Colorado recently passed a new bill which is expected to be signed by Governor Polis. The bill makes significant changes to Colorado statute 8-2-113 regarding non-compete agreements. This bill has also added some additional limits on confidentiality agreements as well as non-solicitation agreements. It has provided new penalty and enforcement mechanisms. These changes are going to significantly affect Colorado law in this area.

As you know, Colorado statute provides that non-competes are void in Colorado unless the non-compete falls into one of the statutory exemptions. Those exemptions were non-compete agreements in connection with the sale or purchase of a business; non-competition agreements for the protection of trade secrets; contractual provisions governing recovery of training or education expenses for an employee who has stayed for less than two years and covenants relating to employees who are management or executive employees.

The new statute keeps the exemption for covenants in connection with the sale of a business, but eliminates the exemption for management and executive employees. It imposes a minimum salary threshold of $101,250.00 per year in 2022 or an annualized amount of that salary if the employee is employed for less than the full year. For employees who meet the highly compensated salary requirements, if the non-compete is for the protection of trade secrets and the covenant is no broader than reasonably necessary to protect the employer’s legitimate interest in protecting trade secrets, the covenant may be allowable.

The new bill allows a covenant not to solicit customers for employees who earn at least 60% of the highly compensated threshold amount. That non-solicitation covenant can be no broader than necessary to protect the employer’s legitimate interest in protecting trade secrets. Currently that means that employees who earn at least $60,750.00 annually can be subject to appropriately narrow non-solicitation agreements.

The bill does allow for the recovery of education and training expenses over the course of two years although it narrows the definition of training to exclude on the job training.

The bill adds confidentiality agreements to the statute. Previously Colorado did not limit the use of confidentiality agreements as long as it did not attempt to protect information that was in the public. The confidentiality agreement must not prohibit disclosure of information that arises from the worker’s general training, knowledge, skill or experience, whether gained on the job or otherwise, information that is readily ascertainable to the public or information that the worker has a right to disclose as legally protected conduct.

The bill also allows for recovery of scholarship provided to an individual working in an apprenticeship if the individual fails to comply with the conditions of the scholarship agreement.

The bill also states that even if otherwise acceptable, the covenant will be void if the employer does not provide notice of the terms of the non-compete to a prospective worker before the worker accepts the offer of employment or to a current worker at least fourteen days before the earlier of the effective date of the covenant or the effective date of any additional compensation or change in the terms and conditions of employment that provides consideration for the covenant.

The notice must be separate from any other covenants and in clear and conspicuous language. It must also be signed by the worker. There are additional requirements in the statute for how the notice must be given. It is important to note that the notice must contain language notifying the worker that the covenant may restrict their options for subsequent employment and specifically identifies there those restrictions are.

Non-competes for physicians are also void, although the statute continues to allow damages to be recovered related to competition.

This law applies to all workers who at the time of termination primarily resided or worked in Colorado. It prohibits employers from requiring the worker to adjudicate the enforceability of the covenant outside of Colorado.

Enforcement of this statute is also expanded. Any person who uses force, threats, or other means of intimidation to prevent a worker from engaging in any lawful occupation commits a misdemeanor under this statute. An employer can be liable for actual damages and a penalty of $5,000 dollars for a worker harmed by this conduct and get injunctive relief. The statute also provides that a worker or prospective worker can recover actual damages, reasonable costs, and attorney’s fees in any action under this section.

If an employer’s act or omission was in good faith and the employer had reasonable grounds for believing that the act or omission was not a violation of this section a court may elect to not award a penalty.

This statute is expected to be effective August 10, 2022 and will apply to all covenants not to compete entered into or renewed on or after the effective date of this statute.

Practice Pointers:

• Review all non-competition agreements to determine if they comply with this statute
• Review all non-solicitation agreements to determine if they comply with this statute
• Review all confidentiality agreements to determine if they contain the language reflected in the statute
• Before asking any prospective or current employees to sign a non-compete, consult with counsel.

Before seeking to enforce any non-compete, consult with counsel.

As this newsletter goes to print, the Colorado Public Utilities Commission will have just concluded a further evidentiary hearing in the matter of the Application of Public Service Company of Colorado for approval of its 2021 electric resource plan and clean energy plan in proceeding No. 21A-0141E. The Application was filed on March 31, 2021, and is Colorado’s first clean energy plan proceeding under Senate Bill 19-236. The Senate Bill required Public Service to include in its next electric resource plan (i.e., its 2021 plan) a clean energy plan to reduce its carbon dioxide emissions associated with electricity sales by 80% (from 2005 levels) by 2030 and to seek to achieve providing customers with energy generated from 100% clean energy resources by 2050.

The clean energy plan was required to include a resource acquisition period extending through 2030 and to set forth a plan of actions and investments by Public Service projected to achieve compliance with the 80% requirement and 100% goal. If the clean energy plan included accelerated retirement of existing facilities, it also had to include a workforce transition plan and a community assistance plan to address the local jobs and property tax impacts of the plan.

The application included eight portfolios of wind, solar, and dispatchable generation resources that met or exceeded the 80% requirement but with different cost impacts. The term “dispatchable” means a resource that Public Service can ramp up and down to meet operating conditions (with quick start capability of 10 minutes or less and capability to be remotely started by Public Service at any time). The dispatchable resources that are expected to be acquired are natural gas-fired electric generating resources and battery storage.

The eight portfolios varied depending upon the actions Public Service took with regard to its Pawnee and Comanche 3 coal-fired power plants. The range of actions included converting to natural gas, early retirement in various years, or business as usual. All other existing Public Service coal-fired power plants are proposed for early retirement prior to 2030 to help achieve the greenhouse gas reduction requirement of the statute.

Public Service’s preferred portfolio was number 7, which involved converting the Pawnee power plant to natural gas in 2027 and retiring the Comanche 3 coal power plant early (in 2039) but reducing its operations to 30% starting in 2030. As a result of these actions and Public Service’s estimate of its resulting resource needs, the preferred plan proposed the following acquisitions during the resource acquisition period:

• 2,300 MW of wind
• 1,800 MW of large-scale solar
• 400 MW of battery storage
• 1,300 MW of flexible dispatchable generation (this is 100 MW less than Public Service has today)

All eight portfolios were based upon generic modeling results. Following the Commission’s final decision in the pending proceeding, there will be a Phase II all-source competitive solicitation which can change the type and amounts of additional resources that are added.

Following interventions, discovery, and several rounds of filing of testimony by the parties, the application was scheduled to proceed to hearing. But Public Service and the parties were also engaged in confidential settlement negotiations to see if they could settle some of the key issues that had been identified in the proceeding. On November 24, 2021, a Joint Motion was filed requesting approval of a Non-Unanimous Partial Settlement Agreement. The Agreement addressed major issues in the proceeding including moving up the retirement date for Comanche 3 by five years (to the end of 2034), providing for a just transitions plan to address the loss of jobs and tax impacts of the early retirement on the Pueblo community in which Comanche 3 is located, and numerous other issues. The Settlement Agreement was a modification to the Application (including Public Service’s preferred portfolio 7) as to the issues addressed in the Settlement Agreement. Oppositions to the Agreement were also filed.

An evidentiary hearing was held during the first two weeks of December and then the evidentiary record was closed. (Public comments have been filed throughout the proceeding and continued to be filed with the Commission.) The parties filed Statements of Position in January of this year and then the application was ready for Commission decision. The Commission held its first deliberations meeting on March 14, 2022, at which the Commissioners discussed but did not decide several of the major issues in the proceeding.

Following the initial meeting, the Settling and Non-Settling Parties convened discussions regarding potential resolution of key items in a manner response to the Commission discussions on March 14, 2022. The objective of these further discussions was to resolve items and avoid the potential for a protracted reconsideration, reargument, or rehearing process that could further delay the commencement of the Phase II competitive solicitation. Avoiding such delay is critical so that bidders can qualify for available tax credits for their projects. The result of these further discussions was the filing on April 26, 2022, of an Updated Non-Unanimous Partial Settlement Agreement. This Updated Settlement Agreement was the subject of the further evidentiary hearing, which was held on May 17, 2022.

The current proposal, as presented in the Updated Settlement Agreement, includes the following terms:

• Retirement date for the Comanche 3 coal plant. Moves the retirement date for Comanche 3 from no later than December 31, 2034, to no later than January 1, 2031. Provides for reduction targets in operation of Comanche 3 by increasing amounts through 2029.
• Pawnee coal plant. Provides for conversion of Pawnee to natural gas no later than January 1, 2026.
• Other coal plants. Provides for retirement of Hayden 2 in 2027, Hayden 1 in 2028, and Craig 2 in 2028.
• Just Transition Plan for Pueblo County – Location of Comanche 3. Proposes that:
• Public Service will continue to make payments to Pueblo County annually from 2031 through 2040 (and allocated by the treasurer’s office accordingly) in the amount of the projected lost property tax revenues for those years, unless offset by property tax revenues from generation or transmission infrastructure sited at Comanche Station or within Pueblo County.
• A separate Comanche 3 Just Transition Plan to be filed with the Commission no later than June 1, 2024. Through its Just Transition Plan filing for Comanche 3, the Company will conduct a standalone Just Transition Plan competitive solicitation for the replacement of the energy and capacity associated with Comanche 3. This process will occur on a standalone basis in an effort to ensure the Pueblo community and benefits to the community are the focus of the replacement portfolio, simultaneously seeking just transition benefits and the procurement of innovative technologies to help the Company progress towards a carbon-free future.
• Public Service will own, at a minimum, $690 million in capital investment or 500 MW of accredited capacity, whichever is triggered first, for resources necessary to replace the accredited capacity of Comanche 3, provided that a showing of resource need is made in the first phase of the Comanche 3 Just Transition Plan filing and any final approved plan in the second phase must be deemed a cost-effective resource plan consistent with Rule 3601 and Rule 3617 after a full consideration of the just transition and emissions reduction benefits of the plan.
• The Just Transition Plan solicitation will also utilize a utility ownership target of 50 percent for energy and capacity acquired that is in excess of the $690 million investment or 500 MW accredited capacity minimum, and provided that the final approved resource plan is cost-effective as set forth above.
• Provides for a process where generic resources will fill the Company’s Phase II resource needs in 2029 and 2030 while having the 2029 and 2030 resource needs filled through the Pueblo Just Transition Plan solicitation as opposed to this 2021 ERP & CEP.
• Next electric resource plan.
  Establishes that the Company will file its next Electric Resource Plan no later than October 31, 2026.

Modeling results (based upon generic resources) indicate that the Updated Settlement Agreement will reduce carbon emission from 2005 levels by 85% by 2030 and by 99% by 2050.

The modeling also shows the following resource acquisitions through 2030:

But, as noted above, the resource needs in 2029 and 2030 will not be filled through the upcoming Phase II competitive solicitation. Generic resources will be used for 2029 and 2030 in the modeling of the Phase II bids. The 2029 and 2030 resource needs will be filled through the Pueblo Just Transition Plan competitive solicitation.

The next step in the proceeding is for the Commission to deliberate in one or more open meetings, which can be viewed through the Commission’s webcast. Go to: https://puc.colorado.gov/webcasts The Commission will be deliberating regarding the proposed Modified Settlement Agreement and all issues raised in the proceeding that were not included in the Modified Settlement Agreement. (A list of the unsettled issue was filed with the Commission following the May 17, 2022, hearing.) Once the Commission has deliberated on and decided all issues, an initial written decision will be written and signed by the Commissioners. Parties in the proceeding will then have 20 days after the mailing date of the Commission decision (as printed on page one of the Decision) within which to request rehearing, reargument, or reconsideration (“RRR”). If no requests for RRR are filed within the 20-day time period, then the Commission’s decision becomes the final decision of the Commission. If the Commission does not act upon an application for RRR within 30 days of its filing, the application is denied and the Commission’s initial decision is final. If one or more requests for RRR are filed and the Commission elects to act on them, then the initial decision, as modified by the Commission’s decision on RRR, becomes the final decision of the Commission. See Commission Rule 1506. A Final Commission Decision may be appealed to state district court. § 40-6-115, C.R.S.

Once there is a final Commission Decision, the next step will be for Public Service to make any modifications required by the Commission’s Decision and get set up to conduct an all source competitive solicitation to fill the resource need approved in the Commission’s Decision. Once the request for proposals (“RFP”) is issued, bidders will have 90 days within which to submit their bids in accordance with the detailed instructions in the RFP bid package.

A Commission initial Decision is expected in early summer.

On December 27, 2021, the U.S. Army Corps of Engineers (“Corps”) issued a final rule regarding its Nationwide Permits (“NWPs”) for dredge and fill activities (“December 2021 Rule”). See 86 Fed. Reg. 73522 (Dec. 27, 2021). The December 2021 Rule reissued 40 NWPs and issued one new NWP. The Rule also retained consequential changes made to 16 other NWPs in January 2021 and incorporated some of those changes into the newly reissued permits. Most significantly, the December 2021 Rule retained and extended to all NWPs a stringent new mitigation condition adopted in January 2021. The new and revised NWPs took effect on February 25, 2022.

In addition, as of late May 2022, a lawsuit is pending in Montana challenging and attempting to rescind NWP 12 for oil and gas pipelines. The Corps has also undertaken a formal review of that NWP, after seeking public comment about whether NWP 12 should be made more limited or restrictive. Entities seeking to use these revised or challenged NWPs should carefully review the pertinent revisions and stay apprised of the pending challenges and ongoing agency review of NWP 12.

Background on the Corps’ Nationwide Permit Program

The Corps regulates dredge and fill activities (e.g., stream crossings and wetland fills) under Section 404 of the Clean Water Act (“CWA”), 33 U.S.C. § 1344, and Section 10 of the Rivers and Harbors Act, 33 U.S.C. § 403. In lieu of requiring individual permits for every regulated activity, the CWA authorizes the Corps to issue “general” permits, including NWPs, for categories of activities that “are similar in nature, will cause only minimal adverse environmental effects when performed separately, and will have only minimal cumulative adverse effect on the environment.” 33 U.S.C. § 1344(e)(1). Project proponents commonly rely on NWPs for earth-moving activities associated with real estate development, mining, oil and gas activities, water, transportation, and energy facilities, and related maintenance and repair operations. The Corps’ website has a useful summary of the 57 current NWPs, including changes from the last two rulemakings.

Many renewable energy facilities and other sustainability projects benefit from the Corps’ NWP Program. For example, the Corps has issued NWPs for land-based renewable energy generation facilities (NWP 51) and water-based renewable energy generation pilot projects, like offshore wind farms (NWP 52). As discussed below, the Corps recently issued a new NWP for water reclamation and reuse facilities (NWP 59), such as wastewater treatment plants that produce treated effluent for reuse applications like irrigation. And, of course, all these types of projects also benefit from more general NWPs, like NWP 3 (for maintenance activities), NWP 57 (for electric utility and telecom lines), and NWP 58 (for other types of non-oil and gas utility lines).

NWPs greatly reduce—but do not eliminate—the complexities of dredge and fill permitting. Some NWPs require project proponents to provide the Corps with pre-construction notification (“PCN”), which allows the Corps to evaluate NWP-eligible projects on a case-by-case basis. PCN requirements vary by NWP and project type. For example, under NWP 51, proponents of land-based renewable energy generation facilities must submit a PCN if the proposed activity will result in the loss of more than 0.10 acres of waters in the United States. In contrast, under NWP 44, all mining activities are subject to PCN.

The Corps imposes terms and conditions for projects through conditions in each NWP and in the Nationwide Permit General Conditions. For example, under General Condition 23 as revised in 2021 (see below), the Corps requires compensatory mitigation at a minimum one-to-one ratio for projects that require PCN and will result in the loss of more than 0.10 acres of wetland or more than 0.03 acres of stream bed. Each District Office may impose additional or amended conditions for the use of NWPs within its district, including project-specific conditions and region-wide PCN requirements that do not appear on the face of the NWPs. See 33 C.F.R. § 330.4(e)(1), (2). Each state also may impose additional restrictions or conditions on certain NWPs (when used within such state) through CWA Section 401 certification of the new or newly reissued NWPs. Section 401 certification nominally must occur within one year of issuance of the NWPs.

The Corps Addressed 16 NWPs in a Final Rule Issued in Early 2021

Under the CWA, the Corps may issue an NWP or other regional or statewide general permit for only five years, requiring periodic reissuance. Prior to December 2021, the Corps last issued new and revised NWPs just 11 months earlier, in January 2021. See 86 Fed. Reg. 2744 (January 13, 2021) (“January 2021 Rule”). However, the January 2021 Rule only applied to 16 NWPs. This resulted in two groups of NWPs subject to two different expiration dates—those issued or reissued in January 2021 (set to expire on March 14, 2026) and those last issued or revised in January 2017 (set to expire on March 18, 2022), see 82 Fed. Reg. 1860.

The January 2021 Rule complicated the NWP program in two other ways. First, the Corps issued revised NWP General Conditions that applied only to the 16 NWPs addressed by that Rule. Notably, the Corps set a 0.03-acre threshold for the amount of stream-bed loss that triggers required compensatory mitigation and made that mitigation requirement applicable to all 16 NWPs if and when they require PCN. Id. at 2871.

Second, due to long-pending controversies over the use of NWP 12 for extensive oil and gas pipelines, the Rule separated linear transmission projects into three categories subject to separate NWPs. NWP 12—which previously covered linear transmission projects generally—was revised to apply only to construction, maintenance, repair, and removal of oil and natural gas pipelines and associated activities. Id. at 2769. Two new NWPs were issued to cover electric and telecommunication projects (NWP 57) and water and any other utility line projects (NWP 58).

The Corps Declined to Revisit the January 2021 Rule in Its Recent Final Rule

The Corps issued another final rule in December 2021. Given that the January 2021 Rule was issued in the last days of the Trump Administration, some commentators expected the Corps to walk back changes to the NWPs, including the more lenient standards imposed on oil and gas pipeline projects under NWP 12. However, the Corps declined to revisit the NWPs and conditions issued or revised in January 2021, instead opting to restore some consistency across the NWP program. See 86 Fed. Reg. 73522, 73525.

Five
important takeaways from the December 2021 Rule are as follows:

1. The General Conditions issued or revised in January 2021 now apply to all NWPs. See 86 Fed. Reg. 73522, 73525. Most importantly, all 57 NWPs are now subject to a uniform General Condition 23, requiring at least one-to-one compensatory mitigation for any project that requires PCN and will cause the loss of more than 0.03 acres of stream bed. This is an extremely low threshold. Because streams are considered “difficult-to-replace resources,” the Corps encourages permittees to implement stream rehabilitation, enhancement, or preservation to accomplish compensatory mitigation; however, permittees also may accomplish mitigation through restoration or enhancement of riparian areas. See 86 Fed. Reg. 2744, 2871; see also 33 C.F.R. § 332.3(e)(3). Potential NWP permittees should carefully consider whether their project will trigger this mitigation requirement and, if so, determine in advance how, where, and when the requirement can be satisfied. This determination may call for pre-construction conferral with the Corps.
2. The Corps did not reconsolidate NWPs 12, 57, and 58, and will continue to authorize dredge and fill activities associated with eligible oil and gas pipeline projects only under NWP 12 or individual Section 404 permits. Proponents of other linear transmission projects seeking to use an NWP must still seek authorization under the two distinct permits issued early last year, NWP 57 (electric utility line and telecommunication activities) and NWP 58 (utility line activities for water and other substances).
3. The Corps reissued 40 NWPs but only amended the text of a few of them. The textual changes made in the December 2021 Rule were minor. For example, the Corps added “driveways” to the list of linear transportation projects covered by NWP 14. 86 Fed. Reg. 73522, 72535, 73574. The January 2021 Rule, on the other hand, implemented more consequential changes to the NWPs, such as eliminating provisions that used to disqualify projects from NWP authorization if they would cause the loss of more than 300 linear feet of stream bed. See 86 Fed. Reg. 2744, 2785.
4. The Corps issued one new permit, NWP 59, which authorizes discharges of dredged or fill material from the construction, expansion, and maintenance of water reclamation and reuse facilities. See 86 Fed. Reg. 73522, 73558. The Corps recognized the importance of such facilities for climate change adaptation, including both potable and non-potable reuse applications.
5. All existing NWPs now expire on the same date, March 14, 2026.

To some extent, the December 2021 Rule reduces the complexity and uncertainty injected into the NWP program by the January 2021 Rule—the regulated community can again look to a single set of NWPs, with uniform General Conditions and expiration dates. That said, the December 2021 Rule could greatly expand the number of projects that need to conduct compensatory mitigation by extending the expanded General Condition 23 to all 57 NWPs.

Prospective NWP permittees also should be on the lookout for any regional NWP conditions added or amended by the Corps’ District Offices, as well as any state-specific conditions added by states through their CWA Section 401 certification of the NWPs. Permittees should pay special attention to any new PCN requirements added by those supplemental conditions, which could trigger General Condition 23’s stringent mitigation requirement for NWPs that do not on their face require PCN.

The Corps’ December 2021 Rule Is Not the Final Word on NWP 12

Although the Corps declined to reconsolidate or otherwise revise NWPs 12, 57, and 58, controversy remains over the provisions of NWP 12. In May 2021, environmental organizations, including the Center for Biological Diversity and Sierra Club, sued the Corps in the District of Montana. See Center for Biological Diversity, et al. v. Spellmon, et al., No. 4:21-cv-47-BMM (D. Mont. May 3, 2021). The plaintiffs contend that reissuance of NWP 12 violated the Endangered Species Act, National Environmental Policy Act, and Clean Water Act, and they ask the court to vacate the permit. As of late May 2022, cross-motions for summary judgment are pending before Chief Judge Brian Morris.

Spellmon illustrates some of the tensions inherent in the clean energy transition. The plaintiffs take issue with the streamlined permitting afforded to oil and gas pipeline projects under NWP 12, but their arguments are not entirely unique to oil and gas issues. In an amicus brief filed on April 1, 2022, the Edison Electric Institute argued that the plaintiffs’ claims under the ESA, NEPA, and CWA threaten to undermine the entire NWP Program—and hence, the streamlined permitting process upon which renewable energy and other sustainability projects have come to rely. The U.S. Chamber of Commerce raised a similar concern in its amicus brief.

Amidst the flurry of briefing in Spellmon, the Corps published a notice of its intent to conduct a formal review of NWP 12. See 87 Fed. Reg. 17281 (Mar. 28, 2022). In the Corps’ view, “[p]revious uses of NWP 12 have raised concerns identified in Executive Order 13990, such as environmental justice, climate change impacts, drinking water impacts, and notice to impacted communities.” Id. at 17282. As part of its review, the Corps held public meetings throughout May 2022 and solicited public comment on a variety of topics, including whether further limits on NWP 12 or changes to the NWP General Conditions would be prudent. Id. at 17283. The Corps’ review will likely track President Biden’s emphasis on progressive environmental policies like environmental justice and climate change mitigation. However, further changes to the NWP General Conditions could have unintended impacts on sustainability projects, which already face more onerous mitigation requirements following the December 2021 Rule.

Entities seeking to use any NWPs should carefully review and comply with the pertinent changes to those NWPs and should also closely follow the pending challenges and ongoing agency review of NWP 12, which may very well have ramifications for the entire NWP Program.

The Colorado General Assembly wrapped up its 2022 legislative session on May 11, 2022. In our February newsletter, we provided an overview of energy-related bills as of February 8, 2022. At that time, only a handful of energy-related bills had been proposed. But by the end of the session, the legislature considered almost 20 bills related to energy, environmental protection, and air quality. This update highlights some of the final bills that were passed and some that were not.

Energy-Related Bills That Passed

Many of the bills passed this session are aimed at furthering clean energy development in Colorado. Here are some of the highlights:

• House Bill 22-1381, Colorado Energy Office Geothermal Energy Grant Program: This bill creates a geothermal energy grant program to facilitate the development of geothermal heating systems and geothermal electricity generation.
• Senate Bill 22-118, Encourage Geothermal Energy Use: This bipartisan bill seeks to encourage the use of geothermal energy by providing regulatory treatment similar to that afforded solar energy. Among other provisions, the bill requires the Colorado energy office to develop basic consumer education and guidance about leased or purchased geothermal installation, in consultation with industries that offer these options to consumers.
• Senate Bill 22-110, Equip Wind Turbine Aircraft Detection Lighting System: This bill requires an owner or operator of certain wind-powered energy generation facilities to equip them with an aircraft detection lighting system.
• House Bill 22-1362, Building Greenhouse Gas Emissions: This bill updates the state’s minimum energy code requirements. Among other things, the bill requires the creation of the building electrification for public buildings grant program, creating the high-efficiency electric heating and appliances grant program, and establishing the clean air building investments fund.
• House Bill 22-1355, Producer Responsibility Program For Recycling: This bill requires companies that sell consumer-facing packaging to join a producer responsibility organization, which in turn would charge fees to fund a statewide recycling system.

Energy-Related Bills That Failed

One of the more prominent energy-related bills to fail in the 2022 legislative session was Senate Bill 22-138, titled Reduce Greenhouse Gas Emissions In Colorado. This bill concerned measures to promote reductions in greenhouse gas emissions by, among other things, incentivizing people to buy electric lawn equipment. It also included measures directed at streamlining carbon capture and sequestration projects in Colorado, including giving the Colorado Oil and Gas Conservation Commission authority to issue and enforce Class VI injection wells used for sequestration of greenhouse gases.

In addition, two of the bills mentioned in our February 2022 newsletter were ultimately rejected by the legislature. Senate Bill 22-073, titled Alternative Energy Sources, would have directed the state to investigate the feasibility of using small modular nuclear reactors as a carbon-free energy source for Colorado. That bill was sent to the State, Veterans, and Military Affairs Committee, where it ultimately died. House Bill 1140, titled Green Hydrogen To Meet Pollution Reduction Goals, would have directed the state to recognize green hydrogen as a renewable energy source that certain retail electric service providers could use to meet statewide greenhouse gas pollution reduction goals. That bill was ultimately killed in the House Energy and Environment Committee.

What Should We Expect from the 2023 Legislative Session?

It’s too soon to say. But at the end of this session, none of the bills proposed addressed pore space ownership. As we noted in our February 2022 newsletter, ownership of the pore space remains unresolved in Colorado, and obtaining certainty about who owns the pore space is critical to encouraging investment in carbon capture, use, and sequestration projects. Given this uncertainty, we might expect to see the Colorado legislature pick up that issue during the 2023 legislative session.

On December 17, the Fifth Circuit’s stay of the Occupational Safety and Health Administration (OSHA) COVID-19 rule for employers with 100 or more employees was dissolved. While it is likely there will be petitions for the Sixth Circuit to rehear the case en banc, and there have been appeals filed in the U.S. Supreme Court, there is no stay currently in place.

OSHA had previously announced that it would “stand down” during the Fifth Circuit’s stay. The rule’s December 5th deadline to put a written vaccination or “mask and test” policy in place has already passed. The December 17th announcement read:

OSHA is gratified the U.S. Court of Appeals for the Sixth Circuit dissolved the Fifth Circuit’s stay of the Vaccination and Testing Emergency Temporary Standard. OSHA can now once again implement this vital workplace health standard, which will protect the health of workers by mitigating the spread of the unprecedented virus in the workplace.

To account for any uncertainty created by the stay, OSHA is exercising enforcement discretion with respect to the compliance dates of the Emergency Temporary Standard (ETS). To provide employers with sufficient time to come into compliance, OSHA will not issue citations for noncompliance with any requirements of the ETS before January 10 and will not issue citations for noncompliance with the standard’s testing requirements before February 9, so long as an employer is exercising reasonable, good faith efforts to come into compliance with the standard. OSHA will work closely with the regulated community to provide compliance assistance.

OSHA is currently intending to enforce this standard commencing on January 10, 2022, barring another stay. In order to be in compliance with the standard on January 10th, some work toward developing a written policy will be needed to move forward.

Please contact Laura Riese or a Davis Graham Partner if you have any questions or if we can assist you with any legal needs.

On November 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act, Public Law No: 117-58, a piece of bipartisan legislation known for months as the “Infrastructure Bill” (“Infrastructure Act”). The Infrastructure Act appropriates $1 trillion to improve and modernize the United States’ infrastructure. Among its many legislative priorities, the Infrastructure Act contains provisions relating to carbon capture, utilization, storage, and transportation infrastructure, conventional oil and gas development, critical minerals, and existing mining communities.

Carbon Capture, Utilization, Storage, and Transportation Infrastructure – Division D, Title III, Subtitle A

The Infrastructure Act includes numerous provisions related to carbon capture, utilization, storage, and transportation infrastructure; Division D, Title III, Subtitle A is entirely devoted to these issues.

In the Infrastructure Act, Congress makes several policy findings to support funding for carbon capture projects, including:

• “carbon capture and storage technologies are necessary to reduce hard-to-abate emissions from the industrial sector,” § 40301(2);
• “carbon removal and storage technologies, including direct air capture, must be deployed at large-scale in the coming decades to remove carbon dioxide directly from the atmosphere,” § 40301(3); and
• “carbon dioxide transport infrastructure and permanent geological storage are proven and safe technologies with existing Federal and State regulatory frameworks,” § 40301(6).

Congress also suggests that, with respect to new carbon dioxide transportation infrastructure, each state should consider treating the infrastructure as pollution control devices under state law and establishing a waiver of ad valorem and property taxes for the infrastructure for at least 10 years. §40301(8).

Class VI Permitting

Section 40306(b) authorizes appropriations of $5,000,000 per year from 2022-2026 for permitting of Class VI wells for the injection of carbon dioxide for the purpose of geologic sequestration in accordance with the requirements of the Safe Drinking Water Act. This section also establishes State permitting program grants to grant funding to States to “defray the expenses of the State related to the establishment and operation of a State underground injection control program.” § 40306(c)(2). A total of $50,000,000 per year from 2022-2026 is appropriated for the State grant program.

Geologic Carbon Sequestration on the Outer Continental Shelf

Section 40307 amends the Outer Continental Shelf Lands Act (“OCSLA”), 43 U.S.C. § 1337(p)(1), to authorize the Secretary of the Interior to grant a lease, easement, or right-of-way on the outer Continental Shelf for activities that “provide for, support, or are directly related to the injection of a carbon dioxide stream into sub-seabed geologic formations for the purpose of long-term carbon sequestration.” Section 40307 also amends OCSLA, 43 U.S.C. § 1331, to incorporate definitions of “carbon dioxide stream” and “carbon sequestration.”

Elsewhere in the Infrastructure Act, Section 40343 amends OCSLA, 43 U.S.C. 1337(p)(1)(C), to authorize the Secretary of the Interior to grant a lease, easement, or right-of-way on the Outer Continental Shelf for activities that produce or support “storage” of energy from sources other than oil and gas.

Section 40307(d) directs the Secretary of the Interior to develop regulations to implement the amendments to the OCSLA related to carbon sequestration.

Carbon Utilization Program

Section 40302 amends Section 969A of the Energy Policy Act of 2005 (“EPAct”), 42 U.S.C. § 16298a, and directs the Secretary of Energy to develop a program to provide grants to states, local governments, and public utilities and agencies to procure and use commercial or industrial products that (i) use or are derived from anthropogenic carbon oxides; and (ii) demonstrate significant net reductions in lifecycle greenhouse gas emissions compared to incumbent technologies, processes, and products.

Carbon Storage Validation and Testing

Section 40305 amends EPAct, 42 U.S.C. § 16293, to direct the Secretary of Energy to establish a large-scale carbon storage commercialization program. Under this program, the Secretary would provide funding for the development of new or expanded commercial large-scale carbon sequestration projects and associated carbon dioxide transport infrastructure, including funding for the feasibility, site characterization, permitting, and construction stages of project development.

The Secretary must establish an application process for projects at any stage of development to receive funding. In selecting projects for funding, the Secretary must give priority to projects with substantial carbon dioxide storage capacity or projects that will store carbon dioxide from multiple carbon capture facilities. Section 40305 appropriates $2.5 billion for this program.

Carbon Dioxide Transportation Infrastructure Finance and Innovation Program

Section 40304 amends EPAct, 42 U.S.C. § 16181 et seq., to establish the Carbon Dioxide Transportation Infrastructure Finance and Innovation program or “CIFIA program” under EPAct. § 40304(a). The Infrastructure Act directs the Secretary of Energy to establish a transportation infrastructure finance and innovation program to provide grants or federal credit instruments to private entities for pipelines, shipping, rail, or other infrastructure to transport carbon dioxide captured from anthropogenic sources or air.

Projects are eligible for financing under the CIFIA program if: (1) the entity planning a project submits a letter of interest prior to submission of its application; and (2) the project meets the statute’s criteria. § 40304 (§ 999B). The project proponent must be creditworthy and have a reasonable prospect of repaying any Federal credit instrument. § 40304 (§ 999B(b)(1)). A project is eligible to seek funding under this program if the eligible project costs are reasonably anticipated to equal or exceed $100 million. § 40304 (§ 999B(b)(4)). In addition, to be eligible under the CIFIA program, an applicant must show a “reasonable expectation that the contracting process for construction of the project can commence by not later than 90 days after the date on which the Federal credit instrument or grant is obligated for the project under the CIFIA program.” § 40304 (§ 999B(b)(8)). Further, financing is available only for projects that exclusively use iron, steel, and manufactured goods produced in the United States. § 40304 (§ 999B(e)).

The Secretary is directed to give priority in selecting projects to receive credit assistance to projects that: (A) are large-capacity, common carrier infrastructure, (B) have demonstrated demand for use of the infrastructure by associated projects that capture carbon dioxide; (C) enable geographic diversity in associated projects that capture carbon dioxide; and (D) are sited within, or are adjacent to, existing pipeline or other linear infrastructure corridors to minimize environmental disturbance and other siting concerns. § 40304 (§ 999B(c)(2)).

Federal credit assistance under the CIFIA program is only available for projects that received a decision or categorical exclusion under the National Environmental Policy Act (NEPA). § 40304 (§ 999B(d)(2)). Provision of credit assistance under the CIFIA program also does not relieve an applicant of any state and local legal requirements. § 40304 (§ 999F).

Carbon Removal

Section 40308 amends EPAct, 42 U.S.C. § 16298d, to direct the Secretary of Energy to establish a program to fund direct air capture projects that will contribute to the development of four “regional direct air capture hubs.” Such hubs will be networks of direct air capture projects, potential carbon dioxide utilization off-takers, connective carbon dioxide transport infrastructure, subsurface resources, and sequestration infrastructure located within a region, which have capacity to capture and sequester, utilize, or sequester and utilize at least 1 million metric tons of carbon dioxide from the atmosphere annually.

The Secretary will select projects in regions with existing or recently retired “carbon-intensive fuel production or industrial capacity.” Two regional direct air capture hubs must be located in “economically distressed communities in the regions of the United States with high levels of coal, oil, or natural gas resources.” Priority will be given to projects that are likely to create opportunities for skilled training and long-term employment to the greatest number of residents of the region.

Within 180 days of enactment of the Infrastructure Act, the Secretary of Energy must solicit applications for funding of eligible direct air capture projects and must make selections based on these applications within three years. The Secretary may make grants, or enter into cooperative agreements or contracts, with selected projects to accelerate commercialization of, and demonstrate the removal, processing, transport, sequestration, and utilization of, carbon dioxide captured from the atmosphere.

Carbon Capture Technology Program

Section 40303 amends Section 962 of EPAct, 42 U.S.C. § 16292, to expand a carbon capture technology program to include a “front-end engineering and design program for carbon dioxide transport infrastructure necessary to enable deployment of carbon capture, utilization, and storage technologies.” Congress allocated $100,000,000 for 2022-2026 to fund this program.

Conventional Oil and Gas Development

The Infrastructure Act establishes a categorical exclusion under NEPA for gathering lines on federal and Indian lands. The Infrastructure Act also prioritizes the plugging and abandonment of orphaned oil and gas wells on both federal and nonfederal lands. Further, it calls for a study of the impacts on President Biden’s decision to revoke the permit for the Keystone XL Pipeline.

Statutory Categorical Exclusion for Gathering Lines on Federal and Indian Lands – Division A, Title I, Subtitle C

Section 11318 creates a categorical exclusion under NEPA for certain gathering lines on federal or Indian land. This categorical exclusion is aimed at reducing flaring of natural gas from oil and gas wells on federal and Indian lands resulting from lack of infrastructure.

Section 11318 provides that issuance of a sundry notice or right-of-way for a gathering line located on federal or Indian land and services oil or gas wells may be considered “to be an action that is categorically excluded . . . for the purposes of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).” § 11318(b)(1). Notably, Section 11318 defines “federal land” as any land owned by the United States but that is not part of the National Park System, the National Wildlife Refuge System, the National Wilderness Preservation System, or a wilderness study area within the National Forest System or Indian land. § 11318(1).

A gathering line must meet certain criteria to be eligible for the categorical exclusion. First, the gathering line and associated field compression or pumping unit must be located within federal or Indian land for which an approved land us plan or environmental document prepared pursuant to NEPA “analyzed transportation of oil, natural gas, or produced water from 1 or more oil or gas wells” in that land as a reasonably foreseeable activity. § 11318(b)(1)(A). Second, the gathering line must be located near or within an existing corridor for a right-of-way or existing disturbed area. § 11318(b)(1)(B). Finally, the gathering line must reduce the amount of methane flared, vented, or unintentionally emitted from the land or reduce the vehicle traffic that would otherwise service the land. § 11318(b)(1)(C).

Orphaned and Idled Wells on Federal, Tribal, State, and Private Lands – Division D, Title VI

The Infrastructure Act amends the current program for orphaned well site plugging, remediation, and restoration in Section 349 of EPAct, 42 U.S.C. § 15907. Compared to EPAct, Section 40601 expands this program’s responsibilities and addresses environmental and public health concerns related to orphaned wells. Congress views this program as part of methane reduction efforts.

Section 40601 defines an “orphaned well” on federal or Tribal land as a well (1) “that is not used for an authorized purpose, such as production, injection, or monitoring” and (2) for which an operator cannot be located, the operator is unable to plug the well and to remediate and reclaim the well site, or that is within the National Petroleum Reserve—Alaska. On state or private lands, an “orphaned well” has the meaning defined by the particular state or whatever term the state uses to describe a well eligible for plugging, remediation, and reclamation.

Section 40601 calls for the establishment of a federal program to address orphaned wells on lands managed by the Department of the Interior and Forest Service. Section 40601 directs the Secretary of the Interior to establish a program to plug, remediate and reclaim orphaned wells on federal lands within 60 days of the Infrastructure Act’s enactment date. The program must:

• Institute a method for identifying orphaned wells and associated pipelines, facilities, and infrastructure on federal land, § 40601(b)(2)(A)(i);
• Rank those wells for priority based on public health and safety, potential environmental harm, and other subsurface impacts, § 40601(b)(2)(A)(ii);
• Distribute funding for plugging, remediating, and reclaiming the orphaned wells, associated facilities, and surrounding environment, § 40601(b)(2)(B);
• Attempt to identify persons responsible for the orphaned well and obtain reimbursement for the associated remediation and reclamation, § 40601(b)(2)(D);
• Measure, estimate, and track the emissions of methane and contamination of groundwater or surface water associated with the orphaned wells, § 40601(b)(2)(E); and
• Address the disproportionate burden of adverse health or environmental effects of orphaned wells on communities of color, low-income communities, and Tribal and indigenous communities, § 40601 (b)(2)(F).

Similarly, Section 40601 requires the Secretary of Interior to establish a program to allocate grants to Indian Tribes for plugging, remediating, and reclaiming orphaned wells on Tribal land. § 40601(d)(1). Alternatively, a Tribe may request that the Secretary administer and carry out plugging, remediation, and reclamation activities in lieu of a grant. § 40601(d)(1).

With respect to orphaned wells on state and private lands, Section 40601 directs the Secretary of Interior to offer states grants as large as $5 million to fund plugging, remediation, and reclamation of orphaned wells. § 40601(c)(1) and (c)(3). These grants may be used to track methane emissions and contaminated ground or surface water associated with the orphaned wells, remediate and restore the surrounding habitat, address any adverse health or environmental effects of orphaned wells, and publish information related to the state’s use of the funds on a public website. § 40601(c)(2)(A). States have one year from the date of receipt to use such funds. § 40601(c)(3)(C).

Importantly, Section 40601 does not absolve the owner or operator of an orphaned well of any potential liability. Sec. 40601(g)(3).

Finally, Section 40601 directs the Secretary of Interior to submit a report annually to select Committees at the Senate and the House of Representatives describing the inventory of orphaned wells and wells at risk of being orphaned on Federal, Tribal, and State land, the methane and other gasses emitted from orphaned wells, and the emissions reduced as a result of plugging and reclaiming the wells. § 40601(f). The report shall include the number of jobs created and saved due to this Section and the acreage of land restored. § 40601(f).

Section 40601 also directs the Secretary of the Interior to periodically review all idled wells on federal land and to reduce the inventory of idled wells on federal land. § 40601(b)(3)(B). Notably, Section 40601 defines “idled well” as a well “that has been nonoperational for not fewer than four years” and “for which there is no anticipated beneficial future use.” With this definition, Congress escalated the timeframe in which a well is considered “idled.” In EPAct, Congress had defined an idled well as one that has been nonoperational for at least seven years. See 42 U.S.C. § 15907(e)(1) (2020).

Keystone XL Pipeline – Division D, Title IV, Subtitle C

Section 40434 addresses the impacts of President Biden’s decision in Executive Order No. 13,990 (Jan. 20, 2021) to revoke the Keystone XL Pipeline permit. Section 40434 directs the Secretary of Energy to conduct a study to review the total number of jobs lost, and the impact on consumer energy costs projected to result, as a direct or indirect result of Executive Order No. 13990 . This study shall address the projected impacts over a ten-year period, beginning on January 20, 2021 (the date the Executive Order was issued). § 40434. The Secretary of Energy is required to submit the results of this study to Congress no later than 90 days after the date of enactment of the Infrastructure Act. § 40434.

Critical Minerals and Mining Community Resilience

The Infrastructure Act includes provisions related to critical minerals and the mining sector in general, as well as the rehabilitation of abandoned mine lands and the use of former mining sites to promote renewable energy development. The Infrastructure Act adds new provisions to various statutes that govern energy and mining, as well as public lands and public lands agencies, reflecting the United States’ growing understanding of the importance and intersectionality of issues related to economic opportunity for historic mining communities, the energy transition and securing critical mineral supply chains, which broadly implicate national security.

The bulk of the provisions of the Infrastructure Act concerning minerals or mining reside in Division D – Energy, with the most notable provisions found in in Title II (Supply Chains for Clean Energy Technologies), Title III (Fuels and Technology Infrastructure Investments), and Title VII (Abandoned Mine Land Reclamation). Corresponding funding appropriations are in Division J – Appropriations.

Critical Minerals and Supply Chains

The Infrastructure Act contains a number of provisions aimed at increasing domestic production of rare earth elements and critical minerals to promote domestic supply chains and to alleviate the economic and national security concerns associated with the United States’ dependence on foreign suppliers.

On the technical side, Section 40201 allocates $320 million to the U.S. Geological Survey (USGS) for the Earth Mapping Resources Initiative (Earth MRI), a program designed to support above- and underground mapping of mineral resources across the United States, including the identification of abandoned mine land and mine waste, which is thought to be an important potential source of critical minerals. The results of Earth MRI will be made available to the public.

Section 40205 allocates an additional $167 million to USGS to establish an Energy and Minerals Research Facility in partnership with an academic institution. Funding of $140 million has been allocated to support the design, construction, and build-out of a Rare Earth Demonstration Facility, which will endeavor to demonstrate the commercial feasibility of extracting rare earth elements from acid mine drainage, mine waste, and “other deleterious material,” which could theoretically include coal ash.

Additionally, Sections 40207 and 40208 contain provisions designed to support the development of a domestic battery supply chain by allocating: $3 billion to fund grants for advanced battery material processing demonstration and production projects; $3 billion to fund grants for advanced battery manufacturing and recycling projects; $125 million to fund federal, state, and retail seller grants to support recycling and critical mineral recovery from smaller rechargeable (less than 5 kg) and non-rechargeable (less than 2 kg) batteries; and $200 million to fund grants related to recycling and finding “second use” applications for electric vehicle batteries. Section 40210 also creates grant programs within the National Science Foundation to support basic research on domestic critical minerals mining and recycling, with an “end to end” life cycle approach, examining the entire production and supply chain for critical minerals.

On the policy side, Section 40210(c) establishes a Critical Minerals Subcommittee of the National Science and Technology Council to advise the federal government on appropriate policies and procedures, and identify opportunities, relating to the exploration for, and production and recycling of, critical minerals, emphasizing solutions that can be implemented domestically or in cooperation with allies and trading partners. The Critical Minerals Subcommittee will also examine workforce issues associated with the critical minerals supply chain.

Other provisions of the Infrastructure Act aim to address obstacles to the development of U.S. critical mineral supply chains by improving the federal permitting process for mining projects on federal public lands. Earlier this year, large scale mining was added as an eligible sector for the FAST-41 permit streamlining program, but given the administration’s policy positions toward major mining projects to date, it is questionable whether any mining projects will actually be granted access to the FAST-41 program. In addition, because most critical minerals are co-located with, or byproducts of, more major mineral commodities, FAST-41 is perhaps too blunt of an instrument to try to prioritize critical minerals projects specifically.

Section 40206 embodies many of the same principles as FAST-41, mandating the Bureau of Land Management (BLM) and the U.S. Forest Service (USFS) to conduct a thorough self-assessment of their minerals permitting procedures; engage in more timely collaboration with government, tribal, and private stakeholders, with concurrent, rather than sequential, consultation processes; develop best practices for communication and dissemination of information to the public; and develop firmer timelines and quantifiable performance metrics to assess adherence to each agency’s performance goals. Within one year of the Infrastructure Act’s passing, the Secretary of the Interior and the Secretary of Agriculture must report to Congress on what additional measures would increase the timeliness of critical minerals project permitting, including, possibly, the institution of cost recovery paid by permit applicants as a means to offset the costs of additional training for personnel involved in the permitting process.

Promoting Renewable Energy Development and Resilient Mining Communities

Other sections of the Infrastructure Act are geared toward revitalizing mining communities and finding new uses for historic mine sites. Section 40701 allocates funding of nearly $11.3 billion for states and Indian tribes to reclaim abandoned coal mines through the Abandoned Mine Reclamation Fund. Priority will be given to programs that employ current and former employees of the coal industry. As a concession to the coal industry, the Abandoned Mine Reclamation Fee payable by miners on tons of coal produced has been reduced by 20%, while the authorization to continue collecting the fee has been extended to 2034. § 40702. Section 40704 establishes a new $3 billion fund to support reclamation of abandoned hardrock mining sites on federal, state, tribal, local, and private land. Funds awarded under the hardrock program cannot be used to satisfy obligations under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”).

Adding to efforts to address physical conditions at mine sites, and the impacts on surrounding communities, Section 40342 provides for the establishment of up to five “clean energy” demonstration projects on current and former coal and hardrock mining sites, two of which must be solar projects. “Clean energy” is defined broadly to include the following technologies: solar; micro-grids; geothermal; direct air capture; fossil-fueled electricity generation with carbon capture, utilization, and sequestration; energy storage, including pumped storage hydropower and compressed air storage; and advanced nuclear technologies. The primary factors to be considered in evaluating project candidates: are job creation at the project site (particularly in economically distressed areas and with respect to dislocated workers who were previously employed in manufacturing, coal power plants, or coal mining) and throughout the supply chain, reducing carbon intensity and greenhouse gas emissions, technological innovation and commercial deployment potential, reducing the cost of generated or stored energy, and reducing the project time from permitting to completion. $500 million has been allocated to support the demonstration projects.