The Problem of Oil and Gas Leakage, Transportation Emissions, and Local Government Flexibility

In this episode, Will Toor of the Colorado Energy Office shares about the state’s ambitious climate agenda and the array of energy policies they’ve been passing under a Democratic political trifecta.

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Washington, DC, is a slow-motion nightmare right now, but out in the states — at least the states that Democrats control — climate and clean energy policy is still happening. A few weeks ago, I covered the fantastic policies recently passed in my home state of Washington (see also my podcast with Washington legislator Joe Fitzgibbon).

Today, we turn our gaze to Colorado.

In 2018, Democrats gained a trifecta in the state — the governorship and both houses of the legislature — for the first time since 2013. They promptly got busy passing a vast array of clean energy policies: reform of electric utilities, support for electric vehicles and charging infrastructure, new restrictions on oil and gas production.

During this year’s legislative session, Gov. Jared Polis released a comprehensive roadmap to 90 percent statewide reductions in greenhouse gas emissions by 2050 and the state legislature tackled clean buildings, industry, environmental justice, reform of state transportation agencies, reform of natural gas utilities, and on and on.

To discuss this flurry of activity, I turned to a man who has been involved in Colorado politics since the previous century: Will Toor.

Toor was mayor of Boulder from 1998 to 2004. From 2005 to 2012, he was Boulder County Commissioner. During all that time he was also board chair at the Denver Regional Council of Governments, where he led efforts on climate policy. He then became director of the transportation program at the Southwest Energy Efficiency Project, until 2019, when the newly elected Polis appointed him to run the Colorado Energy Office.

Toor has had a hand in shaping Polis’s energy agenda from the beginning, and he has been closely involved in negotiating bills through the legislature. He helped walk me through Colorado's sector-by-sector approach to emissions, what the state has accomplished so far, and what might be next for it.

Listen, enjoy, and if you appreciate work like this, please consider becoming a paid subscriber to Volts.

As a bonus, here’s a picture of Toor in 2003, as mayor of Boulder, hosting visiting scholar Noam Chomsky.

Text transcript:

David Roberts

All right, with no further ado, Will, welcome to Volts.

Will Toor

Thank you.

David Roberts

So I've been following states and climate policy for a long time, and it seemed like a few years ago, Colorado just kind of burst out of the gate at a full gallop and has been going really strong now for two sessions of the legislature. So maybe just by way of starting, tell us some about the political developments of Colorado over the last five years that put all the pieces in place that allowed this burst of activity.

Will Toor

Yeah, really, I think what happened was that in 2018, we both elected a new governor, Jared Polis got elected governor on a platform of, among other things, 100% renewable electricity by 2040 and bold climate action, and we elected a Democratic Senate. We had had a Democratic House, but had not had a Democratic Senate since 2014. And so the combination of having a governor who was committed to climate action and a House and a Senate that were aligned and the fact that there was just kind of a pent-up demand for action on climate and clean energy really set the stage for a kind of monumental legislative session in 2019.

So that year we had, depending exactly how you count it, something like 15 major bills on setting climate targets, modernizing our utility regulation to set our utilities on a pathway to at least 80% greenhouse gas reductions by 2030. A bunch of bills on electric vehicles, a bunch of bills on energy efficiency. We had a major oil and gas reform bill. One of the things that's a little unusual is that Colorado is a major oil and gas producer that is actually acting on climate and clean energy. And Senate Bill 181 completely rewrote the regulatory structure for oil and gas in Colorado.

Then last year was a little bit quieter because of the pandemic that kind of shut down our legislative session partway through, although there was still lots of action at the Public Utilities Commission and the Air Quality Control Commission. But then this year has really shaped up to be another year where that kind of pent-up demand for action really came out at the legislature.

David Roberts

Well, I want to get into some of the specifics of the legislation, but just as a background political question, because I'm curious. Do you have a supermajority of Democrats or does Colorado — do you need a supermajority to sort of override Republican objections or sort of like, what's the disposition of the state Republican Party on all of this? Are they just irrelevantly sitting on the sidelines, or is there some engagement? What's the degree of Democratic domination, I guess, is what I'm asking.

Will Toor

So, there's a large Democratic majority in the House. In the Senate, it's a much narrower majority. For 2019 and 2020, it was actually a one-vote margin, 18-17. After the 2020 elections, it's now a 19-16 margin. I would say that some of the issues have been bipartisan, but the vast majority of votes on clean energy have been primarily Democrats. There is one Republican in the Senate who is a very strong advocate for clean energy and climate action, Senator Kevin Priola, who has actually been a sponsor of many of the pieces of legislation. Where the Republican Party, I think, has had an impact has been often helping to shape some of the pieces of legislation in ways that may make them work better for their communities.

They often represent rural parts of the state, and there's been a lot of interest in trying to make sure that we're moving forward on climate action in ways that can work for rural Colorado in addition to the urban part of the state. We had one major bill this year on funding our just transition effort for coal communities, and that was a very bipartisan bill.

David Roberts

Right, I bet.

Will Toor

Yeah.

David Roberts

So one thing that happened this year, I think prior to most of the big bills, is the governor issued his roadmap. This is a sort of roadmap whereby Colorado can reach its goals. So tell us what the targets are and sort of what is the roadmap, what was the purpose of the roadmap?

Will Toor

Yeah. So this really came out of that 2019 legislative session. One of the pieces of legislation that moved forward for the first time created legislatively adopted GHG targets for the state of a 50% reduction below 2005 levels by 2030 and a 90% reduction by 2050. And the governor asked the energy office to convene the other major state agencies that were engaged on this — our Department of Public Health and Environment and Transportation and AG and Natural Resources — and do both a technical analysis and a stakeholder process to basically develop the strategic plan for how are we actually going to achieve the targets that we had adopted?

We worked with Energy and Environmental Economics, E3, a consulting firm that's done scoping plans for a number of states over the years, and really developed a plan that was very much focused on what was achievable in each one of the major emitting sectors in the state. So transportation, electricity generation, the oil and gas industry, residential and commercial fuel use, and industrial fuel use and process emissions. Those really dominate our emissions as a state. And we developed sectoral targets and near-term action steps for each one of those areas.

David Roberts

Right. Maybe it would be helpful, I think, to tell listeners what is the share of each of those, like, what are the big categories to the little categories of emissions sector-wise.

Will Toor

So, interestingly, if you look at transportation, electricity generation, the oil and gas industry, and then fuel use sort of combined in buildings and industry, each one of those is fairly similar. They're each around a quarter of our emissions. Transportation is the largest single source, but by a pretty small margin.

David Roberts

And it just edged ahead recently. Right. Which is the same thing that happened nationally.

Will Toor

Yeah, basically, electricity has been decarbonizing faster than any other sector, so it used to be our largest, especially because Colorado has traditionally been a heavy coal state. Oil and gas, it depends a little bit on how you count things. So the way that we count it, the emissions of methane from the upstream oil and gas industry are one category, and then the combustion emissions that they have from the processing of oil and gas actually fit within our industrial sector. If you put those together, oil and gas would actually be the largest single source. So there's different ways that you can parse it.

But the way that we generally parse it is transportation is the biggest, followed by electricity, followed by oil and gas, and then industrial and buildings.

David Roberts

Okay, well, let's start with electricity, because in some ways it's kind of the most straightforward. I think the policy instruments are sort of the most well understood. The road ahead is well understood. So what are the big things Colorado is doing on electricity? I know. Obviously getting rid of coal has got to be step one, right? Or at least phasing it down.

Will Toor

Yeah. So essentially, again, coming out of 2019, we had an interesting sort of legal and regulatory structure where our largest single utility, Xcel Energy, which accounts for more than half of the generation in the state, had a voluntary commitment to achieve 80% by 2030. And we worked with them to write it into statute. So, they were legally required to submit a plan to the Public Utilities Commission to achieve 80%.

David Roberts

Just them or all utilities?

Will Toor

Well, the way that we structured it, they were legally required. Other utilities weren't technically required, but we gave a broad grant of authority to the state Air Commission to regulate them, but said that if they submitted a plan to the Public Utilities Commission that would achieve 80% by 2030, then they would have a safe harbor from additional air regulation until 2030. We then went out to every utility and said, "wouldn't you rather just do this on your own terms rather than us have to create a mini clean power plan for the state?" And essentially all of the utilities said, well "yeah, that works for us."

And so we're in a place where for other utilities, they have all voluntarily come forward with plans. We've since passed legislation that actually puts an additional regulatory piece in place. And so there's now legislation that says that if any utility did not come forward with a plan, the Air Commission within nine months would have to adopt rules requiring them to get to 80%. But we're in a place where all these plans are just moving forward and it's been pretty remarkable to see our second largest utility, Tri-State Generation and Transmission is a G&T cooperative who provide the electricity for most of the rural co-ops in the state.

David Roberts

Right.

Will Toor

They are historically very coal heavy.

David Roberts

Yes, I was going to ask. They're legendarily problematic in all states.

Will Toor

Yeah. They not only owned multiple coal power plants, they actually, in some ways, were a vertically integrated coal company in the northwestern Colorado. They owned a coal mine and had mine mouth power plants. And in the past, you know they were funders of climate denial at the national level. Their prior CEO was kind of legendary for a conference where he stated that, to sort of pull from the NRA, "you'll pry our coal plants out of my cold dead fingers." That completely changed in 2019. So that CEO was still the CEO when I started this job. When I came in with Governor Polis in January of 2019, by April they had new leadership.

That new leadership came in to meet with me to talk about "how can I work with the Governor's office to help meet his clean energy goals." And by January of the next year, Tri-State had adopted a plan to close every coal power plant they have in Colorado and New Mexico to reduce in-state emissions 90% by 2030. And they have since submitted a plan to our public utilities Commission that would achieve 80% reduction in emissions serving retail loads. So, including the electricity they're importing from Wyoming and Arizona. Xcel recently filed their clean energy plan, and they're exceeding the minimum requirement.

They're proposing approximately an 85% reduction. Our municipal utilities, one of them adopted a plan to get to 80%, another a plan to get to 90%.

David Roberts

How much of all this is just going to be shutting down coal plants? I mean, I guess it's kind of the low hanging fruit. Is that the bulk of where most of this is coming from?

Will Toor

Yeah, it's basically shutting down coal plants, adding a whole bunch of utility scale wind and solar, and a fair amount of distributed generation, adding a fair amount of battery storage, and backing it up with gas combustion turbines. There is a little bit — we have one utility, somewhat smaller, rural utility, but it's very progressive, Holy Cross Energy, who are committed to 100% carbon free by 2030. And they're doing a lot that's focused on demand flexibility, and a lot more on storage. But at the large scale, it's really shutting down coal, replacing it with renewables.

David Roberts

And renewables have gotten crazy cheap in Colorado specifically. Right? I mean, cheapest I think.

Will Toor

Yeah, we're lucky in that we have both a good solar resource and a good wind resource. Back in 2018, a whole lot of heads turned when Xcel did their all-sources solicitation, and they were getting back bids for wind that were coming in at under two cents a kilowatt hour. And they were getting solar with storage for under three cents a kilowatt hour. And that's a lot of what's enabled this transition, is the fact that you have all these legacy coal plants that cost four, four and a half cents a kilowatt hour for operations and maintenance.

It becomes a pretty easy decision to replace that with two cent a kilowatt hour wind.

David Roberts

Well, this actually raises another thing that happened to utilities in Colorado, I think it was this year, but they're all going to join organized markets, RTOs. What's the story there?

Will Toor

Yes, so there was legislation this session, Senate Bill 72, that is really going to push the state towards an organized market. It both creates a transmission authority and encourages a larger buildout of transmission, not only within the state but also connecting to larger markets. It effectively requires that by 2030, our utilities join organized regional markets. It's not an absolute requirement if our public utilities commission were to find that it wasn't in the public interest or that it would somehow get in the way of meeting our clean energy goals. So it's not a 100% requirement, but given the fact that it should give us greater access to wind to the east and solar to the west, and more of an ability to average renewables over a larger area, it certainly seems very likely that it will move forward.

David Roberts

What RTO would they be joining?

Will Toor

So the bill does not specify. You can look east towards the SPP market or you could look west towards ultimately Cal-ISO.

David Roberts

Do you know if there are, I don't want to get on a diversion, but if there are other western states that are — because this has been talked about for ages, trying to get a western market started, do you know if other states are as close as Colorado to kind of making that jump?

Will Toor

So I think that there is a strong movement across the western states. You know, I don't know that people are quite ready to make the jump. There's a multi-state study that Colorado is part of that Utah is actually sort of coordinating that's looking at options. There's legislation that I think is being proposed in other states very similar to the legislation in Colorado. So I think there's a lot of interest and there's certainly a lot of discussions taking place but there's a lot of complications in getting from here to there and doing so in a way that works financially for customers and for the utilities and that ensures that the clean energy goals of the different states are honored.

One of the issues that we face is there's some pretty different politics among the western states.

David Roberts

Yes. Both of which are leery about the politics of the other.

Will Toor

As a sort of interesting digression. One of the pieces of legislation that got a fair amount of play in the Colorado press from our fellow state, Wyoming, this year was when they created a fund of $1.2 million to sue other states for not buying —

David Roberts

I heard about that. I'm just going to assume that that has very little legal merit.

Will Toor

Yes, I don't think that I would be very concerned with it. And the truth is we have a fine relationship with Wyoming and I don't anticipate there will be any litigation.

David Roberts

You don't anticipate being forced by the Supreme Court to burn Wyoming coal? Okay, so electricity is awesome but in some sense kind of straightforward. You're going to close down the coal plants, you're going to ramp up your renewables, you're going to build a bunch more transmission, you're going to get utilities oriented in the right direction, get them in a market that seems all sort of tidy. And doable other sectors are more complicated. Let's talk about then industry. Sort of industry is known as one of the difficult to decarbonize sectors or at least less certain how to decarbonize.

What's the Colorado approach to industry? And it's kind of a side question how much of what counts as industry in Colorado is just the fossil fuel industry such that it will disappear when fossil fuels disappear?

Will Toor

So if you look at our kind of industrial inventory, I think right now it's about 15 million tons a year, and I think about half of that is really the combustion emissions associated with the midstream oil and gas industry. The other half are a refinery that provides a lot of the liquid transportation fuels on the Front Range, the Suncor refinery, it's the steel mills or the steel mill in Pueblo, although that steel mill now has a 250 megawatt onsite solar plant providing a large part of their electricity. Cement facilities; we've got a couple of large cement plants.

We also have semiconductor like chip factories and then a lot of smaller industry that contributes also. And I would say there's a couple of different pieces that are moving there. So one is on the regulatory front; the target that we adopted in industry for 2030 is not nearly as aggressive as it is for electricity. So we're going 80% in electricity. We're headed for a 20% reduction in industry and that's a 20% below 2005 level. So it's a larger reduction from today because emissions have grown over time. But it's certainly what we see as being possible in the industrial sector is not as deep as the technology and economics allow on the electricity side.

There are a series of rulemakings that are moving forward at our State Air Commission. There's one happening right now that's focused on our trade exposed, energy intensive industries, basically steel and cement. And then there will be other follow up ones over the next two years. Under legislation that just passed, there's a statutory requirement that by the — I believe it's the end of 2023 — rules need to be in place that assure will get to that 20% by 2030. The other piece that's moving forward is we're seeing a lot of activity on the carbon capture and sequestration front, which is interesting because this was something that we did not pay a lot of attention to in our first draft of the roadmap.

Basically our analysis said, "okay, this is something that may be important post 2030, but we don't think we're going to see a lot of it in the near term." But then we started hearing from all of these industrial players who were working on developing projects, and we ended up not setting any target in the roadmap for what we needed in carbon capture by 2030, but instead putting together a carbon capture task force that's meeting this year and is going to come back to the governor and legislature by the end of the year with recommendations about what we should be doing on carbon capture. The big project that has a lot of momentum right now is actually at one of our cement plants, the Holcim cement plant or Holcim-Lafarge cement plant in southern Colorado. The town of Florence is working with Oxy Low Carbon Solutions on a carbon capture project for that cement plant. And they've done an initial feasibility study, they're now in a more detailed engineering study —

David Roberts

To do what with the captured carbon though? What's to be done with the carbon? Are they going to bury it or are they going to try to use it somehow, or do they know?

Will Toor

So I think it's a little bit of an open question. One of the things that we have in Colorado are a lot of saline formations that are actually geologically good places for sequestering carbon. There's also a carbon pipeline that crosses southern Colorado. So they would potentially have the option of using it for something like enhanced oil recovery, which is probably not — from a state perspective, we're probably a lot more interested in seeing it sequestered than seeing it used for something like EOR. We're also seeing a number of other projects that are smaller scale that are also in their sort of feasibility analysis side.

So I think it's fairly likely that we're going to see some meaningful scale carbon capture projects move forward. And as a state over the next year, we're going to need to figure out what role do we see this playing in meeting our targets. How do we look at something like EOR versus true sequestration?

David Roberts

Yeah, that's so tricky. That's so tricky from an accounting perspective, political perspective, you name it.

Will Toor

One of the things that's interesting is in terms of scale, if you think about the 20% reduction that we need in the industrial sector, so we're talking there something like a 3 million ton reduction. I think that the scale of capture that they're talking about in just that Holcim project could be on the order of a million tons a year. We're potentially talking a significant role there. We're early in our task force process. We won't have recommendations to the governor until the end of the year. But at the very least, it's intriguing to really start understanding what some of the opportunities may be there.

There's also, I have to say, a really interesting project that is moving forward sort of independently of the state in southern Colorado. The Southern Utes are historically producers of methane, kind of coal bed methane. They've got a natural gas industry and they are working on a proposed project that would be an Allam Cycle gas plant.

David Roberts

Oh yeah, yeah, yeah.

Will Toor

With, I think, saline storage and saline formations on the reservation. And they're looking at a fairly large — like their proposed plant, I think is a 350 megawatt plant. And we weren't really anticipating that that type of low carbon firm generation might be coming during this decade. But again, we're seeing independently a project moving forward that is very interesting.

David Roberts

Yeah, that's such an interesting X factor. The Allam Cycle would be a great thing for Colorado to stake a claim on.

Will Toor

Yeah.

David Roberts

Okay. That's industry next is the source of a lot of action and excitement. This particular section, which is buildings, this is, again, a much less straightforward area in terms of mechanics about how to get at these emissions than electricity or something like that. Review a little bit about I mean, there were multiple pieces of the buildings pushed this session. What all did you guys do?

Will Toor

Yeah, no, this one is really exciting, and this is one that I would say has been really interesting because some of the advocates have argued that we need to focus on sort of enforceable air regulations that somehow would decarbonize buildings, and we really couldn't figure out what that looked like. But what we did come up with was a series of strategies in the roadmap that all of which amazingly moved through the legislature this year. We had, I would say, four major bills that moved forward. Three of them are sort of tools, and then one is the overall organizing principle that allows those tools to be applied.

The tools were first, a beneficial electrification bill that requires our electric utilities to create electrification programs that are analogous to their energy efficiency demand side management programs, requires the Public Utilities Commission to set targets for those programs based upon all cost effective electrification. And it builds into that cost test the social cost of both carbon dioxide and methane emissions avoided, and requires the use of a discount rate of under two and a half percent. So it pushes you to the higher number from that 2016 interagency study, the same one basically that State of Washington used. So it starts at about $70 a ton for carbon dioxide in 2020 and, I forget, I think around 1400 a ton for methane.

We think that that will drive significant investment in electrification.

David Roberts

And when you say electrification programs at utilities, you just mean sort of like incentives for heat pumps and things like that?

Will Toor

Yeah. So on the residential commercial side, we think it would be primarily heat pumps and heat pump water heaters, and then they could also be doing things on the industrial side, where there's a wider variety. It also allows them to create programs to support new all electric construction. So that's one piece. Another piece focuses on the gas utilities and it basically expands existing gas utility energy efficiency programs. Right now we've got pretty large electric utility programs and quite a bit smaller gas utility programs. And what this does is it takes that same social cost of carbon and methane, builds it into the cost test, and then requires the PUC to set targets based upon all cost effective energy efficiency measures.

So we think that will drive substantial additional investment in upgrading existing buildings. Third thing: piece of legislation focused on commercial buildings. Again, this may sound a little bit familiar from Washington state. We looked at some of the successful efforts there two years ago, and it requires both benchmarking of energy use by those buildings, and then it sets rulemaking at our State Air Commission to adopt performance standards for existing buildings that require that the sector as a whole needs to achieve at least 20% reduction in emissions below 2005 levels by 2030. And so that's including all of the growth in the number of buildings since then, the entire sector has to get to that 20%.

And amazingly, on that one, it actually ended up being something approaching a consensus bill. It wasn't just the environmental community —

David Roberts

I thought real estate and builders hate that stuff, what you pull on them?

Will Toor

So we just worked in good faith with all the parties. We agreed to create a task force that has significant representation from building owners of various sorts in developing the proposed performance standards. But the legislation specifies what the performance standards have to achieve, and so we need to certify that those standards will achieve the 20% by 2030. But it was endorsed by the Building Owners and Managers Association and by NIOP.

David Roberts

Wow.

Will Toor

And labor was on board with it. That's one thing that's been very important to us is to make sure that we're moving this forward in a way that helps provide good jobs. We're making sure that any utility funded programs or high labor standards — I think it's very important to us, both substantively and in terms of holding a broad coalition together to do this in a way that works for labor and that assures that we're helping to create good jobs as we go forward. We also really wanted to avoid the kind of sort of existential battle over building electrification we've seen in some places, that we saw tank legislation this year.

David Roberts

Breaking out all over. There's running battles all over the country now on that stuff.

Will Toor

And that sort of feeds into then the fourth big bill that sort of pulls us all together, and which is, I think, the real innovation here. Senate Bill 264 that we refer to as the Clean Heap Standard Bill, sets carbon reduction requirements for our gas distribution utilities. And it includes in their carbon emissions, the emissions from combustion of gas by their customers. It again is aligned with our roadmap targets in that sector. So it's a 22% reduction by 2030. They're allowed to use multiple measures so they can do more energy efficiency, they can do more electrification, they can inject hydrogen into their gas lines, they can reduce leaks on their distribution system.

And we allowed limited use of what some people call renewable natural gas. We refer to it as biomethane and recovered methane.

David Roberts

Does that mostly come from agriculture in Colorado, or landfills or what? Where does that come from?

Will Toor

So, there will be landfills, sewage treatment plants, agriculture, especially some of our dairy farms. The other place where I think there is an opportunity is there are abandoned coal mines in western Colorado that are just pouring methane into the atmosphere. And as of now, there is only one project in the state that is capturing and using that methane. So there's a number of opportunities there. The way it's structured out of the target, they can reach about a quarter of the target through the use of recovered methane or biomethane. And the rest of it has to happen from sort of on-system reduction.

David Roberts

Well, I have a question about this. For utilities that are electric and gas, this seems kind of straightforward. Like you just shift from the one to the other, right? Shift from natural gas to electricity would be your main tool and you're fine with that. But for natural gas utilities that are just natural gas utilities, I see the road to these 20%, 22% reductions through these kind of bricolage efforts: efficiency here, reducing leaking there. But you don't get to zero with natural gas. If you're a natural gas utility, the end of this story is you going out of business, is it not? Or how are natural gas utilities viewing all this?

Will Toor

So a couple of things I'd say there. So we did structure this around there's the near term target of the 22% by 2030. The legislation also has the 90% by 2050. Sets future rulemaking proceedings for setting targets for 2035, 45 on that road to 50. So at one level, I would say people are focused on the next decade. And the way that we've framed it is that none of us really know what the ultimate solution is going to be. Some people think they know. There are certainly folks who argue that the solution is obviously full building electrification and maybe they're right.

There are others who argue that we're going to figure out a way to do air capture of carbon induced synthetic methane and it will be using that or that we're going to get to a point where we can use higher percentages of carbon or of hydrogen than we think we do in the pipes. We're not trying to answer that question today because a) we don't feel like we have enough information to really answer it. The truth is, nobody has really done the level of analysis that would be required in Colorado as a cold climate state to answer: What would it really mean for us to fully electrify, what would it mean for our electric grid?

Nobody really knows how some of these other technologies are going to pan out and we don't need to answer that today. So we intentionally structured something that allows us to use multiple measures today. It allows the utilities and customers to gain experience with all of these things. It's going to, I think, lead to a big increase in the use of heat pumps in Colorado and allow us to get real experience with using cold climate heat pumps and working out all the kinks and figuring out how do you get high levels of customer uptake. It will allow utilities to see what they can do in terms of making recovered methane and biomethane affordable at scale.

And then over the next decade, I think we will need to answer some bigger questions about, "okay, what does it really look like post 2030?" We're not trying to prejudge those answers. And because of that, we were able to have a broad coalition that supported this legislation. Our largest gas utility, Xcel Energy, is a dual fuel utility. They actually supported the legislation other utilities were not necessarily actively supporting. But I believe in the end there were no utilities that were actively lobbying against the legislation.

David Roberts

Oh, interesting.

Will Toor

And, you know, I think that we had all had the opportunity to watch what happened in the Nevada legislature this year where there was a sort of similar effort, but one that I think perhaps was not as focused on building consensus among multiple parties. Our sense is that we're a lot better off trying to do it the Colorado way and get as many people as possible on board, learn from it, and then we'll figure out what the next steps are.

David Roberts

Right. So for buildings, then you have an overall greenhouse gas reduction, target-specific boosts for energy efficiency and electrification specific targets for reducing gas, specifically gas emissions and energy performance standards. The one thing that seems to be missing is building codes. Have you tackled those or addressed those yet or what's the deal with that?

Will Toor

So that's very much on our agenda for the next big thing we need to do. And we did some work on this in 2019. Colorado is a state that's traditionally a local control state on building codes. But we were able to do legislation in 2019 that put certain minimum standards on local energy codes. But it needs to be updated. It's not aligned with where we need to be to achieve our 2050 targets. And so this is something we called out in the roadmap. We didn't have the bandwidth to do that in addition to everything else this year.

But I'm certainly hoping that we are going to have some vigorous stakeholder conversations over the next year and come back to how do we move forward on building codes in a way that aligns with where we need to be if we're going to have decarbonized buildings that get us to 90% or more by 2050.

David Roberts

All right. Well, let's then hit the last one, the biggest one in Colorado and probably the biggest source of controversy and the biggest source of angst in climate policy generally, namely transporation.

Will Toor

Oh, just before we jump to that, could I throw one other, which is oil and gas? In other places, may not be so big, but for us a really big part of our emissions is methane leaking from the oil and gas upstream operations. And that's one where the stars are kind of aligned, where there's real opportunities to reduce those emissions. Some of it is driven by sensing technology. There's just much better ability to actually monitor emissions than there used to be. And that means that you can actually regulate them and you can reduce them. And so we've got a target in the roadmap of at least a 60% reduction in methane emissions and that is moving forward in a rulemaking process at the Air Commission that the stakeholding is happening right now.

It will be go to the Air Commission for adoption later this year and legislation that was just passed puts that into statute. So the Air Commission rules have to achieve a 60% reduction. It also requires every two years an inventory process to make sure that we're on track and requires additional rulemakings to get there if we find that sort of the real world emissions aren't on the trajectory that we think they're going to be.

David Roberts

Is part of the thinking behind this. I mean, this is a national problem and it's a long standing national problem, these leaks. And the industry has traditionally not been very helpful. They've demanded voluntary standards and et cetera. Is part of the goal here to sort of kick start this work and figure things out in such a way that they can be kind of exported like these sensing technologies and just ways of doing this or is it that we already know how to do it pretty well and they're just not doing it well?

Will Toor

The way that I would describe it is, back in 2014, I think, Colorado adopted our first round of methane regulations, and those did become the model for the national rates that the Obama administration adopted. The Trump administration unadopted them, and they are being reconsidered. So, you know, we certainly would hope that what we're doing here could help to inform a national standard in the future. To some extent the way that we arrived at our targets was we looked at what sort of the leading oil producers with ESG commitments were saying they could do, and we said, "Well, great, just like we worked with Xcel to take their voluntary commitment and put it into the statute. We take you at your word."

David Roberts

Call your bluff might be another way to put it.

Will Toor

No, I would say we take you at your word and we agree that the technology has evolved to the point where this is possible. And we are going to work with you to come up with a workable set of regulations to ensure that we achieve those targets and that all of the industry achieves the targets that those with ESG commitments have made.

David Roberts

Okay, so oil and gas leakage, a huge problem in Colorado and some other states, is being legislated as well. So we can't avoid it anymore.

Will Toor

Transportation.

David Roberts

Let's talk about transportation. The thing that grumpy environmentalists say in response to almost every state sort of climate action plan or set of legislation — they said the same thing in Washington. It's fine and dandy to do all this, but you're also spending a bunch of money on roads, you're also widening a bunch of highways. We all know, everybody knows now it's been proven a trillion times that widening roads doesn't help anything, doesn't reduce congestion.

It just leads to more cars on the road and more pollution. So maybe say a little bit about the broader transportation context and how you think about that relative to steps you've taken. And then let's hear about the steps.

Will Toor

So transportation, as we noted, is now the largest single source of emissions in the state. Just barely, but it's definitely a big one. And we face the same issues that, as you noted, kind of every state that is working on this does. Transportation is a really challenging sector to work on because it involves the decisions of millions of people about how they're going to get around. It is very much influenced by land use decisions that are made by local governments that include both the decisions to build very dispersed development that puts housing very far away from jobs, and the decisions by other communities to enact exclusionary zoning that doesn't allow housing near the jobs.

We have a tradition of local governments having a lot of flexibility to make those decisions. And even more than building highways, that's the big thing that really drives the vehicle miles traveled.

David Roberts

I was going to address that later, but let's talk about that now because this is the big missing piece in all climate plans. Right? And it's like — we know from research that density, walkability, transit is one of the best and necessary ways to reduce transportation emissions. You can switch out cars for electric vehicles, but you still are left with a bunch of the problems of cars, a bunch of the long commutes, the other kinds of pollution, just the general unpleasantness. So do state governments have any instruments or tools whereby to impose some sort of reason or some sort of positive direction on those local decisions? How do you think about that?

Will Toor

In the Colorado context, I think the way that I would frame it is: One big step is that as a state, we're acknowledging we have a problem. And so in the GHD Roadmap, really for the first time, we identified exclusionary zoning as an issue that we need to address as part of our attempts to address transportation emissions. And this year for the first time, we actually had two pieces of legislation that are just sort of the initial front of starting to act on this and they're incentive bills. One of them is a bill that created a new fund for affordable housing.

And in order for a city to get access to the funding, they need to do at least one thing from a menu of options. And that includes making duplexes and triplexes by right in residential zoning districts. And it includes getting rid of occupancy restrictions and it includes getting rid of maximum parking requirements in at least parts of the community. There was another bill that offered something that cities have wanted for quite a while, which is greater flexibility to do inclusionary zoning requirements for rental housing. But again, in order to get permission to do that, you had to pick from one of these things that would help to increase housing opportunities and density within the community.

I think there's a lot of interest in thinking about how do we continue down that pathway?

David Roberts

You're surely watching California where they're trying to impose some state rules and the blowback is predictably nasty.

Will Toor

I think that what is going to be politically viable in Colorado, at least in the near term, will really focus on creating incentives and it may be figuring out how do we bring more money to the table and create really meaningful incentives for local governments. I don't think that the politics here would make it possible to do a Senator Wiener-like legislation from California. That's not on the table here. It's not politically viable. But we are certainly interested in starting to incentivize those local governments that are on the verge of being willing to go in this direction because in actual fact, there's a lot of benefits for the local communities.

It's not just about those broad climate benefits, it's about creating communities that people can afford to live in and they can get places by walking. And there's really strong reasons why this is good for the communities, not just good for the state and where it works —

David Roberts

Yes, but not always good for the homeowners who show up for the meetings though. That's the thing with local control.

Will Toor

Yeah, I was a mayor for a number of years and I lived that.

David Roberts

You poor man. What about transit though? Does the state have a little bit more influence over transit or is that mostly local too?

Will Toor

So certainly our big transit provider in Colorado is in the Denver metro area and they are primarily funded by local sales taxes and they're controlled by an independent board. We did have a large transportation funding bill this year that I think was pretty important for starting to change the direction on transportation in Colorado. It did a number of things, and it certainly provides money for our State Transportation Department's ten year plan. That does include major highway expansions, but it also does a major investment in transportation electrification. Nearly three quarters of a billion dollars over the next decade that we think is going to be very important to achieving our EV targets both in the light duty space and in the truck and bus world.

David Roberts

What's that money go to specifically? Is it like point of sale rebates or charging stations or do you know yet?

Will Toor

Well, it does a number of things, and I would say we already have an existing assignable, refundable tax credit for light-duty vehicles, and actually for larger vehicles, but it's pretty small for the larger vehicles as a percentage of their cost. Because it is assignable, you can actually assign it to the car financing company at the point of sale. So for the companies that engage in that, which so far is Nissan and GM, it acts like a point-of-sale rebate. We also have existing law requiring utilities to invest and Xcel just got a plan approved to spend $100 million over the next three years, mainly in infrastructure, but it also includes enhanced point-of-sale rebates for low-income customers.

David Roberts

Oh, cool.

Will Toor

But this $730 million approximately is divided into three buckets. One bucket will go to our Department of Transportation, where it will be used to help transit agencies buy electric buses.

David Roberts

My favorite.

Will Toor

Another bucket goes to our Department of Public Health and Environment, where it'll be a clean fleet enterprise that will be spent on electric school buses, public vehicles, helping Uber and Lyft drivers switch to electric — and that part is actually funded by a fee on Uber and Lyft rides. And the fee is one level if you're in an ICE vehicle and a single passenger, and it's half as much if you're in an electric vehicle or have two or more passengers.

David Roberts

Funny.

Will Toor

And then it also will go to helping fleet transition for medium and heavy-duty trucks. And then the other bucket that lives here at the Energy Office goes to EV charging infrastructure, and it goes to supporting low- and moderate-income EV adoption. And the structure that we're looking at is kind of cribbed from what we've seen in some other states. And it's sort of like a cash for clunkers, but where we will work with you on both converting to an electric vehicle or to an electric bike, if that works better for you.

David Roberts

Electric bikes, that's going to make some people happy.

Will Toor

Yeah. We started an e-bike pilot last year, and people have loved it. And we're going to use this money to grow it substantially because. It doesn't take that much money to do some pretty significant things with e-bikes. Senate Bill 260 — also this new transportation funding bill both really ramped up the state investment in things other than roads. Like historically, most of our state transportation dollars were, largely by constitution, were directed towards highways. We did manage to change that for the local government share of gas tax revenues. A few years ago, we were able to change it so that's now flexible dollars, it can be used for transit roads or bikeped.

And so this new bill puts a billion dollars into that local share that can be used for whatever locals want. It puts a bunch of money into a multimodal options fund that is basically money that local governments can apply for for transit or bikeped projects. They have to match it for one for one. So it kind of doubles the amount that goes into that multimodal. They created a new air quality mitigation fund that's kind of focused on our areas that are in non-attainment with federal ozone standards and on environmental justice communities. And then it makes a bunch of changes to the planning process that will have an impact going forward.

David Roberts

I wanted to ask about that. Where the State Department of Transportation, you had some new planning requirements there that they include greenhouse gases in their planning, that they incorporate induced demand in road planning, which you'd think like how could any professional transportation agency not be incorporating induced demand by now? But I'm curious, I mean, maybe you can't really answer this, but sort of notoriously, this is true in Washington, like, state departments of transportation are like dinosaur agencies. They're like the caboose of the sustainable transportation thinking. I don't know why they all ended up like that, but do you have that same problem in Colorado, like, what's the level of sort of wokeness of your Department of Transportation?

Will Toor

So our DOT has really changed in the last two and a half years. When Governor Polis came in, he brought in as our DOT director a woman named Shoshana Lew, who had been in the Obama DOT, where her role had actually been helping to, among other things, develop the light-duty vehicle, GHG standards and CAFE standards. And so she was the first state DOT director who I know, who really comes from a background of caring about climate.

David Roberts

Right.

Will Toor

And it was certainly a large cultural transition for the agency. Among other things, it was the first time that there was a young woman running that agency. And one of the things that is really striking, that is very different from other DOTs, is the extent to which many of the leadership positions there are now women from a climate background. In planning in the new Office of Innovative Mobility where they created to focus on electrification and transit and actually hired somebody away from the Energy Office who was leading our climate and transportation efforts. So the culture there has really changed.

They've actually, over the last two years, really begun to do things like incorporate induced demand into their modeling and to really start thinking much more broadly about the role of transportation. Shoshana created a new program coming along with COVID to provide state funding to help with local street conversions from car-only streets to streets that could be used for walking, biking, transit, or sort of retail and restaurant use — that was super popular. People love it. We now have $115 million coming out of this transportation bill to expand that program. And so we're already seeing, I think, a much more progressive vision on transportation in Colorado than you saw in the past.

But this legislation really builds in a focus both on environmental justice, creates a new division of environmental justice, requires much more modeling and mitigation of things like particulate emissions near highways, and it builds in an ongoing requirement that the DOT incorporate into its planning, helping to achieve the state greenhouse gas targets. So there's actually a rulemaking that is about to start at our State Transportation Commission to create greenhouse gas budgets for transportation plans, and future plans will have to show how they can achieve those targets.

David Roberts

Will any of that apply to the current highway widening plans that are set for the next ten years, or is this just for future?

Will Toor

So it will certainly apply over the next ten years. It does not apply to the existing plan. Even though you describe them as ten-year plans, they get updated every few years.

David Roberts

Right.

Will Toor

And so the legislation explicitly requires that the next time the plan is updated, the new requirements around greenhouse gas mitigation and whatever new rules are adopted by the Transportation Commission and the Air Commission would apply both to the DOT and to our Metropolitan Planning Organizations. And it also tied some of the new funding to a requirement that in order to access that new funding, plans would need to be updated within the next three years.

David Roberts

Oh, interesting. So there's at least a chance then that not all of the highway widening that's currently in the plan ends up happening.

Will Toor

So, there are some projects that are certainly going to happen, the projects that are very far along, and the ones that most people think probably make sense. We have a highway through Denver, Highway 270, that is extremely congested, where they are planning on adding some high-occupancy toll lanes to them that is going to move forward. There are reasonable arguments as to why it should move forward and it's going to move forward. There's a project on Interstate 70 up into the mountains where the road is three lanes, and then it's two lanes for a while and then it's three lanes again where they're going to make it continuous three lanes.

They're very close to starting construction. That's going to happen. But projects that are further out in the plan will certainly need to be reevaluated under the new planning rules.

David Roberts

Right. Okay, let's move on to the last big thing I wanted to hit before maybe the last two things. I want to talk about environmental justice quickly because there's environmental justice kind of sprinkled throughout. So what's the big story on environmental justice and sort of where are you most proud of it showing up in legislation?

Will Toor

Yeah. So this is an issue that I think in Colorado, as in many places and as in the national conversation, this has really become a much larger part of the conversation over the last year. There's much more community engagement and organizing around this, and there's a lot of elements in legislation. The climate legislation that just passed creates a new environmental justice ombudsperson at our Public Health and Environment Department. It creates a new Environmental Justice Advisory Board and gives them some real authority over money because it's going to take environmental fines that companies pay and transition those out of our state general fund into a new fund for mitigation in EJ communities.

And the Environmental Justice Advisory Board will have a huge role in how that money gets allocated. There was the creation of this new environmental justice office at CDOT to make sure that as CDOT is planning transportation projects, they're really engaging and thinking about some of those historical injustices and what the impacts of those projects will be. And then there are multiple places where various utility programs are being structured so that significant portions of the investment have to go to benefit either low-income communities or individual low-income residents. The other place that I think is going to be a significant focus is as we move forward with these new transportation electrification investments, we're really going to have a focus on deploying especially heavy-duty electrification in those communities that are most impacted by pollution.

So we have an area, for example, in north Denver, where there are three major highways, tons of trucks and trucking fleets that are headquartered around there, the Suncor refinery and multiple other industrial facilities. When you think about the areas that are most polluted and where people are really being very much impacted by localized air pollution, that's not the only place in the state, but it's really a prime example. And it's a place where, when we think about fleet investments and where we're going to deploy charging, I think there will be a major focus on assuring that that's one of the areas that we focus on early.

David Roberts

The one final thing I had a question about that is the advisory board — I guess when the EJ people hear about something like that, they're naturally, I think, suspicious a little bit, given history. So, what teeth does it have? Can it grind things to a halt? Can it really what are the legal mechanisms around it?

Will Toor

So again, the place where it will have the strongest authority is over how those new mitigation funds are spent in EJ communities. But it will also certainly have a voice in the operations of the Department of Public Health and Environment and will have a voice in a rulemaking process. But as you said, it will certainly be an evolving process as we see exactly how it brings the EJ voice to bear in his rulemakings.

David Roberts

Okay, just by way of wrapping up, I've kept you long enough, now you've done so much stuff, we could just do a laundry list for 2 hours. There was some controversy along the way, some of the state environmental groups got upset. And I think, insofar as I understand it, the idea was that the roadmap that the governor released doesn't have legally enforceable caps in these sectors. It relies on sort of the sectoral policies and incentives and voluntary agreements. And so they tried to put forward a bill, Senate Bill 200, that I guess basically would have created a cap and trade system, or at least caps on all these sectors.

And then there was some negotiation and now there are caps on some sectors and not others. Tell me the capsule version of that story.

Will Toor

Yeah, I will do my best, and I think you framed it fairly well. There was certainly a narrative that was out there that the roadmap was a purely voluntary and aspirational document. I never quite understood that when we were moving forward in clean energy, plans at the Public Utilities Commission and rulemakings on oil and gas at the Air Commission had already adopted low and zero emission vehicle standards. Have a 2022 hold for medium- and heavy-duty emissions and looking at fleet rules and indirect source standards. Like, there's lots of individual sectoral policies that were enforceable. But what we did not have was an overall cap or cap and trade program.

David Roberts

An economy wide program. I guess that was the source of sort of like the complaint, right? They wanted some sort of enforceable economy wide cap, right?

Will Toor

That's right. And I think there were a couple of issues that we saw. One is that all of the work that we had done was sort of focused on this sectoral approach. And we had a set of strategies that we believe will get us where we need to go, with transportation certainly being the most challenging sector. And for a variety of reasons, the administration doesn't believe that a cap and trade program is right for Colorado and certainly not right for Colorado today. We also felt like the approach in SB 200 was such that it was going to take many stakeholders, including labor stakeholders and many stakeholders from different areas of the state and different industries who have been pretty willing to work with the state on implementing the roadmap.

And it was going to turn them into determined opponents of climate action in Colorado.

David Roberts

But if the targets are there, why would making them legally enforceable turn these people against them unless they weren't planning on meeting them? Do you know what I mean? I mean, that's the suspicion.

Will Toor

I think part of the problem was that you were looking at making things enforceable in sectors where it didn't work very well. So ultimately what the administration said was there were big parts of that bill that we liked. We liked the environmental justice provisions, we liked the small fees on GHG emissions to better fund the climate division within our public health and environment. We liked the social cost of carbon language, which broadened the use of social cost carbon for air regulatory purposes. And we were fine with having the statutory caps in areas where it aligned with strategies that made sense to us.

So, we were already doing the rulemaking on oil and gas that's now statutory, and we're fine with having the legislature say "you have to achieve what we were planning on achieving anyhow." They did the same thing on the industrial sector and it added additional regulatory teeth on the electric side. That doesn't really change much because all the utilities were headed there anyhow and we already had the authority to act if we needed to if a utility didn't move forward. But it does strengthen that. So all of those we were fine with. Where we had issues were saying that the Air Commission had to adopt a cap on buildings because who are you capping?

Like, we have the clean heat plans on the gas utilities. We think that that's a really creative approach to doing sort of the closest you can get to an overall regulatory requirement on buildings that makes sense. The way that it was written, we believe, would have required us to create a cap and trade program on buildings that would likely have imposed significant costs on consumers. Whereas the way we've structured it, we have a program that lives primarily at the Public Utilities Commission that requires them to work with utilities to develop the most cost-effective programs possible. That's not what we would have gotten out of a cap on the enforced through the air side.

Similarly, on transportation, we know that, yes, there are models out there like TCI (Transportation Climate Initiative) in the northeastern states. But when we looked at TCI, which I think we would have been forced to do something like that, what we looked at was what, seven years now of debate over how to implement it. Most of the states —

David Roberts

Not implemented by any of the states yet, right? I mean, it's still —

Will Toor

Not implemented anywhere. And when you look at the projections of what it would actually do, it would generate revenue to invest in electrification and multimodal transportation. When you look at the amount for the four states that are talking about going forward, you look at the amount that would be invested per state. And we are getting more money invested in electrification and multimodal transportation by passing our transportation bill this year than we would if we were a TCI state. So we sort of looked at it and said, why would we do this incredibly complicated and controversial transportation cap approach when we can just work with a wide variety of stakeholders, have support from the business community and from local governments and from the environmental community on these new transportation fees and just move forward in a much more straightforward and less controversial way?

It just seems like common sense to us. And ultimately we were able to get to a place with the legislative sponsors and advocates where we moved forward with the legislatively adopted emissions caps in those sectors where it works, move forward on the whole suite of buildings bills that we think is the most elegant approach to having as close as you can get to an assured approach on the building side. And we're able to take significant steps on transportation and we will continue as a state to move forward in multiple ways on transportation. We know after this greenhouse gas budget rule's adopted, we need to think about medium and heavy-duty vehicles.

We then need to think about post-2025 light-duty vehicle rules, and there will be more work to do in the future.

David Roberts

They're not here to defend themselves. So maybe this is not fair, but I feel like some of the people in the environmental community have an exaggerated sense of the significance of statutory caps. I mean, people are passing statutory caps all over the place that are getting violated and thrown out and — it's not magic; just because you make it statutory that it's definitely going to happen. You have to do the sort of ground-level work, the sort of detailed sector by sector work regardless even if you have the cap.

Will Toor

And the caps make more sense when you have a handful of industrial operations that you can work with — traditional regulatory approach makes great sense. When you're talking about millions of individual buildings and vehicles. You have to focus on a broader suite of strategies that get you market transformation.

David Roberts

What about a clean fuel standard like in Washington? Well, it's on the whole west coast now I guess. Did you think about that?

Will Toor

So we did and it's not on our near-term agenda. We took a look at it. We did a feasibility study a year ago and the thing that gave us significant pause was when we did the analysis and looked at different scenarios for how you would comply. What we saw was a combination of both a fair amount of cost passed on to consumers but most of the money going into biofuels. And from our perspective, we think that the future is really about electrification. There may be an important role for hydrogen in the long haul heavy-duty space but at least based on our analysis to date we don't see the future as being largely about biofuels in the transportation sector.

David Roberts

Right.

Will Toor

And we were a little put off by an approach in which we were going to drive a lot of costs with most of the compliance happening through biofuels.

David Roberts

Yeah, that's sort of the danger of kind of the tax approach or the incremental rising cost approach is you get the cheapest proximate solutions, right, but they might not be the ultimate solutions. And if you know the ultimate solutions why not just skip straight there instead of trying this sort of bank shot, ratchet attempt? Well, this has been very illuminating and excellent. Last question then is: I understand you don't have authorization yet from the governor's office to give specifics about your next term agenda but what in your mind are kind of the big climate wise and clean energy wise what are the big pieces left for Colorado to tackle?

Will Toor

Also two of them I've already touched on and that is we really do need to take the next steps on building codes. We really do need to figure out how the state can work with local governments to help move towards better approaches to land use that will tend to reduce VMT and greenhouse gas as instead of driving higher levels of driving and actually in many cases higher levels of building energy use also.

David Roberts

Well, it's amazing what happens when you elect a bunch of Democrats, I got to say.

Will Toor

You know, Governor Polis has been a real visionary in this stuff. I know I realized that the environmental community hasn't necessarily framed him as a climate champion in a way that we've seen in some other states. But, boy, working in the administration, I have seen the kind of all of government approach where he is building a focus on climate into every relevant department in the state and is giving us a real free hand to move creative policy.

David Roberts

Yeah, I mean, I got to say, even though we've spent now almost an hour and a half talking about it, we've only hit kind of the big items. There's all these I mean, this is the kind of stuff I love reading about. Just this sort of really small bore, very specific stuff. Just tweaking this agency or this department or this budget. Just little things. But those are the things that add up. It's like hundreds and hundreds of those things that really add up in the end.

Will Toor

Yep.

David Roberts

Well, thanks so much, Will, and maybe we'll see what y'all do next session and have you back on.

Will Toor

Sounds good. Thank you, David.

David Roberts

All right, thanks a lot. Bye.

Will Toor

Bye.

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