Firestone Explosion: Gov. Cautions Against Heavier Local Oil And Gas Regulations

Ryan Warner: Governor, welcome to the program. I want to say that because of some technical issues we're both on the phone. But I think it's the quality of the conversation that matters, more than the quality of the connection. Thanks for being with us. 

Gov. John Hickenlooper: Of course and I agree completely, the quality of the conversation is what matters. 

RW: We're going to hit several topics today, including what effect that deadly house explosion in Weld County might have on oil and gas regulation. First, when this legislative session began 120 days ago, you talked repeatedly in your State of the State Address about finding a new source of money for transportation, to deal with what you say is a $9 billion wish list of state projects. And you told the Legislature, "If talk could fill potholes, we'd have the best roads in the country." For Coloradans stuck in traffic jams who are swearing about their commute, or who are driving trucks on bumpy rural roads, how did this session work out for transportation?

JH: Well you know I think that if you look at the stuff we talked about back then, at the State of State speech for instance, we did talk a lot about roads and bridges, but we also talked about the Hospital Provider Fee for the housing, grey market enforcement, healthcare reform. I think transportation, we made a big step by getting the Hospital Provider Fee finally done, which again, I give tremendous credit to President Grantham and Speaker Duran. They both had to make compromises that neither were comfortable for but in creating the Hospital Provider Fee, they did get at least a start. In other words, that money that's going to be dedicated to transportation in the Hospital Provider Fee, about I think 25% goes to rural roads, 10% goes to transit, so there's about, you know, of that money, maybe a little over a billion dollars, $1.1 billion will go to other transportation projects. That's out of $9 billion that we really needed, so we made a good step forward, but it certainly doesn't solve the problem. 

RW: If there are listeners wondering how the heck a Hospital Provider Fee relates to roads and bridges, the Hospital Provider Fee refers to a pretty contentious accounting change, that frees up money in the budget, it appears, though negotiations I understand are still underway, that this is headed for passage and for your desk. And so it's a dent you say, in the $9 billion transportation wish list. What did not pass this session was a proposed tax increase, specifically for transportation that would have been referred to the ballot, so that voters could have decided, and it would have raised $3.5 billion for transportation. Why do you think lawmakers found room for agreement on the Hospital Provider Fee, but couldn't crack the nut of that, not even tax increase, but proposed tax increase to go before voters?

JH: Well, it was disappointing and puzzling, I agree with you. I think part of the reason the Hospital Provider Fee got through was things other than transportation. Transportation became part of the deal to convince people, especially Republicans that were really had problems with Hospital Provider Fee being reclassified as a fee, which we've always argued it was. A lot of them felt by putting some transportation, that this money that would be freed up, making sure that a significant chunk went to transportation. That helped them get there. 

In terms of the tax increase, I really am, I mean, we were asking permission from the Legislature to put this on the ballot, to let the people decide. Isn't that what TABOR, is implied in TABOR, that we would from time to time bring issues before the voters? When that got killed again, I give Kevin Grantham a lot of credit, because he led in a very politically difficult issue for Republicans, he was willing to stand up there and say, "No, no, this is something that voters should get a chance to decide." I give him a lot of credit for sticking in there. 

RW: So the compromise bill that appears headed for passage as you've said, does much more than just address transportation. In fact, our reporter at the capitol, Vic Vela, has called it, "The kitchen sink bill." There is money in this to keep rural hospitals, and safety net hospitals open. It may increase some co-pays for Medicaid patients, there are small business tax breaks. We'll get to some of those others, but one more question about its funding for transportation, just under $2 billion, is there a list of what projects come first? In other words, can you tell the people of Colorado right now what the priorities are in terms of specific projects out of that money?

JH: Yeah, that all goes through a non-partisan, we'll call it Transportation Commission with representatives from all across the state. And I haven't, I'm not sure if they've redone that list or sat down looking at, with a different amount of money, is that going to change their priorities in any way. I'm sure that they will get on that in the very near future. I'm sure they're working on it right now. 

RW: All right. 

JH: Again, the bill hasn't passed yet, so they've got to wait and make sure as the bill comes out, and then they're going to begin the analysis. 

RW: Yes, it has to pass of course by the end of today, this being the last day of the legislative session. Okay, to some of the other items in this kitchen sink bill, and that is keeping open rural hospitals and safety net hospitals. Do you believe this is a long-term fix, or is this a band-aid on deeper issues that are effecting especially rural communities, and the healthcare provided for them?

JH: I think the money going to rural hospitals is a long-term fix for many of them. I think it was important to get done. The state, there's no way should we ever consider turning our back on the parts of the state that provide our food. Our agricultural economy is a big part of this overall state's economy. But I do want to point out that this wasn't all that we should be doing for rural healthcare. It is a big step forward, but unfortunately one of the bills that got killed was what we called the local government opt-in, which would allow the smaller towns to become part of the state pool in terms of how insurers, which insurers would provide insurance, and what rates would be provided. Obviously when you have a bigger pool, your premiums go down. So it's towns like Brush, Colorado, could have been part of this much larger pool, and would have seen their insurance premiums gone down for sure. That obviously didn't happen. There's also another bill that offered what was called premium support, it would have affected 47 out of 64 counties, and that slivered, it wasn't covered by Obamacare. The people from four times to five times the federal poverty level would've gotten a very modest premium support so that, again, people in rural areas wouldn't be paying dramatically higher insurance premiums than the people in the rest of the state.

RW: To put a bow on this conversation about this bill which does many things as we've explored, so it touches transportation, it touches healthcare. There are some moving to the ballot and hoping to ask voters themselves if there can be a tax increase for transportation and infrastructure that is because the legislature did not refer a measure to the ballot they would gather signatures and put it on the ballot themselves. I think there are any number of efforts that would do this. Would you endorse those efforts to put a transportation tax on the ballot through other means?

JH: I haven't seen any of those measures or any of the language so I don't know. I'd have to see what it looks like.

RW: Is there a part of you that's crossing your fingers that one of them makes it?

JH: Again, it would depend on what it is, but I do think obviously only having what turned out to be about $1.1 billion when we have $9 billion worth of needs is not satisfactory and this state, I mean, right now we have, at 2.6% unemployment we have the lowest unemployment in America, the strongest economy in America and yet we're unwilling to invest our resources and making sure that our success doesn't strangle us in the future, and it's very frustrating. I think the voters if given that choice would certainly say, "Hey, I don't mind paying. I want it to be as small an increase as possible. I want to make sure it all goes towards transportation infrastructure but I want to make sure that we have a system that works." The fact that it's not going to the voters, it's very frustrating.

RW: If you liked what you saw from a measure on the ballot, it met your needs, whatever those are, would you campaign for it?

JH: Sure. I mean if the General Assembly had referred a measure to the ballot, I, at least the versions I saw, again, it depends on how things would've come out when it finally gets passed but I would've supported them. Most of the things I saw were modest, limited tax increases that would've provided essential resources to make sure that we fix I-25, fix I-70. You know, the traffic congestion that we get in the urbanized areas of the state are, I mean, it's gone on too long and the state's got to be a partner in addressing those issues especially in those places where you know you're connecting to an urbanized area but it's going through a rural part of the state that can't raise the money themselves.

RW: Why don't we take a quick break. You're listening to Colorado Matters. I'm Ryan Warner and we are live with Governor John Hickenlooper from the state capitol. He and I are both on the phone and this is the last day of session. Actually we're going to continue with the conversation, Governor. No break needed. So let's talk about another big issue, oil and gas regulation. Last month an explosion at a home in Firestone in Weld County killed two people. Investigators say that was caused by a gas leak from a broken flow line that was connected to an old well. You gave oil and gas operators 30 days to inspect wells and flow lines within a thousand feet of occupied buildings. They have 60 days to fix any leaks they find. But that's the companies inspecting themselves. Is that enough to guarantee peoples' safety?

JH: Yes, I think so because we're going to do spot checks all over the place. We have almost a hundred inspectors on the state payroll as well. So we're going to be redoubling our efforts to make sure that we are, you know, supervising and, if you would, auditing, making sure that all the flow lines get checked. Obviously some of the flow lines are abandoned. The companies that put them in place, no longer in business. I think that's where we're also going to put effort to say, to work with local counties and municipalities to really make this a state-wide effort to, let's get all this stuff on paper. Let's get a map of where each flow line is and then make sure that the local communities and neighborhoods can have access to that information. It should be public. In my opinion it should be public information.

RW: So when you say, spot checks, that is to say you'll be checking up on the self inspections that the industry is doing but several oil and gas operators and contractors have told CPR News they think the timeline is far too short. Some have even said you're trying to cram a year's worth of work into a couple of months. So will those wells and lines be inspected and maintained within the 30 days or the 60 days you've ordered and how can you make sure to enforce that if it's unworkable for some companies?

JH: Well obviously we made that decision in, you know, literally in 24 hours and we had no assessment of the viability. No one has said that to us, or at least not to me. Maybe someone said it to the Colorado Oil and Gas Conservation Commission. But we're not trying to demand something that's impossible but what we wanted to do is create a sense of urgency. Again, I am still of the opinion that this was a freak occurrence, that there's not any likelihood that there's a similar situation anywhere in the state, but that doesn't mean we shouldn't go out and do everything we can, as quickly as possible, to go through every flow line and make sure as we do that that we make a paper record, we map where they are.

RW: You call this a freak occurrence. What do you base that assessment of what happened on?

JH: Well one thing is that I'm not aware of this kind of explosion ever happening, not just in Colorado but anywhere in the West. I don't, I haven't seen a lot of the data, and maybe it has happened in a couple places but certainly I haven't seen a leak coming out of an abandoned flow line in a house in Colorado, ever.

RW: I do want to say though that a state report in 2014 blamed bad pipeline for half of the equipment failures that caused oil and gas spills. I think you'd have any number of people saying there have been warning signs about wells, pipelines, flow lines for years.

JH: I think keeping equipment up-to-date is a constant issue and has been a constant issue and we've, in the last four years we've increased the penalty from $500 a day up to $5,000 a day for leaks of that nature because obviously if you don't have consequences like that, they don't get addressed. And I think there's been real progress in making sure that those equipment malfunctions are being addressed. That being said, is it perfect? No. But having a flow line that's been abandoned so close to a housing project, at least in my understanding of this, is very unusual.

RW: Unusual but possibly more common as more development occurs and I mean housing developments in places that previously were not populated in this state.

JH: Exactly. So that's why we're going out and making sure that it hasn't happened in any other new housing development or near an oil field, and making sure that within even a thousand feet there's not a truncated line. In other words, we're erring on the side of caution here to make sure that we're covering every possibility. We might find, I mean, that's why we're doing this. In my experience, usually when you've never seen an occurrence before, it doesn't mean it couldn't be there. Otherwise we wouldn't spend, make all this effort to test and map every flow line in the state. That's a tremendous expense. The bottom line is since it hasn't happened before in Colorado that we've had a similar thing, I don't feel that there's a high probability or a likelihood that we're going to encounter the same situation.

RW: What do you say to those who think that what happened in Firestone, that deadly home explosion, is more confirmation that local governments should have the power to regulate oil and gas operations more so than they do now? I know that in the past you've said that's a constitutional question, a state constitutional question, but there are those who really are clamoring for more local control.

JH: Again, this is a terrible tragedy and our, again, what these families have gone through, the Martinez and Irwin families, I can't even, it's unthinkable. To turn it into an argument, a political argument for local control, the local municipalities already have control of this. If anything, this would be an argument for more state control and having a statewide system by which we look at flow lines going over private property and make sure that there's a check, a system by which once they're in place, if they're ever abandoned, someone goes and looks at them and makes sure that they are capped.

This was an abandoned line that got cut and nobody ever capped it. Now that's, where those flow lines are, how close they are to houses, how close a housing development can go to the flow lines, that is in local control. That's not in what the state control is.

RW: In many ways it's a zoning, a local zoning issue, about the proximity of new homes to operations. 

JH: What the measurements are, what the safeguards are, what the insurance is. My full intention is to sit down with counties and municipalities and members of the general assembly and sit down and say, "All right, how can we together work on a system that guarantees every home is safe?" Trying to point figures and say well, "This is another example of where we need more local control," this is a place where we probably needed some more state control. Again, doesn't mean we shouldn't continue looking at more local control, continue trying to find ways to make sure that our state is as safe as it possibly can be. As safe as it can possibly be, that's going to require local government, state government, and the industry working together.

RW: You called some of the motivations, some of the reactions, to this explosion political. I think that critics would say this is a question of health and life and safety, just to interject a different view there. You're listening to Colorado Matters. I'm Ryan Warner and we're live with Governor John Hickenlooper from the state capitol. We're both on the phone because of some technical issues. This is the last day of session, and we're weighing in on any number of issues under the Dome and outside of it. I'd like to move now to federal healthcare, Governor. The US House passed a healthcare bill last week. You have said it would be irresponsible for the US Senate to approve it as it stands. What's the biggest problem the bill would pose for Colorado, in your mind?

JH: Well there's a massive cost-shifting. If that house bill, which for the life of me I don't see where it improves anything in the Affordable Care Act. It's not going to lower premiums. It's not going to add care. It's not going to lower costs. It's not going to help people on Medicaid. As close as I could tell, the single biggest change is that it's a massive tax cut for the highest earners in America. At least in Colorado, those high earners, when I talk to them, they say, "Is this a problem for you?" To a person, they say, "No. This is not something I'm going to fight over or argue for."

So really what they've done is create a massive tax break for the wealthiest people in America. It's going to shift over a billion dollars, probably somewhere between $1 and $1.5 billion of cost to the state from the federal government. As you know, we just went through a very long budget process. We can't do that. We don't have $1.5 billion. We'd have to take it out of schools or higher ed or prisons, whatever. We'd have to take it from a million different places. We'd have to petition for a tax increase. It would be a, just a disaster.

RW: Are you working on a plan like that just in case?

JH: Of course. We're always looking at the potential consequences if something like that did pass, but let me tell you, there are no good outcomes. And I'm just dumbfounded that Congress could vote for something like this. It really doesn't make people healthier. It doesn't improve care. It doesn't expand coverage. Indeed, it would almost certainly force, or try to force, states to roll back coverage of Medicaid. That's not, this was supposed to be an effort, or a demonstration, from the Republican party of how they were going to have more people covered. Everybody was going to get a good healthcare system. Everybody was going to be covered and it was going to save money in the process. At the same time, I forgot, going to give over trillion dollars of tax cuts to the richest Americans over the next ten years. That just doesn't hold water. Look at how many people are saying, "Don't worry about it. That's not what's going to get passed because the Senate's going to make changes." That's what the House passed. What happened to the House being the forum of the people, the working people of this country? You can tell I'm getting worked up, but it's very frustrating.

RW: Specifically on Medicaid, what you'll hear from Republicans is that there can be more efficiency in the program and that even in Colorado, a program called "Medicaid Prime" on the Western Slope demonstrates that a state could do more with less. How do you respond?

JH: Oh, I totally agree. Listen, I agree that Obamacare needed to be changed and improved. I'm not arguing that. Certainly on Medicaid, if you look at Colorado, we're one of the top three or four states in the country. Our per person costs for Medicaid have been flat since 2012. That's a pretty remarkable achievement when you look at overall medical inflation and when you take into consideration the Affordable Care collaboratives, that you point out Medicaid Prime. We're doing a bunch of innovative things to try and lower that cost still further. I'm not saying we don't do that. Of course we're going to do that. We gotta do that anyway. At the same time, to shift one billion dollars or $1.2 billion or $1.5 billion of costs onto Colorado, it seems, to me, irresponsible.

RW: And so all eyes are now on the US Senate and it appears that Republican US Senator from Colorado, Cory Gardner, will be critical in the negotiations around healthcare in that chamber. Have you had conversations with him in the last few days about what you'd like to see?

JH: Not in the last few days, but we have discussed healthcare on several occasions. I think Senator Gardner recognizes the importance of trying to keep the people that have coverage now to make sure we don't roll back that coverage. I think he places a high priority on that.

Again, we recognize, everybody recognizes, that you can't continue having costs that increase without an end in sight. That's partly why we put together all these healthcare bills. Almost all of them got killed in the last couple weeks. We had a hospital transparency bill. About a third of our total Medicaid spending, $2.8 billion out of a total spend of a $9 billion, goes to hospitals, and we just wanted some transparency so we could see exactly what people are getting when they spend that money. Suddenly it goes to the kill committee because evidently the hospital lobby thought we were just out of control and how dare we want people to know what they're actually getting for the money that's being spent. How are we going to control costs if we can't see what the costs are? 

RW: I imagine there might've been some fear that that looked like regulation and that that meant a lot of time and efforts to execute.

JH: Or maybe some campaign contributions weren't going to come forward that had been coming in the past. I don't know what the reasons were, but it's very frustrating when you're trying to control costs not to be able to get simple bill like just basic transparency. It was not filled with a bunch of paperwork. It was as lean, I mean if leanness was a question we could certainly, no one wants less red tape and leaner systems than I do. I'm open to anything of getting that information in a less troublesome way but I don't think that was the issue.

RW: We have just a few minutes left. I'd like to return to the legislative session, which is wrapping up right here. You've seen seven sessions now. I wonder in this one if there is a bill we haven't talked about that you think deserves this spotlight, perhaps one that flew under the radar or, and I know you're loathe to talk about this one that is likely to get your veto pen. You can head in either direction.

JH: I think that this of all the seven sessions I've been in, we really got a lot done. Our budget director, Henry Sobanet, we gave him our, each year we give a state award for somebody who's done the most, and he got it this year. We got the construction defects done. Speaker Duran really stepped up and was involved in the details of this and worked with President Grantham to finally get this over the finish line.

RW: Let me say there that the promise of construction defects is that there will be more condo construction and that with more availability of condos on the market, the cost of housing will go down. I'd actually like to follow-up on that and say at what point do you think we'll start to see more housing stock and lower prices as a result? That was the long promise of this.

JH: Well the goal of getting more housing starts or condominiums, again, these projects take six months or a year, sometimes two or three years to put together but I think there are a lot that are percolating out there now. So my guess we'd see a couple pretty large projects in the hundreds or units within, let's say, six months or within 12 months at the latest. Again, I'm not aware of any. I haven't gone out and done that research, but if it is true that the fear of lawsuits was compelling developers to avoid condominiums, I think this takes a big step towards allowing them to get back to work in building condominiums. 

Now in terms of seeing a significant drop in the cost of housing, it'll help a little bit, but again, we are growing at a fast rate. And the challenge when you're growing, I mean again, our unemployment is 2.6. That's the lowest of any state in America. It's the lowest in the history of the state of Colorado. When that many entrepreneurs are coming and starting businesses in your community and that many jobs are being filled, you can't keep up with housing. The condominium passing construction defects will help, but it is certainly not going to be at a scale that's going to suddenly see a drop in the cost of housing. It's going to slow down the interest.

RW: We'll check back in with you on that. Governor, thank you so much for being on the phone with me. 

JH: It was a pleasure Ryan.