X
Place:	SCR 356	Liston	X
		McFadyen	*
This Meeting was called to order by		Mitchell	X
	Senator Schwartz	Scheffel	X
		Solano	X
This Report was prepared by		Veiga	*
	Elizabeth Hanson	Rice	X
		Schwartz	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Committee Discussion on Legislation Presentation by the Department of Natural Resources Presentation by the Governor's Energy Office Presentation by the Colorado Council of the Arts		Witness Testimony and/or Committee Discussion Only Witness Testimony and/or Committee Discussion Only Witness Testimony and/or Committee Discussion Only Witness Testimony and/or Committee Discussion Only

11:12 AM

The meeting was called to order. A quorum was present.

Senator Schwartz opened the meeting by recognizing the members of the Business Advisory Board. She also recognized Jan McCoy, a volunteer who has been assisting her.

11:12 AM -- Committee Discussion on Legislation

The committee began discussion on the list of proposed committee bills (Attachment A) and whether to recommend these bills to the General Assembly. Senator Schwartz and Representative Rice stated that the committee would discuss each bill, ask if any members had an objection, and approve each bill to be included on the list. A packet that included six introduced bills was distributed to the committee (Attachment B).

The following persons testified:

11:29 AM -- Representative Joe Miklosi testified about a bill he plans to introduce. This bill proposes to create a loan program for individuals to invest in energy improvements in the residential sector. The objectives of the proposed legislation include increasing property values, providing job creation, and protecting the environment. He asked the committee to support his efforts.

11:34 AM -- Representative John Kefalas testified about his proposed bill, House Bill 09-1105, which was not included on Attachment A. The bill would provide an investment tax credit to encourage new businesses. He urged the committee to support his proposal.

11:36 AM

The committee continued to discuss the list of bills included on Attachment A. Members raised questions about including number 19, proposed legislation by Senator Schwartz to expand the tax exemption for wind energy to other industries. After discussion and with no objections, the bill remained on the list.

After discussion, number 27, proposed legislation by Senator Schwartz to create a loan program for Fast Track, was eliminated from the list.

In final deliberations, items 1 through 26 and item 28 remained on the list of bills to be further considered by the committee. House Bill 09-1105 was also added to the final list.

11:47 AM -- Department of Natural Resources

Mr. Harris Sherman, Colorado Department of Natural Resources, gave a power-point presentation (Attachment C) about the new oil and gas regulations. He explained that the rulemaking is being done to implement legislative changes passed in the 2007 session in HB 1298 and HB 1391. These bills directed the Colorado Oil and Gas Conservation Commission (COGCC) to consult with both the Colorado Department of Public Health and the Environment and the Colorado Division of Wildlife. He further said that the regulations were approved by COGCC.

Mr. Sherman stated that the new rules are important to the future of Colorado's economy and discussed the permitting process in Colorado. He said Department has issued a record number of permits, over 8,000 in 2008, which amounts to 30 permits per day. According to Mr. Sherman, this is more permits than any of the states in the Rocky Mountain region. He also stated that New Mexico has a larger staff but issued only a quarter of the permits that the Colorado Department of Natural Resources issued during that same period.

Mr. Sherman said the current rules comply with the legislative intent of HB 1341 and HB 1298.

11:50 AM

Mr. Sherman stated that the recent oil and gas rules are one of the most extensive and transparent rulemaking activities in state history, with more than eighty hours of deliberation and unanimous approval by COGCC. He stated that the rules had substantial input from oil and gas companies, local governments, property owners, conservation and wildlife groups.

Committee discussion ensued about whether the decline in natural gas activity was because of the Department rules. Mr. Sherman said he does not agree that the decline in natural gas activity is a result of the rulemaking, and believes it is market forces driving the decline, specifically four main factors. According to Mr. Sherman, these factors include: the reduced price of natural gas, the credit crunch, competition in the market, and regional pipeline constraints. He also stated that as the price has fallen, the rig counts have also declined.

12:11 PM

Mr. Sherman responded to questions from the committee regarding several issues, including market factors and the impacts of the rules on drinking water, the environment and the public.

12:19 PM

Committee discussion ensured round the authority of other agencies in issuing a final permit. Mr. Sherman stated it is important for all legislators to review the regulations carefully and stressed that only the Department has the authority to issue a permit. The only role of the agencies is to make a recommendation. Mr. Sherman also stated it is rare that a petition for a hearing is filed to the COGCC

Mr. Sherman also stated that new pipelines will likely need to be built in the next two years.

12:30 PM

Mr. David Neslin, COGCC, continued the presentation before the committee. Mr Neslin said that COGCC adopted many industry proposals verbatim in the final rules, including rule 25 about chemical inventory and rule 1203 regarding wildlife operating requirements. In addition, he stated that COGCC will issue permits under the old rules until May 2010. The permits will be good for one calendar year, and operators can use these permits to drill under the old rules until the end of April 2010. In addition, companies can obtain multi-year planning certainty with approved Comprehensive Drilling Plans (CDPs). He stated the CDPs are voluntary and not mandatory.

12:41 PM

Mr. Neslin continued his testimony, stating that permit applications need to be examined closely because drilling is an industrial activity. In 2008, 3,500 new wells were drilled in Colorado, according to Mr. Neslin. He further stated the rules ensure the permitting process is timely and efficient.

12:48 PM

Mr. David Neslin responded to questions from the committee that were raised about multiple environmental issues, including groundwater contamination, the impacts of the rules on wildlife, restricted surface occupancy, and endangered species, among others.

01:04 PM

Senator Schwartz thanked the presenters and recognized the members of COGCC. The committee continued its discussion of the regulations and the potential impacts of the rules on the oil and gas industry, specifically with respect to drilling, pipelines, and the creation of new jobs in Colorado.

01:20 PM

Committee discussion ensured regarding whether to delay the rules and regulations for a year. Mr. Sherman said he believes it would be a mistake to delay the regulations because the proposed rules strike the right balance, and will help Colorado's economy.

01:23 PM -- Presentation by the Governor's Energy Office

Mr. Morey Wolfson, Governor's Energy Office (GEO), distributed several handouts from the Governor's Energy Office, including a presentation about energy efficiency, renewable energy and transmission issues (Attachment D), a document entitled "Key Transmission-Related Developments in Colorado Since 2006" (Attachment E), a document entitled "Renewable Energy Development Infrastructure (REDI)" (Attachment F), and a handout with recent newspaper articles and related information about the natural gas industry (Attachment G). He also distributed a publication entitled "Renewable Resources To The Markets" (Attachment H).

(the full version of Attachment H can be viewed at Archives)

Mr. Wolfson began his presentation on the benefits of renewable energy. Mr. Wolfson discussed the role of the office in the statewide effort to promote clean energy projects, saying Colorado has tremendous renewable resource potential. Mr. Wolfson noted that there are many challenges and market factors that play a role in terms of bringing more projects such as high voltage transmission lines to Colorado. He closed by pointing out that statutory changes are needed to allow the office to bond certain renewable energy projects.

01:30 PM

Mr. Tom Plant, GEO, began by giving the committee an overview of the GEO and commented on the office's ability to bond energy projects. In response, Senator Schwartz asked that the GEO come back with some recommendations for the state to create jobs in the renewable energy sector. Mr. Plant responded by discussing the release of a green jobs study and its findings. He stated that the breadth of jobs tied to the new energy economy is extensive especially in the San Luis Valley. Mr. Plant said that overall, the GEO focuses its attention on energy savings projects tied to buildings in order to reap savings and create jobs.

Mr. Plant noted that money invested in energy efficiency upgrades promote the greatest amount of economic activity in terms of jobs. These energy companies have not been affected by the credit crunch and energy is one sector of the economy that investors are willing to fund because these projects have less financial risk.

Mr. Plant discussed the market's trend toward high efficiency buildings and discussed state funding for the GEO. He noted that the revenue estimate for December 2008 is showing that the gaming forecast has declined, which may make less money available for the office in FY 2009-10. Mr. Plant turned the discussion to clean energy delivery systems (transmission projects) and discussed the potential for development in the western United States. He said the GEO must first define and analyze existing approaches to finance transmission projects, and is investigating the viability of new opportunities, including cost sharing and the potential role of refinancing projects. Mr. Plant closed the discussion by talking about the jobs tied to renewable energy. He mentioned the new Vestas Power Plant Project in Pueblo and other companies that bring such jobs to Colorado. These are generally high-paying jobs that add to the state's tax base.

Mr. Morey Wolfson, GEO, concluded the GEO's presentation by commenting on the federal grants that are transferred to the GEO. At the conclusion of the presentation, the committee engaged in a brief discussion on the recent construction of the Grand Junction cellulostic ethanol plant.

02:02 PM

Mr. Lee White, Colorado Clean Energy Development Authority (CEDA), began discussing two issues tied to transmission-related needs in the state. First, he expressed a need for legislation that would facilitate funding for new transmission lines or the upgrading of existing lines in rural Colorado. Currently, there is a statutory restriction that prohibits CEDA from issuing loans for transmission projects. Second, he said that CEDA needs to be able to engage in some fossil fuel production to offset the total energy needs of the state. He closed by saying that state law must be changed to allow fossil fuel energy to be part of CEDA's total energy mix.

02:09 PM

The committee engaged in a discussion about the statutory changes needed to allow the GEO to bond energy projects. Senator Schwartz asked the Office of Legislative Legal Services to research the changes needed to allow the GEO to bond certain energy projects.

02:12 PM

Mr. Gregory Johnson, Patton Boggs LLP, noted that he worked on the CEDA staff and commented on the need for legislation to allow it to bond certain types of clean energy projects. He closed by saying that certain clean energy projects have to be deemed important by CEDA to be eligible for funding.

02:15 PM -- Presentation by Colorado Council of the Arts

Ms. Elaine Mariner, Colorado Council on the Arts, began by handing out two publications: Arts & and the Economy(Attachment I), and A 2008 Study of Arts and Education in Colorado Public Schools(Attachment J). Ms. Mariner discussed the various jobs in Colorado that are tied to the arts sector. She stated that a company's decision about where to locate its business is often influenced by factors such as the availability of a creative workforce and the quality of life. She noted that companies that choose to move to Colorado and offer jobs tied to the arts have added 186,000 jobs to Colorado's workforce in past years. Overall, jobs tied to the arts make up 3.9 percent of the state's jobs, which is the fifth largest industry in the state. Ms. Mariner noted that total earnings amount to about $5 billion per year.

(the full version of Attachment J can be viewed at Archives)

The committee discussion continued on the number of jobs tied to the arts industry in Colorado. Ms. Mariner responded to the discussion by commenting on the number of artists that have moved from other Western states to Colorado. She noted that Colorado has a lot of incentives to offer this working community and the industry promotes itself. Ms. Mariner suggested growing jobs at the state level by creating a Governor's task force that looks at creating new jobs through the arts community.

Ms. Mariner closed the discussion by talking about the pending film incentives bill (HB 09-1010) and highlighted the need for the state to promote film-making in Colorado. The committee closed by discussing the companies that have relocated to Colorado and are tied to the arts community. The committee agreed that the industry is important to Colorado.

02:47 PM

The committee adjourned.